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 remain unanswered about how
struggling OEMs and surviving service providers
restructure their business strategies and
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 long-
term 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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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 telecom-
domain 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 demands, ever-changing industry
standards, legacy systems' inability to keep up
with the growing volumes, 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, making the overall telecom
climate volatile and the need for adaptability
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).
Figure 1: Volatility by Industry (Source: IDC, 2002)

Outsourcing Partner
Outsourcing: Panacea for Selection is the key
Telecom Industry There have been many how-to guides
The author contends that outsourcing is one written about taking advantage of offshore
way for the telecom companies to tackle this outsourcing. These guides generally focus on the
volatile industry. Outsourcing is not a fad, and it selection of projects and services to send
is not just a method of gaining a one-time cost offshore, the contractual terms and conditions of
advantage. Outsourcing has the potential of the agreement, and assessing risk factors,While
overcoming cost-pressures, gaining access to these are certainly items for consideration, it
specialized resources, optimizing existing makes sense to first focus on the primary critical
investments and establishing a sound, flexible element that will have the most impact on the
strategy. In fact, this view is supported by IDC's success of any outsourcing arrangement – the
survey, which indicates that companies in volatile selection of an outsourcing partner.
industries are already embracing outsourcing as
With organizations viewing outsourcing as a
way of managing uncertainty. As shown in figure-
solution to transcend the volatile telecom
2, companies in volatile industries have a greater
industry, developing the right supplier
than average tendency to outsource IT functions.
relationship is a key. It was once considered
And the trend is only expected to continue.
good business practice to simply specify mutually
Figure 2: Tendency to Outsource (Source: IDC) agreed upon deliverables and metrics across a
five-year plan. Attaining or exceeding

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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 time-
pressed to launch killer-applications before the
competition and handset manufacturers are
challenged by the multi-vendor environment and
changing customer-preferences. Designing
long-term outsourcing agreement has
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 suggests four parameters
considered for successful outsourcing
partnership. These parameters are based on HSS'
designed matrix (Figure-3), which is
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
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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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, and offshore resources to
accommodate changing client needs and
preferences? Does the offshore provider have the
ability to change this mix when necessary to
a mitigate risks or meet escalated project
to deadlines?
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
to be a hygiene factor in an outsourcing agreement, so
much so that quality-certifications cease to exist
in supplier vendor-evaluation forms lately. Buying
used organizations should however ensure that this
commitment to quality is not only resident in far-
away offshore facilities, but also is delivered
locally with each project engagement. Further
the offshore vendor should be flexible enough to
an 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.
 HSS’ Recommended
Outsourcing zone
Cultural and Process Gaps
between partners

Low Medium High

Flexibility in offerings-
Quality Processes &

High High
Metrics driven

development to
maintenance
Medium Medium

Low
Low
Low Medium High

Cost associated with Outsourcing

project execution

Figure 3: HSS matrix for Outsourced Project cliched it may appear, an outsourcing decision
selection must be based on a sound cost-benefit analysis.
Cultural and Process Gaps between
Cost associated with Outsourcing partners
project execution Successful partnerships require trust,

Cost containment and cost cutting have openness and a 'we are in this together' work

always been major push-factors in favour of culture. Since many outsourcing firms do not
have significant experience in managing diverse
outsourcing. The supplier should take into
account all the cost-implications associated with team interactions, it is important to look for an

outsourcing including intangible parameters, outsourcing partner experienced in helping to

bridge this gap. Outsourcing firms who most
which have an important bearing on the
outsourcing decision, and are often ignored. The successfully bridge this cultural gap have a

organization must take these qualitative factors strong global delivery excellence, across-
continents project management presence, can
into consideration while evaluating the decision.
The parameters, which fall in this category utilize local on-site resources to gain sensitivity to

include- cost associated with assigning a a client’s culture and unique project
requirements, and follow a strict methodology for
dedicated outsourced-project manager;
management time cost; intellectual capital costs- knowledge transfer. Some of the best practices

this is the expense associated with recruiting and that can be adapted to bridge the culture-gaps
include- cultural training programs, cultural-
retention of employees’ etc. While some costs are
to be borne by the supplier, some costs get awareness initiatives, team-building workshops,

shifted to the supplier. Hence, no matter how collaborative development processes etc.

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Outsourcing: A must for the Telecom Industry

Summary and Conclusion outsourcing as the preferred path, the

journey cannot be smooth unless the partner
The volatility that telecom organizations face
selected share the same business goals. It is here
today undoubtedly brings about business issues
that the partner-selection becomes the key. The
and decisions that will require companies to take
outsourcing firm should give serious
action. Outsourcing is one strategy that makes
consideration to establishing and maintaining a
the company more flexible and adaptable to
relationship with a partner with flexibility in
rapidly changing business and market conditions.
service-offerings and which exhibits expertise in
But the challenge doesn't end here. While the
bridging quality-gaps and cultural and process
uncertainty in the environment dictates
gaps between the partnering organizations

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Published:
At Hughes Software Systems. For information on our Products and Services, mail us
Plot-31, Sector-18, at info@hssworld.com or visit us at
Electronic City, Gurgaon http://www.hssworld.com/
Haryana- 122015
India
Phone: +91-124-2346666

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

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