Study: Telecoms Love Outsourcing

NEW YORK -- Telecommunications service providers facing a difficult business environment are pursuing outsourcing opportunities more aggressively than ever before. According to a recent study from global management consultant Booz Allen Hamilton, more than 75% of North American telecom executives consider outsourcing a key component of their business plans today. Moreover, the study found that service providers are willing to outsource some activities that previously were considered "core" business functions.

Improved financial performance tops the list of reasons that service providers give for outsourcing. All of the respondents (100%) cited operating expense reduction and optimization of capital expenditures as a key driver, closely followed by headcount flexibility, which was mentioned by 77% of wireless and 63% of wireline players. Other reasons, such as exploring new technologies and capabilities, were far less important and primarily mentioned by smaller players.

Booz Allen interviewed senior executives from major service providers to reveal the drivers and trends for outsourcing in the North American telecommunications industry. Study respondents represent more than 80% of the market, including local carriers, long distance carriers, wireless carriers and smaller players.

Although service providers have previously embraced outsourcing support functions such as HR and IT, they generally have not supported outsourcing of core technical or customer facing activities including network planning and architecture, platform development and sales and marketing. However, that attitude has changed - most executives interviewed conceded that they are actively moving towards outsourcing network functions once considered core. In fact, over 70% said they have either already outsourced some network-related activities or would do so in the near future. Among network-related functions, installation (66%) and maintenance (63%) are most likely to be outsourced.

"Telecom companies are turning to outsourcing for the cost savings they need to stay competitive," said Frank Ribeiro, Principal at Booz Allen. "The move to include network-related activities should help the outsourcing market continue to expand."