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.