Telecom equipment vendors offer range of services

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."