Art of outsourcing

Amid increasing competition, falling ARPUs and rising operating costs, it comes as no surprise that telecom operators are increasingly looking at outsourcing as a means of reigning in expenses.

Not only can outsourcing of non-core services such as call centres and IT help lower costs, it can also remove significant headaches for company directors, allowing them to concentrate on the main task of running their core operation.

In other cases, some operators – particularly new players – are keen to outsource more than just one or two components of their business and instead opt for a managed services agreement.

With a managed services agreement, operators can outsource numerous processes, including service parts management, front and back office, call centre, billing, and in some cases, even the operation of entire networks.

Such models can give operators a major advantage over their rivals. For example, PBTL a CDMA operator in Bangladesh, was able to reduce network outages by 73% after it entered a managed services agreement with Huawei, while customer complaints fell by some 86%, according to Leroy Blimegger, VP of global technical services at the Chinese vendor.But operators looking to outsource also need to ensure they evaluate what they are doing, and that they choose carefully which parts of the business to outsource, and who they outsource to, according to Mauricio Franca, a partner at Delta Partners, an investment company and consultancy specialising in the telecom sector.

Whether an operator is outsourcing just one or two parts of its business, or entering a more wide-ranging managed service agreement, it is effectively handing a certain amount of control to another company.

Furthermore, newer operators might lack a strong understanding of various components of their business, such as IT or call centre, and this could leave them in a weak position when negotiating an outsourcing deal. “If 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.

Managed service agreements can also become problematic if expectations vary between the operator and vendor, and if both parties fail to adhere to agreed guidelines. Indeed, while flexibility is usually viewed as a positive force in business, Huawei’s Blimegger says that it can create major problems in managed service agreements.

“Flexibility and customisation: these words have a bit of danger to them, because in the process of becoming flexible or customised, you add variability into processes. That variability is evil. It is the worst enemy of quality.”

For operators, vendors and other parties involved in telecoms outsourcing, the message form industry insiders is simple. Clearly agreed and clearly defined roles lead to the best chances of successful partnerships.

Roger Field is the editor of Communications Middle East & Africa.