Third-Generation operators rely on outsourcing

Third-Generation operators rely on outsourcing

Zatni Arbi, Contributor, Jakarta

Outsourcing for information technology systems has been around
for several years now, and analysts say the market is growing.

With multiple benefits to companies, including cost saving,
flexibility, accountability, and access to new technologies and
skills -- without having to add or retrain existing human
resources -- letting another company provide IT services for your
company can also improve customer satisfaction, and make
operational costs more predictable and consistent.

The most important advantage however, is that it allows
businesses to focus, not solely on technology, but on the broader
objective of improving productivity and bottom line profits.

Over the years, outsourcing has penetrated deeper and deeper
into companies' operations. In the IT industry, leaders in
outsourcing services include IBM, Hewlett-Packard and Sun
Microsystems. IBM offers a slew of strategic outsourcing services
including business process outsourcing and business
transformation outsourcing.

Depending on the need of the outsourcing customer, the
contract may or may not involve transfer of technology and human
resource assets.

HP, for instance, provides an outsourcing service that will
free business organizations from the tasks of managing and
maintaining the health of their PCs. Called "Management" the
service will take care of the technical support, the problem of
system obsolescence and many other problems businesses face.

A nationwide bank, for example, will no longer have to handle
the logistics of distributing their PCs to its widely scattered
branches. HP will do it for them.

In the telco industry, outsourcing has also gained a lot of
attention. Telecom companies such as Telecom New Zealand have
relied on outsourcing to make sure their networks perform as they
should.

Telecom New Zealand has chosen Lucent Technologies as the
outsourcing provider for its CDMA2000 1xEV-DO network. Other
outsourcing providers in the telco industry include Alcatel,
Ericsson, Motorola, Nokia and Siemens.

It is also not uncommon for an operator to sign contract with
different providers to manage different segments of its networks.

Telecom New Zealand, for example, has chosen Ericsson as the
outsourcing provider for its Time Division Multiple Access (TDMA)
network.

Managed services consist of different tasks, starting from the
traditional repair services and network performance monitoring to
more resource-heavy jobs such as network optimization and service
disruption prevention.

Managed Services enable the operators to roll out their
services quickly. With these services, they no longer have to
invest in training to develop in-house skill resources. They can
concentrate on more strategic tasks, such as marketing their
products and services, creating more attractive packages to
capture more subscribers.

True to their word, outsourcing providers let other external
parties do the jobs that fall outside their core competence. "At
Ericsson, we even outsource our IT needs," said one of the
company's senior executives recently.

What about the necessary expertise? The telecoms industry is
known as a multi-vendor environment. Operators usually procure
their infrastructure hardware and software from more than one
vendor, and therefore compatibility becomes a key concern.

The good news is that telco vendors with the outsourcing
services offerings have worked closely together to share their
expertise. It is a form of cooperation in competition, which has
been dubbed "coopetition".

In many developed markets, where the telecom business may be
reaching its saturation point, the new 3G services are expected
to once again jumpstart the mobile industry.

Clearly, competition will be tougher, and the time to market
is short. The aspiring 3G operators, who have pocketed the
license to use the frequency resources, will not have much time
to build their own 3G expertise base and instead will have to
rely on external assistance.

Ericsson is arguably the largest provider of outsourcing
services. It has been offering the services for 10 years, and is
currently managing the networks that serve almost 40 million
subscribers worldwide.

In fact, its Managed Services currently contribute almost 26
percent of its total revenues.

The bulk of its 22 managed operation and capacity services
contracts, however, are still in the GSM/GRPS areas.

However, Maxis Sdn Bhd of Malaysia has already awarded an 18-
month managed services contract to Ericsson, which has been and
will be responsible for setting up Maxis' 3G network, operate it
and transfer it to Maxis after the contract expires.

Earlier, the Swedish telco giant signed a managed services
contract with H3G Italy.

Here in Indonesia, telco outsourcing providers are also vying
for a slice of the business in 3G services that we expect to be
available here soon. Nokia, for example, is running a six-month
trial operation of 3G WCDMA service for Telkomsel, Indonesia's
largest cellular network operator, and it will not be surprising
if this Finnish company is also engaged in providing managed
services for new 3G operators.

Whoever is chosen to provide the managed services, it is
highly likely that our 3G operators will have to rely on
outsourcing if they want to launch their services as quickly as
possible.

More importantly, with managed services, 3G operators should
be able to offer affordable rates to their subscribers.