By 2008, five percent of the telecom industry's 5.5-million labor force, or 275,000 positions, will be off-shored to countries with lower labor costs, according to a survey 42 global telecommunications operators that was conducted by Deloitte & Touche's Research division. The survey 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.
Although the off shoring trend in the telecom industry currently lags behind high tech and financial services, Deloitte & Touche believes off shoring is fast becoming one of the industry's most significant business trends.
The Deloitte & Touche 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 China, Estonia and Argentina are coming online as off-shoring sites.
- The ability to off-shore varies. For example one operator waited 118 days to set up an IP VPN with India - this company only realized 5% cost savings;
- Currently 30% of operators are off-shoring; slightly over half of all operators have no current policy, or have decided not to off-shore at present
- Cost savings for operators that had undertaken off-shoring were typically in the range of 20% to 30%, with some operators attaining in excess of this.
Deloitte & Touche also identified several risks for telecom operators to consider. These include operational complexity and loss of control; language barriers, cultural differences and the protection of intellectual property; objections from home country groups, such as trade unions, as well as anti-globalists and internal employee resistance; and business disruption and security, driven by political instability or immature operations.
Deloitte & Touche is offering advice to operators that are considering an off-shoring strategy. The company forecasts cost savings for the industry to have reached $14 billion per annum by 2008. http://www.deloitte.com/research
