Telecommunications Outsourcing on the Rise

While outsourcing experts agree that business process outsourcing and knowledge process outsourcing will be at the forefront of outsourcing growth in the coming year, some sectors are also gaining momentum.  Companies from different industries are starting to take advantage of outsourcing services such as back office solutions including supply chain and finance and accounting outsourcing.  One sector that is currently thriving is the telecommunications outsourcing sector which is estimated to end the year with an 8% growth in outsourcing as compared to 2009.

According to telecommunications industry market research firm, Infonetics Research, in a report released on the 21st of December, telecommunication services providers have been increasingly adopting outsourcing as a way to cut costs and to remain competitive.  Stéphane Téral, Infonetics Research principal analyst states that, "Fierce competition among telecom service providers around the world is driving them to increase operating expenses, and that in turn is forcing service providers to outsource more of their network tasks".

Perhaps one of the biggest deals to come through in the telecommunications outsourcing sector, is the million outsourcing deal that was awarded to IBM (NYSE:IBM) on the 7th of December by Bharti Airtel (NSE:BHARTIARTL).  The ten year contract is for the management of Bharti Airtels' technology operations in Bangladesh, including its information technology and data center operations.  This is the second deal between the two companies this year, the first being another 10 year agreement on the 17th of September, for the management of technology operations in Africa.

Africa presents an advantageous market to telecommunications providers as estimates by Deloitte peg demand for telecommunications, particularly mobile phones, to be growing at an average of 25% annually.  On the 3rd of December this year, Ethiopia signed an agreement to outsource the management of the state-owned Ethio Telecom to France Telecom (NYSE:FTE).  The contract is slated for two years and worth 30 million euros.  According to France Telecom, it will "strive to improve and modernize Ethio Telecom's overall business aspect by implementing a new organizational structure".

Another major outsourcing player to sign an outsourcing deal with a telecommunications provider is Wipro (NYSE:WIT), who received a three-year outsourcing contract from Vodafone Essar on the 7th of December, to support the company's fixed-line services to business customers.  Wipro will be providing Vodafone (NASDAQ:VOD) with services including network design, as well as building an enterprise network operation center.  Echoing Téral's and Infonetics sentiments on the growth in telecommunications outsourcing, Vodafone Essar director Naveen Chopra advised that Vodafone hopes to, "bring an innovative approach to servicing the enterprise telecom market and also enhance [Vodafone's] business revenues."

Meanwhile, along other verticals in outsourcing, business process outsourcing provider Firstsource Solutions (NSE:FSL) announced on the 20th of December that it has signed a three year outsourcing agreement with IP infrastructure and service solutions provider, GENBAND.  Firstsource will be providing among other services, technical support, emergency recovery, installation technical assistance, return and repair, managed spares, sales support, remote account management and contract administration.

With the bid to remain competitive in the market driving telecommunications outsourcing, we will likely see the trend to continue on in the coming year.  It is likely that we will see telecommunications outsourcing to expand outwards towards other outsourcing verticals as telecommunications companies focus even more on core activities to bring down costs from non core activities.