Uncommon Wisdom

May 5 2009   12:13PM GMT

Network outsourcing trend grows from operations economics

Tom Nolle Tom Nolle Profile: Tom Nolle

Sprint is rumored to be looking at outsourcing its network management/operations to Ericsson, another data point in the growing number of management outsource deals. While there are certainly some potential savings involved in this sort of thing, we believe it’s actually pretty clear that savings per se are not the driver.

Sprint and other large operators are more than large enough to reach full operations economies of scale internally with the right tools and support. The problem is they don’t have that, and there’s no prospect of such tools arriving on the scene because of logjams in the standards processes. The outsourcing trend, in our view, is the result of long-standing operator angst about escalating operations costs and risk, and the lack of any systematic vendor support for new options to hold down costs.

By negotiating a deal with an outsourcer, operators can let the outsourcer do what’s needed, defying standards and other factors. In the long run, this may create an enormous advantage for vendors like Alcatel-Lucent, Ericsson, and NSN, which have large and successful outsourcing businesses. After all, while outsourcers don’t dictate network purchases, they are certainly in a position to influence them.

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