Industry news

Tata Consultancy Services (TCS), India's largest outsourcer, reported on Monday strong growth in revenue and profit for the quarter ended 31 December.

TCS' revenue for the quarter was $2.14 billion (£1.34 billion), up by 31 percent from the same quarter in the previous year. Net profit of $517 million for the quarter was up 35 percent. The results are in accordance with US accounting rules.

Based on discussions with customers, the company expects its customers' IT spend to remain the same or improve, TCS CEO and managing director N. Chandrasekaran said at a news conference in Mumbai. TCS and other Indian outsourcers derive most of their revenue from North America and Europe.

The results from TCS follow similar strong results from Infosys Technologies, India's second-largest outsourcer. Infosys said last week that revenue was up by 28.7 percent from the same quarter in the previous year, while net profit was up by 18.9 percent.

There is, however, still uncertainty for Indian outsourcers on a number of fronts. The industry has not yet seen a return to growth that is guaranteed to be long term, said Siddharth Pai, a partner at TPI, a sourcing data and advisory firm.

The return to growth has been confined to a few large Indian outsourcers, who are mainly benefiting from a surge in pent-up demand after the recession, and because more work is now moving offshore, Pai said. The Indian outsourcing industry at large has not reached the high growth levels before the recession, he added.

The weak economic recovery in the US and the sovereign debt crisis in Europe could still impact the growth of the offshore industry, Infosys cautioned. Chandrasekaran said the macroeconomic environment was still "dynamic".

Costs are also increasing for Indian outsourcers as they compete for staff with one another and the Indian subsidiaries of multinational services companies such as IBM, Accenture, and Hewlett-Packard. TCS for example added 12,497 staff in the quarter and expects to add between 12,000 to 15,000 staff in the next quarter.

To keep their costs low, Indian outsourcers are focusing more on campus hires, said Jimit Arora, research director at Everest Group.

The appreciation of the Indian rupee against the U.S. dollar and the U.K. pound has also affected margins, as it affected the revenue in rupees for these companies. However despite these pressures, TCS was able to grow its margins, said Chief Financial Officer S. Mahalingam.

TCS added 35 new clients in the quarter.

Source: http://www.computerworlduk.com/news/outsourcing/3257080/tatas-revenue-profits-soar-despite-uncertain-environment/

The Office of the National Coordinator for Health Information Technology awarded Accenture a two-year contract to help identify the standards and specifications that facilitate the exchange of data across the evolving healthcare system.

Under the contract, Accenture will work with ONC to develop and manage business scenarios called “use cases” that ONC will use to help determine the standards and IT systems necessary for peak operation. In cooperation with ONC and other healthcare stakeholders, Accenture will help identify real-world needs, prioritize them through a governance process, and create explicit documentation of the use cases, and provide information for development of computer system requirements and technical specifications that enable interoperability – the seamless exchange of information among diverse providers and systems.

“Standards that all stakeholders in the connected health environment can adopt are essential to achieving the goals of the HITECH legislation and will help drive down costs and increase the quality of and access to healthcare,” said Rick Ratliff, global managing director, Accenture’s Connected Health IT Solutions. “Those standards will pave the way for fully integrated, patient-centric healthcare­ that focuses on prevention and wellness.”

The use cases will focus on patient-related information, such as ensuring that care providers’ certified electronic medical records systems can handle patient requests for clinical summaries. Accenture also will create a comprehensive, sustainable process for ONC’s standards and interoperability framework, as well as use-cases as part of the framework.

ONC’s framework will establish a set of tools, processes and reusable components that enable the refinement and increased adoption of interoperability standards. Interoperability is critical to the expansion of the secure, electronic movement and use of health information across healthcare networks. The framework also supports future standards for regional health information organizations, state-wide health information exchanges and the National Health Information Network.

Hi-tech manufacturers are Britain's most confident companies, research reveals today, with almost half planning recruitment sprees this year.

The research, commissioned by the US-based conglomerate General Electric, suggests that 71 per cent of hi-tech businesses are optimistic that their performance will improve over the next 12 months, even though a quarter of such companies posted double-digit growth in 2010.

The sector is also poised to deliver a much-needed boost to the employment market, with 48 per cent of companies pledging to take on staff during 2011, with plans to expand their workforces by an average of 5.7 per cent.

Four-fifths of companies in hi-tech industries rely on exports for at least some of their orders. But most are confident about the prospects for demand from overseas, predicting a 12.3 per cent increase in orders from overseas buyers. Domestic demand, by contrast, is expected to rise by 5.8 per cent.

While some companies remain nervous about the economic outlook, particularly with commodity prices expected to add to operating costs, the research will boost the Government, which has made the promotion of hi-tech manufacturing a priority as it works to rebalance the economy.

But the research also suggests that more help from the Coalition could lift the sector, with only a third saying that the conditions for hi-tech manufacturing in Britain are positive.

Nevertheless, Mark Elborne, the president and chief executive of GE in the UK, said hi-tech manufacturers were much more confident than many other businesses.

"Our research shows a vibrant and positive sector that can help revitalise the UK economy over the next few years," Mr Elborne added. "Many of those surveyed had a positive 2010 and feel confident about 2011, particularly when discussing the potential in export markets."

Source: http://www.independent.co.uk/news/business/news/confident-tech-sector-set-to-boost-employment-2186257.html

Jeffrey Saut simply looks up to remind himself which tech stocks will be hot in 2011.

Saut, chief investment strategist for brokerage Raymond James, says he is betting on companies that are leaders in cloud computing -- using Internet technology to move computers and information away from desktops and into remote data centers.

Despite the surge in cloud computing stock prices last year, investors are expecting an encore in 2011 as the revenue growth for these companies rises faster than the broader technology landscape.

Will Danoff, who manages the $72 billion Fidelity Contrafund, is among the most closely watched investors who has embraced the cloud. He says that the cloud is one of his investing strategies for 2011 because he expects companies that sell into the sector to outperform the broader market.

IT research firm Gartner estimates that companies that sell software as a cloud-based service will see revenue growth accelerate this year, climbing 16.2 percent. Last year sales grew an estimated 15.7 percent.

The sector is drawing attention because its sales are revving up just as growth in overall technology spending is on the decline. Gartner sees worldwide tech spending growth slowing to 5.1 percent this year, down from 5.4 percent in 2010.

Buyout speculation on cloud computing leaders sent valuations in the sector to nosebleed levels last year. Cloud pioneer Salesforce.com Inc trades at 122 times next year's average forecast for earnings per share, compared to a ratio of 13 times for tech blue-chip IBM.

Oracle Corp Chief Executive Larry Ellison last year told Reuters that he looked at buying Salesforce, but that its CEO, Marc Benioff, wanted too much money for the software maker.

Reuters also learned on Wednesday Ultimate Software Group Inc could be the next to go on the block. Ultimate said it has "no present intention" to sell itself.

MOMENTUM PLAY

Some investors are nervous about the high valuations commanded by cloud computing companies, whose volatile trading has led to precipitous declines on some days last year.

But there is simply too much momentum behind the sector to falter this year. "It will probably still emerge as a leader," said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut.

The optimism on the sector is underpinned by the belief that companies behind them are fundamentally reshaping the way businesses use technology, investors and analysts said.

Cloud leaders like Salesforce.com sell their software through web browsers, saving customers the expense and time of buying and maintaining expensive computer servers.

When Benioff founded Salesforce more than a decade ago, his goal was to make running software for managing corporations as easy as using Amazon or Ebay.com Inc to buy goods. Industry analysts say that to a great extent he has succeeded.

Besides ease of use, cloud computing saves money by providing huge economies of scale. It offers businesses centralized software, storage and computing services that are less expensive to procure. That model is somewhat similar to the one that online retailers like Amazon use to provide discounted goods to consumers.

Raymond James is betting on that the model will work.

Saut says his company estimates that embracing the cloud will shave some 30 percent off his company's annual IT budget, which runs at about $170 million per year.

TOP PERFORMERS

The big names in cloud computing also rank among last year's top-performing stocks: VMware Inc, which sells software to build clouds, saw its shares more than double in 2011. Salesforce.com, which sells software that workers access over the Internet from web browsers, soared 80 percent.

NetApp Inc and EMC Corp, which both sell equipment for storing data in the cloud, were also top gainers in 2010.

Wall Street analysts say they are constantly peppered with questions from portfolio managers eager to profit from the surge in popularity of cloud stocks.

Industry analysts say that cloud computing projects tend to generate quick returns on investments, which means that companies are able to quickly recoup the money they spend on the projects and see tangible benefits to their businesses.

That resonates with Fidelity's Danoff, who holds cloud players including Google Inc, Amazon, Salesforce, NetApp and Citrix Systems Inc.

Quick and demonstrable returns on investment mean that it is easier to get chief financial officers and chief executives to approve budgets for projects, Danoff said.

"CFOs and CEOs will say 'Yes Mr. CTO, this is a good thing. We're going to save money by spending money,'" Danoff said.

Source: http://uk.reuters.com/article/idUKTRE70D2YT20110114?pageNumber=1

HP Enterprise Services today announced the Federal Bureau of Investigation (FBI) has selected HP as one of the prime contractors to provide information technology solutions to it and other U.S. Department of Justice agencies under the FBI Information Technology Supplies and Support Services (FBI IT Triple S) contract.

HP will be able to compete for task orders under the $30 billion FBI IT Triple S multiple-award Basic Ordering Agreement contract. The contract has a one-year base period followed by a seven-year option period and serves as a centralized source for the FBI to buy integrated technology products and services. By establishing simple and uniform mechanisms in support of the FBI’s mission and daily operations, the agency is able to obtain contractor services as well as high-quality products.

Under the FBI IT Triple S contract, HP will offer technology solutions across several functional areas, including operations and maintenance, technical development, consulting, hardware and software and other related IT services, to meet the national security and criminal investigation objectives of all FBI organizations, as well as the U.S. Department of Justice.

In a world of continuous connectivity, the U.S. government is leveraging technology to modernize, transform, secure, optimize and deliver immediate services to citizens. In support of the Triple S initiative, HP will offer comprehensive, secure technology solutions on time and on budget in support of the agency’s journey to an Instant-On Enterprise environment. HP’s Instant-On Enterprise delivery model improves flexibility and embeds technology to provide innovation at every point that matters within an organization, from mobile devices to global data centers.

“The FBI IT Triple S contract will be an essential vehicle used to obtain the supplies and services needed to deliver improved and efficient information technology to the criminal justice community,” said Dennis Stolkey, senior vice president, U.S. Public Sector, HP Enterprise Services. “As a Triple S vendor, HP will provide industry best practices, technology, innovation, security and thought leadership from the desktop to the cloud that will assist the Bureau in accomplishing its critical missions.”

HP has provided support services to U.S. government agencies for more than 45 years, building, integrating, securing and operating some of the most complex environments in the world, while enabling agency effectiveness, securing the exchange of information and ensuring citizen privacy.

Nick Hopkinson, formerly the chief information officer at Government Communications Headquarters (GCHQ), the UK communications spying centre based in Cheltenham, has left the UK intelligence service to work as UK director of cybersecurity at IT services firm CSC.

Hopkinson's transfer to the private sector comes at a time the UK government says cybersecurity is now a major priority in its defence of the country, in the face of sophisticated attacks.

Our clients want to be confident that their information and network systems are protected,” said Samuel Visner, CSC vice president and global lead executive for cybersecurity. “Under Nick’s leadership, CSC will work closely with its clients to develop or improve their technology roadmaps, mitigate their security risks and ensure their enterprise is protected.”

For six years, said CSC, he was a member of the GCHQ board, where he led major programmes that transformed the operational technology base of the organisation and modernised IT services.

In his most recent role, Hopkinson was director general for information security and assurance at CESG, an organisation that provides security and risk certifications and assessments for UK government departments and some private sector organisations.

Source: http://www.computerworlduk.com/news/public-sector/3256450/former-uk-spy-centre-cio-joins-csc/

Via the Government Agency for Financial Applications, the French Ministry of Budget and Government Accounting, Civil Service and State Reform, has retained the consortium led by Steria and its co-sourcing partner, Capgemini France - a subsidiary of the Capgemini Group - for the maintenance of Chorus. The six-year contract, is worth around €120 million, and is part of the French state modernization program.

A part of the Ministry of Budget and Government Accounting, the AIFE is in charge of running the state financial information system in France, which notably includes building, deploying and maintaining Chorus.

The Chorus program is based on an SAP solution. It was designed to make a unique and integrated information system that conforms to the Organic Law Relative to the Laws of Finance (LOLF)[1] available to all stakeholders involved in spending, non-fiscal receipts and accounting[2], for financial, budget and accounts management. Chorus contributes to the modernization and rationalization of budgetary and accounting processes of French state services.

Steria and Capgemini at the centre of the modernization of the French Administration

Steria and Capgemini have worked with the French Administration on the deployment of the LOLF for a long time. After having been selected to take part in the construction of the LOLF Agreement budgeting and accounting system, Steria has handled its maintenance since 2005. Capgemini has also been a major partner in Chorus construction, since 2007. Capgemini has supported the deployment of all State budgeting and accounting systems, since 2001, and since 2009, the Group has notably handled the deployment of Chorus to half of all ministries, thanks to the mobilization of 230 IT consultants, from 23 sites around France. This new information system will eventually be used by nearly 50,000 users, of which 25,000 will use the core SAP application.

This new contract sees Steria and Capgemini strengthen their position as partners of large-scale government IT programs, and continue their support of the French state in its modernization program.

“Steria’s expertise in industrialized global maintenance solutions, and the skill of the 150 team members dedicated to the project - notably from the SAP services center in Toulouse - who handled Third Party Application Management under very tight deadlines, were deciding factors in this new contract, and confirm our ability to support major transformation projects for the Administration,” comments Olivier Vallet, Senior Executive Vice President and CEO France, in charge of Group Innovation Policy and the supervision of Scandinavia and Belux.

“Our offer stood out for the complementarity of our skills, and ability to respond to the client’s particularly selective quality and cost criteria. Capgemini’s strategy is to accelerate its commitment to public institutions, by building on its international experience and ability to support the Administration in its large-scale modernization projects,” says Jean-Philippe Bol, Head of Technology Services, Capgemini, in France.

Can outsourcing work for SMEs?

For big companies, outsourcing works. If you’re a major bank and you want to write a new core system and want to outsource that development to Infosys in India, it is absolutely the right thing to do. It’s a big project that’s going to require millions of man hours. It’s got a defined scope and it’s going to need to be very structured, because the bank as a company is very structured, so the fit is perfect.

For small companies and start-ups, outsourcing can also work very well for non-core operations such as legal, accounts and IT support. Whilst companies need to be careful in choosing the appropriate partner, these are functions which are better provided by specialists. However, for core business functions, where you need control over who delivers them and how, outsourcing brings disadvantages for smaller businesses. This is because they may come across the following challenges:

You have a lack of control: Just when you have a great team member who understands your business processes and is really productive, they get moved over to another client and you then have another person in their place. You cannot control who is working in your team.

There is, inevitably, a lack of integration. An outsourced team can’t become part of your team; therefore they will not feel part of your company and understand your business culture – which can have a detrimental effect on productivity levels and quality of work.

You have limited day-to-day flexibility, which is normally a core requirement for SMEs. Outsourcers are very process driven, and SMEs generally are not. If you do not have a process driven approach, projects may veer off track when they are out of sight.

There aren’t always cost benefits. People often outsource projects that last less than a year and subsequently don’t receive the perceived offshoring cost benefits or return on investment because the high planning, training, communication and travel costs mean that the wage differential can be severely reduced, while the training investment is lost when the project ends.

Lastly, there is a lack of IP protection and subsequently you can get IP leakage. If you are experts in something you have to teach an outsourcer your domain knowledge and, over time, the outsourcer becomes an expert as well. The next thing you know these guys are pitching that expertise to your competitors. They can’t help what they’ve learned and, as a third party company, they’re going to try and leverage that as much as they can. Larger companies are typically outsourcing non-core activities where IP is not as much of an issue.

So if outsourcing isn’t a good fit for your operations what are the other options for small companies? Well, for ad-hoc project work you should give it to a freelancer, or find a domestic company which already has an offshore model and expertise in place.

If you have on-going needs then look to build your own team abroad, in a location which meets your strategic needs. You can set up the team yourself, if you have lots of spare resources to devote to this, and are willing to take the risk of going into unknown, or do it via a partner where you retain control but employ their local - or should I say global - expertise. And the final option is to consider a merger or acquisition to bring in a team in the relevant location.

For SMEs and start-ups which need flexibility, speed and control, have changing priorities, or where IP is a critical consideration, offshoring (be it DIY or assisted) is likely to be the best solution.

Legal services company Myhomemove faced exactly this dilemma. Having worked with traditional outsourcers in India and Sri Lanka for over four years, they were looking to move to a different model which would allow them to manage the staff in a way which fitted their company culture and ethos and gave them more control over decisions such as salaries, conditions and career paths of their staff. They considered setting their own operation, but were concerned by the complexity and bureaucracy involved.

By offshoring their operations through a partner they were able to have absolute control over day to day operations and culture compared to a traditional outsourced relationship and without the risks of setting up their own legal entity.

Whatever your needs do make sure you understand the different routes you can take and weigh up the pros and cons very carefully. Some companies make the mistake of confusing offshoring with outsourcing, and disregarding both models as a result. They are distinctly different and should be considered according to their individual benefits and disadvantages.

Neal Gandhi is the chief executive of Quickstart Global, which helps companies to expand globally, and is the author of Born Global which offers practical advice to entrepreneurs. www.quickstartglobal.com

If we look at the number of organisations outsourcing their software development, IT service desk or WAN support to India and other cheap-labour countries, offshoring nowadays seems not only convenient and straight-forward, but as easy as abc. But what the media doesn’t seem to cover is an issue that is not at all uncommon: it hit Barclays, Quark, Dell and a large number of other companies – what happens if all is not well and you have to take the offshored back in-house?

The phenomenon has already been dubbed ‘backshoring’ in the US, where 30% of Fortune 500 companies have experienced it, according to Oxford Analytica. As for the UK, a survey conducted by the National Computing Centre found that 14% of the respondents who have used offshored facilities for their IT have switched work back to the UK, and another 24% are considering the move. This means that nearly 40% of organisations haven’t found offshoring satisfying.

However, the problem is that once you decide to reverse the decision, the process is not trouble-free. Of those who have taken services back in-house, 30% say they have found it ‘difficult’ and nearly half, 49%, ‘moderately difficult’. When we talk about IT, in fact, we are dealing with the pulsating heart and veins of a modern business, where everything seems to rely on technology. So the costs of reversing an offshore operation do not only cover the facilities and assets – it extends to data security, staff skills, system disruptions and inefficiencies, low user or client satisfaction, client loss, and maybe much more. What happens to the CIO who proposed or supported the offshore move?

Let’s look at some examples. Barclays’ recent ‘divorce’ from Accenture appears to be peaceful and grievance-free, just the best answer to their present needs. When the application development and management of their banking systems were assigned to Accenture in 2004, around 900 employees were transferred to the provider. But only 230 are expected to be taken back. What happens to the various development, support and maintenance staff and their skills every time they are shifted to the other side? Some are taken on by the new employer under TUPE arrangements - the Transfer of Undertakings (Protection of Employment) Regulations preserve employees' terms and conditions with the previous company - although the majority will be lost, either voluntarily or forcefully made redundant. Unfortunately, when you lose people you lose their acquired skills as well, and to that there is no remedy.

An organisation which decided to openly talk about their failure is Everdream, which provides customers with remote desktop management services, and that in 2003 decided to outsource their Californian help desk to Costa Rica to aid scalability as their business was growing. Fifteen people were sent to the provider to train the call centre employees ‘the Everdream way’. It turned out to be an ever-nightmare when trainers found themselves dealing with a completely different business culture where the idea of customer service was “move ‘em through”, clashing with the hands-on approach of the firm. The strong foreign accent also failed to impress the customers, who started to complain almost immediately. The ‘shallow talent pool’ led Everdream to pull out, as happened to Dell the previous year: customers unhappy with their Indian technical support launched in 2002 made the company decide to re-route calls back to the U.S. In Everdream’s case, the pull-out was spread across six months, making the transition softer and minimising the damage, and many employees had their jobs back. However, it did take some extra financial effort to take the work back in-house and the long-term damage, the relationship with customers, is difficult to measure.

Bad customer service and poor product quality is what brought many Quark clients to switch from their software to Adobe’s InDesign during the Indian experience, never to return – 60% of their customer base, it is claimed. When work was brought back home, the C-executive who decided and led the offshore move was fired without hesitation.

Finally, a mixture of reasons have brought many offshored Oracle projects to fail for a number of US companies, it was reported a few years ago. Communication problems, poorly skilled and trained developers and enormous cost over-runs were topped with the previously unconsidered difference in the Indian law system. Oracle jobs were re-shipped back to the US, but the unrecoverable financial loss left many organisations strained.

These examples confirm the findings of research in the area: the most popular reason for failure is the lack of preparation and execution not on the provider’s but on the client’s side. An organisation needs to be prepared and know what they want from the provider and if offshoring is the right move, to avoid disappointment. Poor joint planning is also often at the root: if the client does not clearly outline and clarify roles and responsibilities, expectations, performance metrics and flexibility prior to signing contracts, there is not much to be expected. Service Level Agreements have to be clear for both sides and have realistic metrics and targets. Experts also suggest defining an exit strategy for contract end or for under-performance, as in fact poor vendor performance is another important reason for failure. Problems related to communication between the in-house and offshore team and to their different culture are often the cause of poor execution, as highlighted with the case of Everdream.

It is important to note, nonetheless, that not all outsourcing projects end up in failure. There are plenty of instances where they do deliver real benefits, both in terms of cost-reduction and improvements in service. However, the success stories tend to involve the use of a partner closer to home, able to understand the client’s environment while allowing easier monitoring of their performance.

So in the case of offshoring gone wrong, what should a CIO take into account when considering the costs of its failure?

The most obvious, and often largest, cost comes about when taking down the offshored department and re-installing it elsewhere should things go wrong, either in-house or with an IT partner nearer to home. Then there are the costs related to lost skills: organisations are unlikely to be able to re-employ previously fired staff so it will be a case of starting again from scratch. New staff will have to be found and trained, and it will take time before service levels are sufficient to deal with business demand – meaning costs could quickly run to seriously damaging amounts.

Technical issues like data security are also not to be overlooked. Different countries have different laws, and might not be so respectful of the privacy of your data. It can be lost, stolen and leaked by redundant employees abroad, legal protection from whom might be weaker than in the UK.

Finally, one last consideration for any CIO is the cost to them as an individual. Should a project as controversial as offshoring fail the responsibility is likely to rest squarely on the shoulders of the person in control. This means ensuring offshoring is really the right path for your organisation is key, as is making sure you are able to clearly demonstrate that it was the partner, not the process, that was at fault should things go wrong – both of which being easier said than done.

Network capacity consumption for data services side continues to skyrocket globally, and communications providers are under tremendous pressure to increase capacity and manage costs, while delivering high-quality customer service.

How can one accomplish these goals simultaneously? The answer may be found in strategic outsourcing of key network functions, which can enable providers to cut costs up to 40 percent, by consolidating fragmented operations and more efficiently using resources across companies and geographies.

If strategic network outsourcing can be so effective, it’s rather surprising that outsourcing isn’t as widespread among communications providers as one might expect. To find out why, we talked to senior network and IT executives at some of the world’s leading global communications providers. We asked them if outsourcing their network and IT operations is their first choice to better manage their company and help ensure customer service – and if not, why not. We described network operations as the people, processes and systems that plan, provision, and manage voice, video and data networks and services; typical IT functions include help desk, desktop support, data center operations, disaster recovery and Web site/e-commerce systems.

We queried senior IT and network executives at communications companies in Western Europe, but we believe their perspectives are common to any provider, regardless of the geography it serves. Among network executives, the top challenge cited is completing the roll-out of next generation broadband networks, such as fiber to the node (FTTN), fiber to the premise (FTTP), or 3G/4G mobile broadband networks while continuing to cut operational expenses, maintain legacy networks and support migration to the new technologies. For IT executives, controlling costs is the biggest hurdle, followed by “business agility,” or the ability to accommodate the fulfillment, management and monetization of new services or consolidation of current systems.

Network executives expressed an overall higher reluctance to outsource network operations, compared with IT executives, who have historically used outsourcing to enhance capabilities, tap into deep skills, and reduce costs. Most network executives said their company outsourced one or more specific individual tasks, rather than entire processes. By contrast, IT execs were more likely to outsource complete functions, such as desktop management, infrastructure (networks and servers) and management or module development (such as application development and testing). And among the IT executives we interviewed, many had also outsourced either the desktop or infrastructure as well as their company’s help desk.

IT and network executives agree that their network is core to their business, and therefore not something that can be easily managed by an external provider. Despite this assertion, given the challenges that they face, providers are starting to reconsider outsourcing certain network functions. Why the change of heart? They must offload the planning, provisioning, and management of legacy services -- such as private line, frame relay, and ATM – so they can focus on next generation networks and services. Secondly, they need additional capacity to scale new networks and services, such as FTTx, Internet TV, or 3G/4G.

When considering outsourcing as an option, network reliability, above all, IT and network executives’ number one worry. Other mutual concerns include potential loss of customer satisfaction, loss of control and internal expertise, and difficulty keeping suppliers motivated throughout a long-term contract.

We believe there are ways to address these areas. Some guidelines providers can keep in mind include:

• Look for an outsource supplier who can handle entire processes, such as order entry, circuit provisioning, and service activation, rather than discrete tasks. The best outsourcing providers stake their reputation on bringing industrialization, standardization and disciplined approaches to end-to-end processes, which typically results in improved cost control, higher quality and high business value for their clients.

• Base sourcing decisions not only on cost considerations, but on other differentiating factors, including flexibility, cultural fit, industry knowledge, and a reputation for delivering results. Look for a long term partner, rather than a low- cost service provider, and closely examine the outsourcing company’s track record in managing contracts several years into it.

• Choose a provider that can outsource as well as transform the operational capability. The ability to improve processes and systems through transformational outsourcing can result in even lower operational costs, improved operations, and higher service levels.

As the technology environment changes at an accelerated pace and time-to-market gets more squeezed, relying solely on internal skills could become a risky business, indeed. At the very least, providers would be wise to more deeply understand the potential benefits they might derive from the strategic use of network outsourcing, so they can make an informed decision that serves their business – and their customers – well.

By Gerardo Canta, Network Outsourcing Lead, Europe and Latin America, Communications & High Tech Operating Practice, Accenture, and Rob Rich, Managing Director, TM Forum Insights Research