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New Deloitte Survey Shows Off-shoring Will Save Communications Industry €12 Billion, Improve Quality of Call Center Capabilities and Enhance Innovation in Broadband and Mobile Data Services

A new  survey of 42 global operators representing all three major segments – fixed, mobile and cable – found that global telecommunications operators are increasingly using off-shoring as a strategy to decrease operational costs and enhance services, according to the Global Technology, Media and Telecommunications Industry Group of Deloitte.

Moreover, the survey, conducted by Deloitte Research, shows that by the year 2008, 5%, of the industry’s 5.5-million labour force, or 275,000 positions, will be off-shored in the communications industry. The industry lags other sectors such as high technology and financial services, but the practice is fast becoming one of the industry’s most significant business trends. Of the operators surveyed who are either off-shoring or have definite plans to off-shore, benefits cited included: cost reduction of 20% - 30% by 2008; enhanced quality of staff supporting more technically advanced broadband and wireless data services; and accelerated time-to-market for advanced data services and applications.

“Off-shoring can be one of an operator's most complex business decisions. For most companies, it’s not a question of whether to off-shore, but what functions to off-shore, and how. And, operators with more experience are reviewing what operations they should off-shore next,” said Jean-Luc Gustin, Partner for Deloitte’s Technology, Media and Telecommunications Group in Belgium. “The drive for enhanced data services, better customer support and faster turnaround for innovative applications and services, as well as the perennial drive for profitability, means that many operators consider off-shoring a necessary strategy for growth.”

Benefits and Risks of Communications Off-shoring
The study found the following benefits from off-shoring across all operators.

• Cost savings for early adopters are expected to range between 20% and 30%, with additional savings expected.
• Industry’s move toward advanced data-oriented services will fuel the off-shoring trend by increasing the need for affordable support staff with strong technical skills. 
• Enhanced competitiveness, as multiple time zones allow teams to work around the clock to reduce time-to-market for application development.
• Top processes being off-shored include IT services, call centers, accounting and finance, operations and application service development.
• India is the destination of choice for off-shoring, but countries such as Estonia and Argentina are coming online as off-shoring sites.

The report also identified several risks to consider.

• Operational complexity and loss of control means that companies must develop new business processes for ensuring the quality and control of development and customer support activities.
• Language barriers, cultural differences and the protection of intellectual property can increase the risk of miscommunication, including legal commitments, leading to inefficiencies or misunderstandings that impede progress.
• Objections from home country groups, such as trade unions, as well as anti-globalists and internal employee resistance can impede the success of off-shoring.
• Business disruption and security, driven by political instability or immature operations, can put off-shoring investment at risk.

Considerations for Operators
The Deloitte survey identified seven “rules of thumb” for operators to consider as they choose their off-shoring strategy:

• Don’t get left behind. Be an early mover, but not a first mover.
• Choose the right partner in the host country.  Unwinding a sub-optimal decision can be costly.
• Think big, but start small. Initial success creates future momentum. Start with areas that well understood.
• Do not limit your focus solely to cost reduction. Off-shoring can create enhanced value through high quality, accelerated application development, and enhanced customer service.
• Set realistic expectations and time horizons for benefits.
• Be ready to revert to on-shore if the business case or macro economic/political environment changes.
• Develop off-shore expertise and know your options.

“There are a variety of options available to operators. Off-shoring should not be not be considered a solution for all ills. In some cases, it may be more efficient to fix a process, such as billing, rather than off-shore,” said Jean-Luc Gustin. “No matter what strategy an operator chooses, off-shoring is a complex business decision that must require careful analysis to understand the relevant business risks, benefits and opportunities.”

Survey Background
Completed in December 2003, the Deloitte Research communications off-shoring study surveyed 42 of the world’s leading communications operators, representing all three major segments: fixed, mobile and cable. The sample included 10 of the world’s top 20 operators on a revenue basis and the survey sample represents approximately 30% of total industry revenues – based on 2002 results. The survey looked at the industry’s current activities and future expectations for off-shoring. Companies responding to the survey either own their own off-shore facilities; have established a joint venture, or are outsourcing today.

The report is available online at www.deloitte.com/research.  

About Deloitte’s Technology, Media & Telecommunications (TMT) Group
The TMT group is composed of service professionals who have a wealth of experience serving technology, media and telecommunications companies throughout the world in areas including software, semiconductors, cable, media and publishing, communication utilities, networking, wireless, computers peripherals, sports and entertainment. These specialists understand the challenges that these companies face throughout all stages of their business growth cycle and are committed to helping them succeed. Deloitte is a leader in providing strategic, financial, operational, and information technology assistance to its technology, media and telecommunications clients.

About Deloitte
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