Sprint Nextel announced plans to outsource network services to Ericsson earlier this month. This news is of interest for several key reasons. Signing the seven-year, $5 billion deal, Sprint became the first U.S. telecom provider to contract with a third party for network management. Sprint has historically maintained very tight control of its network. Outsourcing of network management is increasingly gaining interest of telecoms as they seek to shift their focus from the engineering of networks to the products and services that will win them customers. Announcement of this deal followed closely on the heels of similar deals entered into by BT, Deutsche Telekom, Vodafone and China Mobile.
Further analysis of the trend of telecoms entering into network services contracts:
Telecom operators worldwide are increasingly considering outsourcing the management of their networks to companies like Nokia, Alcatel-Lucent and Ericsson in order to lower costs, increase capabilities and/or focus on other strategic imperatives, says Mark Mayo, partner and president of global resources management for outsourcing consultancy TPI. In fact, network services contracts accounted for half of all the megadeals (contracts with values of $1 billion-plus) signed in the first half of this year, according to market analysis released by TPI last week.
In the disruptive environment that we are in today, running networks is no longer viewed as a necessary core competency:
“Operators are increasingly shifting their emphasis from the engineering-centric stuff like running networks to customer-centric stuff like marketing, segmentation and customer service,” says Jan Dawson, practice leader for operations, wholesale and regulatory at consultancy Ovum. “They see networks as a necessary asset that allows them to do what they do, but running those networks is not necessarily a core competency anymore.”
So far, Sprint is the only American carrier to enter into such an agreement. With the decision, the company will move more than 6,000 jobs off its books. Cutting costs to focus on customer-focused business areas is something that will be considered more closely by telecos around the globe.