Truth, lies and outsourcing: offshoring may have created a political storm in some countries, but operators across the region are looking to outsource everything from IT and call centers to network maintenance and even network operations as they examine what their core business is

Telecom Asia, April, 2004 by Robert Clark

While Asian carriers are not--yet--widely taking advantage of outsourcing, it is a sensitive topic. Most contacted by Telecom Asia were reluctant to go on the record. Three of Hong Kong's six mobile carriers--Hutchison Telecom, New World Mobility and Sunday Communications--source functions outside the territory.

Hutchison uses outside entities for some IT and customer service functions (including a call center in Macau), while New World Mobility said the information was confidential.

Hong Kong's Sunday Communications said one-third of its 700 staff worked for fully-owned subsidiaries in neighboring Shenzhen. These handle customer service, IT back-end, finance functions and even some network engineering, a spokesperson said.

SingTel is understood to contract out a lot of its applications development work on China, but officials did not respond to requests for information.

Certainly, Telstra generated a political storm in January when it admitted it was moving 450 IT jobs to Infosys in India. The deal was part of its outsourcing arrangement with IBM Global Services and was expected to save A$75 million a year. Telstra unloaded most of its A$1.5 billion IT business into IBM Global Services--then a joint venture--seven years ago. The staff union, the CPSU, which opposed the original outsourcing deal, now predicts 1,500 Telstra IT jobs will be lost this year. With an election on the horizon, Telstra's move drew fire from both the government and opposition.

These are predictable responses. As a listed company, Telstra also has an obligation to its shareholders to keep costs down. But the furor ensures Telstra knows its outsourcing options remain limited.

Other, mostly second-tier carriers, are going much further and contracting out their network operations. Ericsson and Indian operator Bharti last month announced a $400 million three-year deal for the management of Bharti's GSM/GPRS network.

It's a logical step on from the BOT model that was used in the past for 2G mobile network deployment. Nokia says now it has 15 reference cases for mobile network outsourcing, including Sweden's 3GIS. It says operators can expect opex savings of around 20%.

Urs Pennanen, vice president of marketing and sales for operator solutions at Nokia Networks, said Nokia believes the network outsourcing market could be worth 10 billion euros by 2006.

In a world-first, Telecom Corp of New Zealand has outsourced the full management and operation of its fixed and cellular networks to Alcatel, Ericsson and Lucent. In the biggest deal, the company has put its fixed networks in New Zealand and Australia in the hands of Alcatel until 2007. The company says the $106 million deal is the best way for a small telco to get to 3G.

Win-win

But Sequeira warns that much depends on the arrangement with the vendor, especially in the case of major process like network operations. The key is to meet the service standards customers require.

"That is not trivial. A lot of traditional thinking around outsourcing is: let me get the cheapest, lowest-cost contract. Our experience is it can come back to haunt you," he noted.