Balancing outsourcing

Operators are increasingly looking to outsource in a bid to streamline operations, but how do outsourced and managed services measure up?

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By  Administrator Published  September 18, 2008

An absence of knowledge can leave a company weak at the negotiating stage, which could then lead to it paying more than it should for the outsourced service, or even agreeing to a type of service that is unsuitable or unnecessary.

"If you don't know what is wrong it is difficult to assess what the provider is telling you - whether something is going to work or not. If you know which things need improving you will be able to do better," Franca says. "Risks that you may not select a provider well, or might select well but don't get the price right, that's another problem."

Forming the agreement in the right way is also essential. "Most important is the contract," Franca says.

"Defining clearly what the responsibilities of each party are. The operator loses a little bit of control here and it is very important to agree on which service, what quality of service the operator is going to provide and also, as much as possible, try to align their interests."

But the nature of outsourcing has also changed in recent years, and these changes generally favour the operators.

Indeed, in Western markets at least, contracts with the service provider tend to be shorter than they used to be, and this has led to greater competition, as other providers vie for business from the operator.

"In the beginning of outsourcing in Europe and the US, you used to have big contracts for a long period of time and then people realised that might not necessarily be the best thing to do because you get tied in," Franca says.

"One of the big things with outsourcing is that you can get someone who is good at the operation, but competition always helps. If you have a contract in which the provider feels very secure, it may not be as motivated as with shorter term contracts."

Cashing in

One of main business components that operators have started outsourcing in recent years is billing. With many operators offering value-added services, in addition to core voice and data services, the way customers are billed has become increasingly complicated.

A further layer of complexity has emerged as revenue sharing agreements between operators steadily increase.

Gavin Stewart, vice president of sales and marketing at interconnect billing specialist i-conX Solutions, has his finger on the pulse of the latest trends in the sector.

The company, which includes UAE mobile operator Du among its clients, has seen demand for its services grow rapidly over the past couple of years, and this trend is likely to continue, according to Stewart.

"As a newly liberalising region the opportunities are yet to be fully capititalised on with many telecoms operators still to source a specific interconnect billing function, believing their retail billing systems to offer adequate support," he says.

"The Middle East is indeed very ‘green' when it comes to interconnect issues and consequently there is a current lack of home-grown expertise."

"Operators within the region readily acknowledge this as a factor. The Middle East is exceptionally receptive to technology and knowledge transfer from different world markets," he adds.

And with interconnect billing inherently complicated, the service serves as a strong example of the advantages operators can reap from outsourcing.

"The biggest advantage - especially for smaller or start-up operators - is that outsourced solutions have turned what was traditionally a very expensive system, into a much more commercially viable option," Stewart says.

"The necessary hardware is supplied as part of the package and with no licence fee to stump up at the start, the initial investment is minimal."

Furthermore, he adds that from a financial perspective, a reliable and transparent interconnect billing system presents tangible business benefits and with a tight service license agreement in place it is straight forward to justify the return-on-investment to directors.

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