Outsourcing OSS: Logical Conclusion or Loss of Control?
By Edward J. Finegold, Editor-in-Chief
Outsourcing has become an increasingly important IT strategy option for enterprises across the board, including large telecommunications carriers. From the outside looking in, the business case for outsourcing seems pretty standard cut costs, offload non-core systems and processes, extend processing and project capacity, and drive operational efficiency. With functions like customer care, and in many cases billing, telecom operators have been outsourcing on an increasing basis for a number of years. As the scope turns toward key OSS functions however, like network management and provisioning, the business case grows murky and the personal and political stakes escalate.
No Economy of Scale
Functions like billing and CRM are common and generally well defined. Today's outsourced software offerings are flexible enough to take in stride the variations in billing and CRM requirements from carrier to carrier and still produce the economies of scale that make outsourcing make sense. Deeper telco processes however, like those for complex service provisioning, are so unique in most cases that they aren't repeatable. Outsourcing such functions may not produce any economies of scale for the outsourcer, and ultimately can lead to more work for telco operations folks as they first move functionality out of house, and then have to manage the outsourcing partner to make sure things are running correctly. In the end, at best the carrier may only trade like-for-like. In some cases decreases in the cost of labor much of provisioning can involve data entry and order policing by clerks can be realized, but can be offset just as easily by the cost to move capabilities out and reorganize the organization. Further, sending manual processes out for cheaper labor doesn't necessarily drive operational improvement as much as headcount reductions and shifting some fixed costs into the variable category.
Outsourcing Realities
It's all about cutting costs, says Mark Fenness, a former director with MCI who is now helping growing carriers to develop operations and automation plans. We're not talking about the super-technical stuff though, we're talking about things like data entry, he says of those OSS functions that are generally sent out. For example MCI, he says, sends a significant amount of its clerk-work to Argentina , though the company does not typically publicize it externally or internally. MCI is certainly not alone as heavyweights such as AT&T and Nextel declined to comment for this story based on their sensitivity toward this topic.
Fenness explains that in many cases, outsourcing decisions are made in mid-stride. Every executive must maintain a budget and budgets get trimmed, he says. As a budget cutting mandate is passed down from the executive levels, different organizations are tasked with cutting a percentage of their expenses and outsourcing is typically considered an option. It can be a long process, however, to determine what can be sliced and the associated risks. In many cases, the final outsourcing selection process is done without a typical RFI or RFP process so as to keep things quiet for reasons ranging from morale and potential media scrutiny to the value of a carrier's stock.
Surrendering Control
The individual's need for control over his environment is a powerful psychological motivator. In fact, it's humans' ability to manipulate and in some way control the environment around us that puts us at the top of the food chain. When it comes time to take control away from someone be it over systems, processes, people, or managing the network there seems to be a primal urge to reject the notion. Those who control the tools control the business, is an old IT axiom that takes center stage in the argument over outsourcing. In many cases, outsourcing is done after the fact and quietly because it wasn't made a strategic priority early on. Generally speaking, those with the ability to make decisions that will keep their hands firmly on the controls will do so until they have no other choice.
All decision-makers, however, should not be condemned for choosing not to pursue OSS outsourcing. In many cases, the risks are too steep and the potential benefits unclear. Fenness explains that common functions like network management can be outsourced in part. This can be cost effective and the right choice in many cases because craft technicians are expensive for a carrier to keep on staff. The expense of such a skilled person makes more sense when spread across multiple carriers in an outsourcing arrangement.
