With pressure rising for cost reductions, a Global Telecoms Business survey of telecoms executives shows that most expect to increase their level of outsourcing in response to the downturn, as they strive to reduce costs and retain customers

Matthew Vallance: saving money is what motivates
people. That’s not the only reason but it’s a big
tick in the box

Readers of Global Telecoms Business expect to increase their use of outsourcing over the next year, according to a survey by the publication.

More than half said they expect their level of outsourcing to rise a little or rise a lot, while about a quarter said they expect their use of outsourcing to stay the same. Only about one in eight told the survey that they would reduce their outsourcing levels.

Matthew Vallance, president of the telecoms unit at outsourcing company Firstsource, told Global Telecoms Business: “It’s a macro trend. There are pressures on operator margins and they need to generate a lot of cost savings.”

The survey — see tables — showed that India and other Asia-Pacific countries were favourite destinations for outsourcing, including China, Hong Kong and Malaysia. And respondents confirmed that cost savings or the ability to vary costs in line with demand was a key factor in the decision to outsource or to move services to other locations.

“Saving money is what motivates people,” said Vallance. “That’s not the only reason but it’s a big tick in the box when you go to the higher levels in an organisation.”

But Vallance also noted that availability of skills was also something that companies worried about. About a quarter of the respondents in the GTB survey said that access to a larger workforce or a wider skills pool was a key advantage for outsourcing.

Some respondents cited the availability of customer service people for longer hours, and Vallance confirmed that this is an important consideration. “A lot of organisations will outsource because of the availability of customer service people — if you can get longer hours.”

Time zones are also important, and outsourcing helps companies to provide service through more of the day. “We have people available from 8am to 11pm from one site,” said Vallance. “A lot of companies don’t want to provide customer service people in-house because it’s difficult to retain them for those longer hours.”

It’s still a challenge for Firstsource, he noted, but the people he employs expect to have to do such shifts. And it’s less of a problem now than it was: “Attrition is reducing, because people want to keep hold of their jobs.”

A few companies said they didn’t outsource — but that might have been simply that the people who helped with the survey were not aware of all outsourcing contracts in their company. “Some companies outsource their travel desk, for example, but executives wouldn’t necessarily think of that,” said Vallance.

Executives who helped with the survey noted that customers were spending less and some were delaying payment of bills. Some were more willing to take up converged services.

“People are more willing to take tougher decisions in this environment,” said Vallance. He likened the feeling to that after the dotcom boom and bust in the early years of the decade. “There was a do or die mentality. You’re seeing that now.”

Telecoms operators are “a pretty defensive sector”, he noted: “They are regarded as a utility.” The use of broadband and data services has become essential “and the concept of mobility has become a macro trend”.

Despite the fact that telecoms is resilient in a downturn, “there are challenges around customer retention”, he noted. “The current market encourages people to shop around.”

Meanwhile, how are operators reacting to the downturn? The biggest reaction, according to the GTB survey, is that companies are reducing in-house budgets or reducing staff. Some are cutting their spend on customer acquisition.

“Organisations are looking to consolidate their vendor base,” says Vallance. “When they have different outsourcing partners they are looking to rationalise that.” That leads to what he calls “a smaller number of more strategic partnerships, a gravitation towards larger, better resourced capabilities”.

There will be a squeeze, at the bottom of the market, he predicts, and that might be fatal to some smaller outsourcing companies.

Meanwhile operators are offering converged services, and that is making more demands on their outsourcers. “They want multi-skilled outsourcers. Call centre operators need technical support, broadband support. Clients are looking for more from their outsourcing partners. That’s pushing them towards the larger providers with wider geographical operations.”

The GTB survey showed that operators are looking to reduce the time it takes them to serve customers — and, at the same time, make sure they collect bills faster.

“Customers are staying, but they are spending less,” says Vallance, who now heads Firstsource’s telecommunications and media division and is managing director for the company’s operations in Europe. “Operators have to provide more services and better service bundles.”

1. If you outsource now, which areas of your business do you outsource?

2. Over the next 12 months do you expect your level of outsourcing to …

3. To which regions do you outsource?

4. Can you identify key advantages and disadvantages in outsourcing and/or moving services to other locations

5. If you outsource at the moment, can you identify cost savings you have achieved

6. What have been the key impacts of the economic downturn on your operation?

7. What have been the key impacts of the economic downturn on your own strategy?

8. What are your priorities for improved customer services?