Outsourcing Increases for Telco IT

magellanllcIf you’re one of the many telco companies that outsources its IT, you’re not alone. In a recent survey by The Global IT Association for Telecommunications (ETIS) and The Boston Consulting Group (BCG), we see that the outsourcing spend for this industry is slowly on the rise. In 2013, IT outsourcing accounted for 26% of total IT spend, up from 23% in 2012. That might not seem like much of an increase, but it does indicate that telco enterprises are letting go of the idea of handling every IT aspect in house and taking advantage of working with providers who specialize in areas where the corporations may be weak.

Why Companies are Outsourcing More

While there was a backlash a few years ago when big brands like Dell got shamed for their floundering overseas outsourced customer support, corporations are now finding that many IT functions are ideal for outsourcing. While certainly, some tasks are sent overseas, many companies are simply outsourcing to other US companies that focus on a particular skill that the corporation may lack resources in (mobile app development is an excellent example).

In the survey, participants cited their reasons for outsourcing to include:

      Cost reduction

      Accessing new skills

      Reducing speed to market

      Decreasing head count

It should be no surprise that 36% of participants in the survey said savings was their top motivator for outsourcing. And while outsourcing hasn’t always statistically proven to reduce IT spend, in this survey, the data seems to indicate that the correlation between outsourcing and high IT spend is weaker than in past years.

Image: BCG Perspectives

Getting closer to reducing costs with outsourcing may come with telcos having a better grasp on how to leverage outsourcing. Many opt for a “partial outsourcing” model, keeping some IT tasks in-house and outsourcing others. Another reason for this weakened correlation may simply be that all IT costs have come down in recent years.

What Are Telcos Outsourcing?

It varies from one company to another, but the vast majority of telcos — at least those surveyed — focus their outsourcing funds on four key areas: 

      Application maintenance (52% outsourced)

      Support and training (44% outsourced)

      Application development (40% outsourced)

      IT infrastructure (34% outsourced)

The benefits to outsourcing are ample. Because telcos don’t focus on niche IT activities like mobile app development or training, they may get better results if they outsource these areas to companies that specialize on these activities. And the cost savings are there, especially if a company attempts to take on a task it has no skills in. I’ve written before about companies that try to build a mobile app in house and then come to Magellan after they’ve botched it. Those failed efforts cost time and money, so going straight to an outsourced provider can skip all the heartburn and get a finished, viable product out to market faster.

Outsourcing also takes the pressure off of IT staff to do more than their job description. After all, your web designer is not by default skilled at maintaining your mobile app. And he’s got a full plate of work as it is. Adding on unnecessary projects takes IT staff away from their core focus, and that only hurts the company.

From the Outsourced Perspective

Speaking from the other side of the fence, I know how successful telcos can be when they hand over anything out of their scope to third parties like Magellan. We like to act as an extra arm for our clients’ companies, and create products or maintain them at the level of quality the clients would create if they had the in-house power to do so.

Want to know how outsourcing mobile app development, maintenance, and content delivery can help your brand? Contact us to find out.


Image: PhotoSpin

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