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Telecom Industry Relies More on Outsourcing

Photonics.com
Nov 2003
MCLEAN, Va., Nov. 13 -- More than 75 percent of North American telecommunications executives consider outsourcing a key component of their business plans, and they are willing to outsource some activities they used to consider "core" business functions, according to a recent study from management consulting firm Booz Allen Hamilton.

All of the companies included in the study said their primary reasons for outsourcing are to reduce expenses and "optimize expenditures." "Headcount flexibility" was ranked second; other reasons, such as exploring new technologies and capabilities, were far less important, Booz Allen said.

The company said the study involved senior executives from major service providers in the North American telecommunications industry, representing more than 80 percent of the market, including local carriers, long distance carriers, wireless carriers and smaller companies.

"Although service providers have previously embraced outsourcing support functions such as human resources and information technology, they generally have not supported outsourcing of core technical or customer-facing activities including network planning and architecture, platform development and sales and marketing," Booz Allen said.

"However, that attitude has changed. Most executives interviewed conceded that they are actively moving toward outsourcing network functions once considered core. In fact, over 70 percent said they have either already outsourced some network-related activities or would do so in the near future. Among network-related functions, installation (66%) and maintenance (63%) are most likely to be outsourced."

Frank Ribeiro, a principal at Booz Allen, said, "Telecom companies are turning to outsourcing for the cost savings they need to stay competitive. The move to include network-related activities should help the outsourcing market continue to expand."

The study also found that assured returns is the most important aspect in considering a vendor; 10-20 percent savings is a "necessary condition," but some service providers are looking for up to 50 percent. Most companies prefer short-term (less than 3 years) deals instead of long-term contracts, and they ranked technical expertise and financial stability the most important criteria in choosing a vendor, Booz Allen said.

For more information, visit: www.boozallen.com



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