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Outsourcing Must for Telecom Industry

Outsourcing Must for Telecom Industry

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Jan 2004

WHITE PAPER

Outsourcing: A must for the Telecom Industry

E-mail: info@hssworld.com

www.hssworld.com

Outsourcing: A must for the Telecom Industry

Introduction
As the Telecom Industry emerges from the depths of its most severe downturn, many questions restructure remain their unanswered business about how and

Volatility in the telecom Industry
To validate, the author's claim to turn to outsourcing as a solution to tide over this dynamic telecom landscape, it is helpful to have an understanding of the overall business climate. Every organization regardless of size or telecomdomain will face a set of challenges. The extent to, and the rate at which these challenges change and a company's ability (or inability) to control and predict them are what determine the overall instability of the environment. Changing customer with the demands, growing ever-changing volumes, industry standards, legacy systems' inability to keep up interworking challenges between diverse nodes are just some of the hurdles that mars the telecom industry. And what’s more disturbing is the fact that these challenges are ongoing, unpredictable, and often unmanageable, paramount. This unstable nature of the industry is further re-validated by a survey conducted by IDC. As per the findings of this survey conducted in 2002, the telecom industry was found to be one of the most volatile industry (Figure-1). making the overall telecom climate volatile and the need for adaptability

struggling OEMs and surviving service providers strategies operational efficiencies for profitable growth. If the industry has stabilized, where does it go from here, and how does it get there? How does an industry once believed immune, prepare itself for similar catastrophes? The road back from the meltdown is not an easy one. It is a tough way and needs to be built on a foundation of longterm stability, proven technology that meets customer needs, and quality services that solves business problems. Businesses in today’s turbulent environment should consider creative strategies to help them weather the volatility in today's telecom industry. One of these strategies is outsourcing. Telecom players have been outsourcing various functions of their businesses from maintaining and supporting mature product lines to more recently co-developing sophisticated 3G node-elements. And given the growth of the overall outsourcing market, it's clear that the strategy is steadily gaining acceptance. This white paper suggests the adoption of outsourcing as means to tide over the volatile telecom industry. The paper further examines how strategic outsourcing can help organizations become adaptive and flexible by partnering with mature partners.

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Figure 1: Volatility by Industry (Source: IDC, 2002)

Outsourcing: Panacea for Telecom Industry
The author contends that outsourcing is one way for the telecom companies to tackle this volatile industry. Outsourcing is not a fad, and it is not just a method of gaining a one-time cost advantage. Outsourcing has the potential of overcoming cost-pressures, gaining access to specialized resources, optimizing existing investments and establishing a sound, flexible strategy. In fact, this view is supported by IDC's survey, which indicates that companies in volatile industries are already embracing outsourcing as way of managing uncertainty. As shown in figure2, companies in volatile industries have a greater than average tendency to outsource IT functions. And the trend is only expected to continue.

Outsourcing Partner Selection is the key
There have been many how-to guides written about taking advantage of offshore outsourcing. These guides generally focus on the selection of projects and services to send offshore, the contractual terms and conditions of the agreement, and assessing risk factors,While these are certainly items for consideration, it makes sense to first focus on the primary critical element that will have the most impact on the success of any outsourcing arrangement – the selection of an outsourcing partner. With organizations viewing outsourcing as a solution industry, to transcend developing the the volatile right telecom supplier

relationship is a key. It was once considered good business practice to simply specify mutually agreed upon deliverables and metrics across a five-year plan. Attaining or exceeding

Figure 2: Tendency to Outsource (Source: IDC)

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Outsourcing: A must for the Telecom Industry

deliverables was considered excellence. However, this approach is no longer adequate. Static terms and conditions cannot support rapidly changing requirements created by market dynamics and technological advances. The challenge today is to create long-term and flexible service relationships that are engineered to adapt to volatile telecom industry. The outsourcing relationship must align with these new expectations and should be fluid enough to adapt to the business environment. In just the wireless space, while service providers are struggling to get their networks to support 3G services, OEMs want to ensure that their node elements are interoperable with third-party components, application developers are timepressed to launch killer-applications before the competition and handset manufacturers are challenged by the multi-vendor environment and changing long-term customer-preferences. outsourcing Designing has a to agreement

to an offshore vendor, its worthwhile to evaluate the vendors not only on their product designing and development expertise, but also on their proficiency to test the system, establish its interoperability with other network elements, integrate the product in the field, offer bug-fix support and enhancement services to the OEM. The outsourcing firm should also give strong consideration to the flexibility of the offshore provider in meeting their needs. Does the offshore provider have the ability to ramp up required skill set resources to meet delivery needs? Does the offshore provider have the flexibility to provide a mix of on-site, off-site, near-shore, accommodate and offshore client resources needs to and changing

preferences? Does the offshore provider have the ability to change this mix when necessary to mitigate deadlines? risks or meet escalated project

anticipate that the telecom world will become even more dynamic – technology innovation will continue to accelerate, as will the unanticipated business challenges and opportunities that result. "Partnering" thus with a specialist to absorb the shocks of technological changes and business dynamics. HSS considered designed suggests for matrix four parameters to be

Quality Processes and Metrics driven
Most of the mature offshore outsourcing firms have demonstrated commitment to quality and continuous improvement by their dedication to achieving the highest levels of ISO and CMM certifications. Quality certifications have become a hygiene factor in an outsourcing agreement, so much so that quality-certifications cease to exist in supplier vendor-evaluation forms lately. Buying organizations should however ensure that this commitment to quality is not only resident in faraway offshore facilities, but also is delivered locally with each project engagement. Further the offshore vendor should be flexible enough to adhere to customer specific quality management system if required and define common quality and process-metrics. Besides the quality focus, the vendor should be process and metrics driven for all of its business operations. It is this inherent commitment to process, methodologies, and metrics management that forms the basis for a true partnership.

successful (Figure-3),

outsourcing is used

partnership. These parameters are based on HSS' which internally by the organization to gauge the partnership synergy with the outsourcing partner. The following elements are critical to the selection process in order to establish and maintain a successful relationship with an offshore provider:

Flexibility in offerings from development services to maintenance
This parameter is of paramount importance. The outsourcing supplier should prefer a partner who can offer full-spectrum services. While timing pressures might force telecom OEMs to outsource the new product development services

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HSS’ Recommended Outsourcing zone
Cultural and Process Gaps between partners Quality Processes & Metrics driven
Low High Medium High

Flexibility in offeringsdevelopment to maintenance

High

Medium

Medium

Low Low Medium High

Low

Cost associated with Outsourcing project execution
Figure 3: HSS matrix for Outsourced Project selection
cliched it may appear, an outsourcing decision must be based on a sound cost-benefit analysis.

Cost associated with Outsourcing project execution
Cost containment and cost cutting have always been major push-factors in favour of outsourcing. The supplier should take into account all the cost-implications associated with outsourcing which have including an intangible parameters, on the important bearing

Cultural and Process Gaps between partners
Successful partnerships require trust, openness and a 'we are in this together' work culture. Since many outsourcing firms do not have significant experience in managing diverse team interactions, it is important to look for an outsourcing partner experienced in helping to bridge this gap. Outsourcing firms who most successfully bridge this cultural gap have a strong global delivery excellence, acrosscontinents project management presence, can utilize local on-site resources to gain sensitivity to a client’s culture and unique project requirements, and follow a strict methodology for knowledge transfer. Some of the best practices that can be adapted to bridge the culture-gaps include- cultural training programs, culturalawareness initiatives, team-building workshops, collaborative development processes etc.

outsourcing decision, and are often ignored. The organization must take these qualitative factors into consideration while evaluating the decision. The parameters, which fall in this category includededicated cost associated with assigning a outsourced-project manager;

management time cost; intellectual capital coststhis is the expense associated with recruiting and retention of employees’ etc. While some costs are to be borne by the supplier, some costs get shifted to the supplier. Hence, no matter how

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Outsourcing: A must for the Telecom Industry

Summary and Conclusion
The volatility that telecom organizations face today undoubtedly brings about business issues and decisions that will require companies to take action. Outsourcing is one strategy that makes the company more flexible and adaptable to rapidly changing business and market conditions. But the challenge doesn't end here. While the uncertainty in the environment dictates

outsourcing as the preferred path, the journey cannot be smooth unless the partner selected share the same business goals. It is here that the partner-selection becomes the key. The outsourcing firm should give serious consideration to establishing and maintaining a relationship with a partner with flexibility in service-offerings and which exhibits expertise in bridging quality-gaps and cultural and process gaps between the partnering organizations

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Published: At Hughes Software Systems. Plot-31, Sector-18, Electronic City, Gurgaon Haryana- 122015 India Phone: +91-124-2346666

For information on our Products and Services, mail us at info@hssworld.com or visit us at

http://www.hssworld.com/

Hughes Software Systems is a leader in offering offshore outsourcing services. HSS excels in communication technologies for Wireless and Voice over Packet, and is fully focussed on creating customer value creation through its strategic outsourcing services spanning full-spectrum services- new product development to maintenance services

© Copyright Hughes Software Systems, 2003

Hughes Software Systems
Plot 31, Electronic City, Sector 18, Gurgaon 122 015, India Tel: +91-124-2346666, 2455555 Fax: +91-124-2455150, 2348931
HSS USA, East Coast
Germantown Tel: +1-240-453-2498 Boston Tel: +1-617-547-6377 Dallas Tel: +1-972-517-3345

HSS Europe
Milton Keynes, UK Tel: +44-1908-221122 Germany Tel: +49-6155-844-274 Finland Tel: +358 40 8290977

HSS USA, West Coast
San Jose Tel: +1-408-436-4604 Los Angeles Tel: +1-323-571-0032; 571-0114

HSS India
Gurgaon Tel: +91-124-2455555; 2346666 Bangalore Tel: +91-80-2286390

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