Telco's IT Going Fast

By Allen Bernard

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According to a new Deloitte & Touche survey of 42 global telecommunications firms, the industry, as a group, are increasingly off-shoring IT and call centers jobs as a strategy to decrease operational costs and enhance services.

While only 50% of those surveyed were doing any offshoring at all, of that group, 42% were offshoring IT first, said Phil Asmundson, deputy managing director of Deloitte's U.S. Technology, Media and Telecommunications group. At 24%, call center functions were next on the list but this is a harder sell since these workers tend to be unionized.

Of the IT jobs going overseas, application service development, programming and coding, and network management positions, are the ones going first.

"No.1 is it all starts with fact that telcos ... are struggling to maintain their revenue base, and so the real focus has been on cost cutting," he said. "What we found through this survey was offshoring is a great way for the telcos to continue the cost cutting while, in certain areas like IT, like contact centers, to have an opportunity, as you decrease costs, to actually increase the quality of the underlying service."

The survey, conducted by Deloitte Research, shows by the year 2008, five-percent of the industry's 5.5-million labor force, or 275,000 positions, will be off-shored. Saving the industry an estimated $14.5 billion in overall bottom-line operations costs. While, telcos lag other sectors such as high-tech and financial services, the practice is fast becoming one of the industry's most significant business trends.

Cost Savings No.1 Benefit

The benefits cited most often by those either engaged in off-shoring or considering the practice were cost reductions of 20%-30% by 2008; enhanced quality of staff supporting more technically advanced broadband and wireless data services; and accelerated time-to-market for advanced data services and applications."For most companies, it's not a question of whether to off-shore, but what functions to off-shore, and how," said Asmundson. "The drive for enhanced data services, better customer support and faster time-to-market for innovative applications and services, as well as the perennial drive for profitability, means that many operators consider off-shoring a necessary strategy for growth."

The study also found:

  • The industry's move toward advanced data-oriented services will fuel the off-shoring trend by increasing the need for affordable support staff with strong technical skills;
  • Enhanced competitiveness as multiple time zones allow teams to work around the clock to reduce time-to-market for application development;
  • The top processes being off-shored include IT services, call centers, accounting and finance, operations and application service development;
  • India is the destination of choice for off-shoring, but countries such as Estonia and Argentina are coming online as off-shoring sites.
  • Survey Background

    Completed in December 2003, the Deloitte Research communications off-shoring study surveyed 42 of the world's leading communications operators, representing all three major segments: fixed, mobile and cable. The sample included 10 of the world's top 20 operators on a revenue basis and the survey sample represents approximately 30% of total industry revenues - based on 2002 results. The survey looked at the industry's current activities and future expectations for off-shoring. Companies responding to the survey either own their own off-shore facilities; have established a joint venture, or are outsourcing today.

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