The Wall Street Journal reports that Sprint Nextel Corp. is in final negotiations to outsource management of its cellular network to Telefon AB L.M. Ericsson and transfer 5,000 to 7,000 U.S. employees to the equipment vendor in a cost-cutting move to help offset Sprint’s dwindling subscriber numbers.
There are the efficiencies of scale here to be gained here. As long as Ericsson continues to maintain the required KPIs and metrics mutually agreed upon between Sprint and Ericsson, the service as experienced by the customers should not change. There is precedent for this – Bharti/Airtel, one of India’s largest GSM providers has been doing exactly this for a long time and it appears to be quite successful. However, I have to wonder why Sprint or Airtel can’t manage to run their own core business more efficiently than outsourcing it to a vendor. Is this just a substitution for poor management? Certain things like drive by testing could be better done by vendors – they can leverage the cars and testers for several different providers, so amortizing that fixed cost over several different networks – but for ongoing OAM? It would require the same sort of headcount because once you’re baselined, the ratio of incidents/people would be the same for anyone. Networks are large and complex enough that you would have dedicated teams per service provider anyway. You would get a bit of flexibility in moving headcount around from provider to provider (think of this as cloud computing except with engineers instead of servers), but I can’t see how the major cost savings would add up. To me it looks like failure of internal metrics and cost controls. This is your core business, you would be able to run it better than an external vendor.
Anyone have some thoughts on this?