Outsourcing: A Solution to Reducing Total Cost of Ownership?

By Stephen Thompson, CEO of Indigo Telecom Group

Telecoms infrastructure is experiencing tremendous growth. It’s reaching more locations and carrying more traffic than ever before, putting network development and maintenance under the spotlight.

Speed to market and lower operational costs are high on the agenda for mobile operators and fixed line carriers, yet the total cost of ownership (TCO) of managing global networks can easily get overshadowed during the land grab stages of rolling out infrastructure.

With competition increasing and resources coming under pressure, carriers are faced with a poorly performing infrastructure and, consequently, network outages.

Using outsourced partners with the expertise and resource to support network infrastructure services is a viable option for many organisations. The question is: how do operators determine where outsourcing will bring value and who are the best partners to engage with?

What about the maths?

Establishing the TCO of running a telecommunications network is no mean feat. There are the obvious considerations including equipment cost, installation, maintenance & OSS/BSS but there is a raft of other elements involved in determining the cost of network management.

Installation and Commissioning: Expanding and converging networks is complex and can mean the fragmentation of services and processes that generate cost while systems are rationalised, processes are developed and personnel are brought up to speed.

Maintenance: The repercussions of not undertaking network maintenance include a shortened life span of equipment and potentially network outages.

Stock and Spares Holding: The holding and delivery of equipment has cost implications that influence network performance SLAs. The time it takes to get hardware into the hands of engineers impacts performance and an operator’s ability to meet KPIs.

• Sourcing and Vendor Engagement: Organisations with procurement capability can realise economies of scale but such functions are costly to run.

• Disposal and Decommissioning: Investment in upgrading network infrastructure inevitably leads to the requirement to decommission, remove and dispose of legacy equipment.

• Change Management: From top-level network strategy and design, to training and time for user orientation, managing change quickly and effectively impacts on the bottom line.

• Network Monitoring: Investing in a state of the art network operation centre (NOC) is a massive undertaking, yet a NOC is at the heart of operations providing 24/7 real-time insight into performance and the monitoring and management of issues.

Long-term trumps short-term

Looking for the lowest cost providers for each element of network support may seem like the best way to reduce overall TCO. However, this approach can lead to short-terms wins that don’t offer long-term value to the overall operation of the network infrastructure.

The trend towards the use of procurement specialists measured on the cost savings they achieve for single areas such as installation misses the point that TCO should actually reflect the cost of ownership over time – not a snapshot at the point of purchase.

The implication of choosing a partner based on the lowest cost for a specific job opens up the risk of suppliers taking a short-term approach too. If the supplier fails to deliver a quality job, they are sent back at their own cost to conduct remedial work. However, there is a long-term impact on the commissioning organisation’s reputation as a service provider and the built in hidden cost of doing the job twice.

It’s time to join the dots

Mobile operators and fixed line carriers can realise the benefits of a joined up approach to infrastructure management by working with partners who see the big picture, not just point solutions.

Taking a full end-to-end suite of services from one partner provides the benefit of seamless support, single point of contact, improved quality, economies of scale, customer intimacy and better organisational reputation.

There are many opportunities for the ball to be dropped if the supply chain is fragmented and this can not only increase costs in terms of remedial activity, additional resource and penalties due to missed SLAs, but can also negatively impact perception of the operator’s brand.

One size does not fit all

Service integration has to be bespoke to the operator. It will introduce costs for the supplier in the short term as it takes on different responsibilities however the supplier should be able to recoup and spread this cost over the longer contract period if the carrier is prepared to make a longer-term commitment. For operators, the savings come in the form of a reduced cost of ownership and increased revenues driven by a better continuity of service.

Managing and maintaining telecoms infrastructure is an important hygiene factor that can distract operators from their main focus of rolling out networks and attracting and retaining customers. Establishing TCO is challenging as there are many areas of cost that are difficult to identify and manage. The benefits of outsourcing need to be balanced against losing control of the end-to-end network operation. Otherwise, this may ultimately result in poor performance, increased downtime, rising cost and lost customers.


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David Dungay

Editor - Comms Business Magazine
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