Telecom Outsourcing Trends

April 28, 2007 3:12 pm 0 comments

Telecom outsourcing – when telecom firms outsource some of their technology or business operations to others -  is an area which has seen steady growth recently. This is especially true for Asia which is the hottest growth market. It has a huge potential for Pakistan as well. There is no large IT company in Pakistan which competes globally for telecom outsourcing projects. Here are some of the recent deals in South Asia which have made global headlines:

  • IBM – Bharti, (Vodafone deal is expected)
  • Tech Mahindra – British Telecom
  • As noted by Analysys Research, IT vendors such as IBM and HP are building on their IT solutions and equipment businesses to capture outsourcing deals in the enterprise telecom space. They have been working hard to develop strong service offerings and, in some cases, have even set up telecom practices within their service divisions. The illustration below from Analysys shows how telecom companies are positioned in the outsourcing chain. Note that in this post I am focussing only on the outsourcing by telecom firms.

    In Pakistan most of the telecom technology solution deals seem to be happening with foreign technology product and solution providers – at least that is the impression one gets from the press releases and the media articles. Si3 is a notable company – it has offered payment solutions to many telecom providers in Pakistan. I do not know if Pakistani companies such as Techlogix, NetSol, TRG etc. serve the telecom vertical but I’m sure there must be other outsourcing (Technical, BPO or otherwise such as HR services)  from Pakistani IT companies. However one thing is clear: the scale of such business seems to be on the small side or the work is limited to certain hot areas such as call centers. Is this another sign that Pakistan lags behind in depth of skills and technical resources needed for larger telecom outsourcing deals?

    Of course we cannot compare directly with giants like Tech Mahindra in India (see below) but there is room for improvement. Here’s a relevant article from The Times of India.

    The phenomenal growth in telecom, combined with severe competition and cost pressures and rising customer expectations, is driving a slew of huge outsourcing deals in the sector.

    The telecom outsourcing story started with the Bharti-IBM deal and then the Idea-IBM one. Now, analysts and industry expect several more similar 10 or seven year deals to conclude soon. Hutchison (Vodafone) Essar is said to be looking for an outsourcing partner. The market speculation is that it could once again be IBM, in a deal worth $1.6 billion. Reliance Infocomm is said to be in talks with companies like Accenture and EDS for a $1.5 billion outsourcing contract. Sources say Aircel is also in talks for a large deal.

    About three years ago, Bharti Tele-Ventures had signed a 10-year contract worth $750 million to outsource its entire IT infrastructure to IBM. Idea Cellular followed, a few months ago, with a $800 million deal with IBM for consolidating and managing its IT infrastructure and applications.

    “Considering the number of deals that have happened in India and the ones that are just about to be clinched, virtually no telecom candidate is left in the market. Telecom services is one segment that has gone in for outsourcing with a huge commitment,” says Alok Shende, V-P, Frost & Sullivan.

    Experts believe that it won’t be long before BSNL, MTNL and Tata VSNL too join the outsourcing bandwagon.

    Network related support is being outsourced to equipment vendors such as Nokia and Ericsson, telecom billing work to companies like UK-based Intec and US-based Convergys. The likes of IBM, Accenture and EDS undertake all IT infrastructure functions, like billing, call centre operations, customer care management and data management.

    Nokia Siemens Networks is the largest managed services provider in the country. It offers managed services to 27 telecom circles: in 17 circles for Hutch and eight circles for Bharti. Intec supplies solutions to Reliance, MTNL and Hutch. Telecom billing solutions typically automates and supports all aspects of customer service, from customer service set-up and account management to billing.

    Scott Winks, V-P , Intec, says he has been seeing a noticeable trend towards managed services across the US, Europe and Asia. “The space is pretty active in India. Outsourcing allows telecom players immense space and time to focus on their strengths, which are based on innovation and marketing.

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