I thoroughly enjoyed reading your article and the relevant comments. Thanks for a lovely adaptation of Moore’s principle to the telecom industry.

As you rightly pointed out, to remain lean and mean, mobile operators have traditionally outsourced non core areas of operation. However, the definition of “what is core” does change over time, and we have seen this, when Airtel and Vodafone outsourced Network Operations and Customer Support, areas once considered “core” to the main business.

Mobile operators are now focussing more on the marketing end, and it will not come as any surprise if mobile operators will outsource product design, which is currently a very core area for any mobile operator. Outsourcing primary competencies are usually unsuitable since it makes you sacrifice exisiting skills and perceived as giving away your “niche” into other hands. There is always the risk of the company becoming hollow and lacking a core deliverable.

But faced with shorter product cycles, rapid advancement of technology, increasing obsolensce of “vanilla” services and increased cost of capital, mobile operators,especially new entrants cannot longer afford the huge capital outlay.

“Horses for courses” does make sense, and each operator will stick to what one does best.

Thanks for sharing your post on microexperience. It is really interesting and complements the post I have written.

-Mohit

You have raised a very valid point. There are pitfalls of outsourcing which need to be managed to get the full benefits (cost is only one part of outsourcing benefits). As described the network is now a hygiene but a necessary component of telecom operator and any outage there cannot be tolerated. It is therefore important to have qualified professionals who can ensure that sufficient redundancies are built in the network. In my subsequent posts, I would be talking about the pitfalls and the benefits of outsourcing of different functions and I hope that should answer all your questions.

-Mohit

The role of outsourcing will grow and shift to increasingly become a strategic asset.

I agree that outsourcing has been less prevalent in N. America but that is changing: Sprint has outsourced network operations to Ericsson. And Verizon and Clearwire have acknowledged that they need to do more partnering, work with open source developers and outsourcing or product and service development and operations. This has become a necessity to deliver competitive services at the rate of change needed and to cost effectively compete.

Furthermore, I expect we will see ‘outsourcing of outsourcing’: major business consultancy and service and product aggregators such as Ericsson and IBM and perhaps the large outsource companies themselves will play a role of being part of the experience base to facilitate ‘transformational business strategies’. While that starts to sound like these firms marketing slogans, the shifts are real.

Excellent article and I agree with you that HR is a core function. HR should be the core function in every company and every industry. It is the quality of people and processes that differentiate one company from other.

As far as telecom is concerned, we too often give Indian (Bharti) examples to highlight the success cases. There have been failures too (ALU-Telstra if i am not mistaken). It is very important to get an organizational buy-in for any outsourcing and people impacted should be handled with utmost care. There are also challenges with the governance models in outsourcing deals.

Would like to hear your views on the pitfalls in outsourcing and some mitigation measures.

Regards
Arvind

I’ve been debating something related on Microsperience when I posed the question: what is the telecoms USP? (see http://www.microsperience.com/?p=1666)

I think these two questions are closely related. I also think what is a USP for one firm won’t be for another because CSPs are of many different types and operating different business models. But what’s happening is CSPs are now being forced to question the very basics of doing business and to focus in on this important question: what makes us different?

On the marketing side this appears to be extremely core because ultimately this is what many CSPs do – they market telecoms services. The trouble is they’re mostly not very good at it. So for an MVNO this may be core. But for a wholesale carrier? If you take a look at a marketing software provider like Pontis, you’ll see that they’re operating as basically an outsourced marketing dept for carriers who are pragmatic enough to realise they don’t have the skills. Likewise HR may appear to be core but the lesson we can draw eg from UK public sector is that it isn’t as core as we think. In the UK govt sector it is common for HR to be run (at the strategy and operational level) by external consultants, and to be staffed by external consultants. So even the interviews are being done by an outsourced team, often recruiting other outsourced resources. Why? Because the skilled staff don’t want to be employed and because the sector was looking for “fresh ideas”. It doesn’t necessarily mean that it is always effective – the taxpayer will tell you it has often turned out to be very expensive – but there you have it.

Finally many of the IT/software services are in your upper right hand box. You are right to say that we now need to think the unthinkable and have to consider whether we should outsource. For some the answer will still be no. But then again, a few years back everyone believed that to be a telco you needed a network. How silly that looks now in the era of the MVNO and of network outsourcing. However, I would caution that when we asked the question ‘what truly is the telecoms USP’ the only answer we got back after lots of head scratching was…

DATA.

Be interested to hear if others have a different view.

Thank you for getting us to think about this very difficult question. I really think this is the core of the business problem facing us. At the moment there is still a lack of clarity on this issue so we really do need to stimulate some debate and some thought.

One of the things we should talk about as well is “what does outsourcing mean?” Traditional outsourcing/managed services v BOT v SaaS/Cloud…there are many flavours these days.