SBC Calls on Outsourcing

Last week, Hewlett-Packard (NYSE, Nasdaq: HPQ) and SBC Communications Inc. (NYSE: SBC) announced that they had entered into a strategic alliance to “help U.S. businesses streamline the management of complex IT and communications environments.”

But wait, there's more. SBC has made another big outsourcing deal that became public last week. According to deltathree Inc.’s (Nasdaq: DDDC) SEC filings, SBC and deltathree have signed a two-year deal under which deltathree will provide the crucial elements for offering and managing SBC’s residential Internet phone service, everything from billing to application development.

In both these cases, the outsourcing could allow SBC to farm out tasks that aren't part of its core expertise -- and hopefully move faster. It could also be the beginning of a big trend for the large incumbents. Experts say these types of alliances will likely become more commonplace, as large service providers try to manage their migration to a wider range of service (see BT Teams Up With Outsourcer).

Sam Greenholtz, principal at Telecom Pragmatics Inc., says SBC is in so many different businesses -- VOIP, Sonet, fiber, wireless -- that partnerships will become more commonplace to make sure the company isn’t spread too thin.

“These deals bring together all of these segments so SBC can offer these services without having to invest heavily on staff and manpower issues,” Greenholtz says. “It’s a matter of efficiency.”

Carriers are always looking for ways to streamline, and outsourcing is a prime way to reduce costs (see Cutting the Fat (Really)). Besides they haven’t spent huge amounts on IT staffs to begin with. Greenholtz points out it’s always cheaper to add outside people than to add within the organization. And in areas such as VOIP, which are new and complex to engineer, it's especially important to find an expert partner, he says.

The partnerships will also help SBC market through new channels. The company should start to see results from both these alliances soon, as it will begin joint marketing the service with HP by the end of the first quarter, and will start implementing deltathree’s VOIP solutions right away.

"This alliance positions the SBC companies and HP to offer seamless, end-to-end IT and telecom solutions and a single point-of-contact approach that we think many of our respective enterprise customers will find appealing," Mark Keiffer, SBC's senior VP of business marketing, says in a statement announcing the alliance. By relying on companies like HP and deltathree to help them deliver IT and VOIP services, SBC says it can focus on upgrading its network and adding new services (see SBC Selects Microsoft for IPTV and SBC Sheds Light on 'Lightspeed'. It also allows the company to offer services it wouldn’t have been able to without partnering.

By teaming up, SBC can draw off the knowledge base of its partners, while still offering SBC branded services. “The deal with HP is an example of an alliance that will strengthen what we’re able to offer our business customers,” says SBC spokesman Wes Warnock. “Everyone likes the one-stop, one-call approach, and these alliances strengthen that.” — Chris Somerville, Senior Editor, Next-Generation Services

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