Telecom equipment vendors offer range of services

Zatni Arbi, Columnist, Jakarta

In the banking industry, the concept of outsourcing has largely been accepted. Smaller banks do not have the capital to invest in their own Disaster Recovery Center (DRC), for example, and they simply outsource this mandatory function to a third party.

The outsourcing provider then achieves economies of scale by offering the same service to other, similar institutions, so that it can offer attractive pricing. Meanwhile, because they do not have to tend to their own DRCs, the banks can concentrate on their core business.

"In the telecoms industry, people are still somewhat cautious when talking about outsourcing, although we are seeing increasingly positive responses from the operators," said newly appointed president director of Alcatel Indonesia Jan Glinski, during a roundtable meeting with a limited number of IT journalists in Jakarta recently.

It is not difficult to understand why, in general, it takes telecoms operators longer to embrace the idea of outsourcing the operation of their infrastructure to a third party. Unlike the banks, telecoms companies are traditionally run by engineers.

To them, the physical infrastructure accounts for the bulk of their company's assets. They view it as the real value of their company.

"This is changing rapidly," observed Jan. "More and more telecoms providers are now managed by people with strong financial and business backgrounds."

Does this not remind us of Lou Gerstner, the person responsible for the dramatic turnaround of IBM? He was not a technology guy, but he was able to save the sinking technology giant and return it to profitability. This does not necessarily mean that engineers cannot have business acumen.

A look at many high-flying corporations will reveal that personnel with a technology background can have business talent, too. Jan is a good example. He has an MSc in electronics and a PhD in physics, but he is now responsible for Alcatel's sales and marketing as well as its operations in Indonesia.

Into Services

Telecom New Zealand is an extreme example of how far the outsourcing of services can go. "The operator has let us build, run and maintain its entire infrastructure," said Jan during the meeting.

He even said that, during the design of the infrastructure, his company would not hesitate to use products from other vendors such as Cisco.

"If we believe that their products are better than ours, we will use theirs as long as it will give the best result to our customers." Needless to say, it is a level of commitment that will inspire confidence on the part of customers.

According to Jan, Alcatel also offers consulting services beyond the physical layers. As a company with a lot of experience partnering with operators and service providers around the world, the French company has certainly accumulated a lot of business experience that it can share with its local customers.

One of those is the pricing of a particular service. "Usually, when we suggest to an operator that it should lower the rate that it charges its customers for a particular service, the response we get is that, by doing so, it would reduce its average return per user (ARPU) and delay its return on investment (ROI)," said Jan.

"However, the experience we have had in other countries shows that, with lower costs to subscribers, the pickup rate is faster and soon the operator has to work hard to meet market demand."

When this happens, revenue will come through volume rather than rates.

In Indonesia, in addition to its partnership with PT Telkom, Alcatel's list of customers includes operators such as Indosat, Telkomsel and Excelcomindo; banks such as Bank Mandiri and Bank Buana; and other companies in a wide range of industries such as oil & gas and transportation.

The interesting development to observe is that this company, which provides submarine, terrestrial and satellite-based telecommunications infrastructure, is also moving toward the provision of outsourcing services. Of course, it is not the only vendor that is taking this path.

As we learned some time ago, Ericsson is also offering similar outsourcing services to operators in different parts of the world. What this shows us is that, to survive, vendors have come to realize that they have to go beyond just providing the hardware and software and become a service provider as well.

"Of course, we are not going to provide our services to end users," stressed Jan, "since that would turn us into a competitor with our own customers."