Pegging the entire outsourcing market at $7.1 billion (EUR 5.9 billion) in 2005, the Analysys report projects that it will grow to $9.5 billion (EUR 7.9 billion) by 2010 — though regional imbalance remains.
“The U.K. is a particular hotspot and is Europe's biggest market. U.K. operators H3G and Redstone have outsourced their entire networks. BT, Vodafone and Orange have all announced outsourcing contracts,” says Simon Sherrington, the lead author of the report.
“France and Germany have not been as active as the U.K. in terms of outsourcing, but outsourcing is alive and well. While no end-to-end telecom-network outsourcing contracts have been announced, a number of IT-service outsourcing deals have been signed, and Deutsche Telekom has stated that it expects to outsource thousands of call-center staff,” he adds.
Most of the telcos are aware of the advantages of offshoring, and a few of them have already offshored their call centers to offshore locations such as India. According to the information available with Global Services, U.K.-based operators such as British Telecom, Vodafone, and Hutchison Orange have taken the lead in offshoring. BT has outsourced its customer service call center to India-based IT services company, HCL Technologies. Hutchison operates its own captive call center in Mumbai, while outsourcing part of the work to Convergys and Vertex, who execute it out of their India call centers. Alternative operators like OneTel and Tele2 have also outsourced their call centers to India-based vendors.
“In recent years, this has been accompanied by the replacement of nearshore suppliers with offshore suppliers,” says Sherrington.
“IT offshoring has been more selective. Typically operators have outsourced to suppliers with a local presence [though they are not necessarily local companies], they are typically global suppliers,” adds Sherrington, though he says that part of that outsourced work is sub contracted to offshore suppliers. “Activities sent offshore in that way have included application development, management of application development partners, application testing and IT helpdesks,” he says.
The only operator that has taken an aggressive offshoring approach by offshoring activities such as network monitoring and management is the long-distance operator, COLT Telecom, which runs an offshore delivery center out of Gurgaon, near New Delhi.
Sherrington also informs that the operators have taken a mature approach toward outsourcing in terms of selecting vendors, with no special bias toward any category of vendors. While specialized call-center companies have bagged a lot of call-center deals, billing and OSS related work has gone to companies that are specialized in telecom. In other IT-related activities, they have chosen large IT-services companies. Simply speaking, they have gone for the multi-vendor best-of-breed approach that shows maturity.
He also advises the operators to take a balanced approach while crafting the outsourcing contracts. “The contract must deliver cost savings where appropriate, but must also encourage and reward appropriate investment by the supplier[s]. Revenue share for new service development is an emerging trend [e.g., in the mobile-content market],” he says, adding that “cost-centric contracts have become long-term straitjackets.”
