TELECOMMUNICATIONS is one sector which has been particularly affected by the movement towards outsourcing. As customers seek increasingly tailored services, outsourcing can help telecom operators to differentiate themselves from competitors.
The Slovak Spectator spoke to Gottfried Madl, who is the Account Director in Nokia Siemens Networks (NSN) Slovakia, about the latest trends and challenges in outsourcing information and telecommunications (ICT) services in Slovakia.
The Slovak Spectator (TSS): What do you understand by the term outsourcing?
Gottfried Madl (GM): Outsourcing is a very commonly used term and everybody understands something different by it. Always when we start talking to a customer about outsourcing or managed services we start with what he understands by these terms, what he wants to achieve, what are his intentions and then we agree on the terms and stick to them.
We actually understand two terms – one is managed services (MS), and the other is outsourcing. Under managed services we mean that we are taking over service responsibility from our customer and we manage those services on behalf of our customers but we do not transfer headcount. So for example, we take operation of the network from our customer, but we do it with our resources; we do not take anybody from that organisation into our organisation.
We use the term outsourcing when we manage a client’s network or other part of his business, but also transfer headcount into our organisation.
Here I would like to stress that no outsourcing, no managed-services deal is like any other. Each time it is a customer-tailored solution, which needs a lot of engagement from both sides and a lot of time before finally concluding the project in terms of defining it and defining the partnership.
TSS: What are the trends in terms of outsourcing ICT services in Slovakia? Could you compare Slovakia with the rest of the world?
GM: When it comes to services and to compare what I see here – and all my colleagues share this opinion with me – Slovakia is pretty much in the same state as the rest of Europe. All of those countries and our customers in Slovakia face the same challenges. They are experiencing pressure basically from four directions – the market, technology pressure, how they operate and financial performance.
With regards to the market, it is obvious that it is becoming more competitive. Our customers, as well as the customers of our customers, are changing in that they do not accept mass services any more and want to have individual services tailored for them only. In terms of technology, we are on the verge of changing the current technology for a new one. In operations, we see a lot of transformation from a more traditional organisation into more customer-focused operations. As for financial performance, this comes with market pressure.
These are the pressures that our customers have to live with. To sum up, all of them want to grow and have to reduce their costs at the same time. This is the framework within which we operate.
TSS: Apart from cost reduction, what other benefits can ICT outsourcing bring to a company?
GM: This is a very good question because everybody, when thinking about outsourcing, thinks about cost reduction. I’m convinced that it’s much more. Outsourcing of non-critical services to an outsourcing partner can bring benefits to the customers in many areas. The first is a re-focusing on the customer by outsourcing services where it makes no difference to the end customer who performs these services; the second is to minimise risk; and the third is to implement and launch new technologies.
Returning to the first benefit, we see that our customers have to focus more and more on their subscribers. Actually, outsourcing can help them here because once telecom companies have decided what their core business is and what differentiates them from the competition they are ready to talk about outsourcing. We can help in areas which are essential in order to provide their services, but don’t make any difference for them.
The second one is managing complexity. New technologies are coming: a trend all over Europe is that fixed and mobile services are converging for those where this is applicable, and this generates complexity.
Internally in an organisation you need to manage from mobile to fixed, from fixed to mobile, you need to create new services, and actually how we can contribute here with outsourcing is that we can lend our customers the benefit of our worldwide experience, which we have generated from our scale, i.e. about 300 management services contracts and outsourcing contracts around the world, and 14,000 people transferred worldwide from our customers into our organisation.
And then there is another point – introducing new technologies. I can give an example – building of LTE, also sometimes called the fourth generation in mobile communication. To build an LTE network, there is no difference to your end customer whether you do it on your own or you let another company build it for you. This is something which can be outsourced via the kind of service we call build, operate and transfer. So we provide the service to build a complete network, we operate it for a certain time, and transfer it back to the customer.
Every outsourcing project requires a lot of work before finally concluding a contract. I would say that the contract is the tip of the iceberg, underneath which there is a lot of work. As the outsourcing provider you have to understand what your customer is doing, and how he is delivering services. You have to understand his processes and you have to understand how his organisation is set up, you have to understand this is important, and what service level agreement (SLA) you have to offer to the customer, because in the end everything will be distilled into an SLA.
From the other side, the potential customer needs to understand that outsourcing is not a typical vendor-customer relationship; it is more of a partnership. He needs to be ready to be close, to show you how he is doing day-to-day and what his processes are. This is necessary to avoid any misunderstanding, because outsourcing is something what should continue for the next three-five years or longer, especially if people-transfer is included.
TSS: In which sectors is Nokia Siemens Networks Slovakia active within outsourcing and what services do you provide?
GM: Our main clients operate in the fixed and mobile networks, but we also serve utilities, for example. If you take a look at the lifecycle of an operator’s business this consists of designing, building, operating, maintaining and optimising the network for fixed and mobile networks. We address all of these areas. Clients can get the most benefit from it if you address all five areas, something which is called end-to-end outsourcing. However, we have projects around the world where we address one of these five areas.
TSS: Where do you see the future of outsourcing of ICT services? Might it be that in the future telecom operators will focus only on marketing and sales and the whole operation and development of their networks will be outsourced?
GM: It’s hard to say now how far telecom companies will go. We are currently at a stage where I would say every operator has to think about what his core competence is and where it can differentiate itself from the competition. Each company has to make a strategic matrix, which says: this I need to make on my own because this makes a difference; and this doesn’t make a difference and I can give it away. Once the company has that, it can take the second step and start thinking about outsourcing.
At the moment I don’t see that the future operation of networks will stop making any further difference: I believe there will be still some parts operated by our customers. But I could be proved wrong. Nevertheless, I truly believe that we will see a lot of movement in the next one or two years in areas where operators especially will make up their minds, and will make decisions on what is strategic to them, where they can make a difference in the competition and which parts they can outsource without harming their competitive advantage.
With regards to the space for future growth, Nokia Siemens Networks is continuously analysing key performance indicators (KPIs) like education level, cost of employees, inflation, political stability and other factors, for all European countries. And while doing these analyses for a lot of countries inside as well as outside Europe, we found that Slovakia is a quite interesting country for providing services from Slovakia to other countries, because for all those major KPIs it looks really good. So we are currently analysing whether to establish in Slovakia something more in terms of delivering services to other countries.
9. May 2011 at 0:00 | Jana Liptáková