OSS Outsourcing Not an Economic Quick Fix

The instinct to look toward outsourcing in tough economic times is natural and understandable, since its main benefit is lowering operational expenses and capital costs. But for several reasons, doing so with your back office is not always, or even often, the answer.

When it comes to core competency, service providers are still network-oriented at heart. They have learned over the years some proficiency at billing and customer care, but these and many of the other processes of the back office have become the bailiwick of the IT department. And while important, when push comes to shove, they are not always considered core to delivering and marketing communications services and are therefore fodder for the outsourcing mill.

But even companies such as Pace Harmon and Patni Computer Systems that specialize in both outsourcing and consulting around outsourcing services warn service providers not to jump into it lightly, especially if they are considering it as a stop-gap measure in response to the economy.

“If you are thinking about doing this as a three-year Band-Aid in response to the economy, then you better not do it,” said Steve Martin, partner at Pace Harmon, a provider of technology sourcing consulting services.

Martin said outsourcing is not for the faint of heart and should not be seen as a quick fix. Not that there is any danger of service providers flocking to outsource their back offices, but interest is on the rise, he said. Martin’s company assesses the operational efficiency of businesses, including telecom service providers, and makes recommendations for improvements. The bulk of Pace Harmon’s advisory business deals with the issue of outsourcing as an option. Martin said that less than half of engagements result in outsourcing.

“I am not convinced that outsourcing makes sense all the time. It is just one of the business options that should be considered when the opportunity is right,” Martin said.

Just what makes the opportunity right is the big question. Greenfield opportunities are obviously good candidates as the service provider has no sunk cost and there are no transition or legacy issues to deal with. When there are transition issues to deal with such as migrating from TDM to IP or from 2.5G to 3G, it can present logical drivers for outsourcing where the contractor would take over a legacy environment and manage it through the transition of customers.