Telecoms to save €12bn by offshoring

While the financial, tech and customer service firms have been quick to turn to offshore outsourcing in recent months, the telecoms sector may soon be catching up.

A report released by Deloitte's technology, media and telecoms arm suggests that the telcos may be hot on the heels of other industries turning to offshoring to cut costs and boost revenues. Figures from the consulting firm predict that by 2008, five per cent or 275,000 telecoms jobs – notably IT, call centres, accounting and application development – will be offshored to locations including India, Estonia and Argentina.

The report, which surveyed fixed, mobile and cable operators, says that the offshoring trend could save the industry €12bn, with those who are already offshoring or who definitely plan to do so citing cost motivations, predicting a saving on wages alone of 20-30 per cent in five years.

While the substantial potential savings are no doubt looming large in bosses' minds and pockets, there are other motivations to offshore, according to telcos, namely an "enhanced quality of staff" to support broadband and data applications and a 24-hour culture that can cut the time needed to produce new applications.

Although it may seem like a question of 'what and when' not 'if' to offshore, the report says that appropriate thought needs to be put into the question of offshore outsourcing. Companies need to look beyond the question of cash and identify what, if any, other benefits there are and suggests that companies should start with a small offshore project before shifting work cross-border wholesale.

Offshoring shouldn't always be viewed as permanent measure – a business case for sending work abroad might not last beyond a certain period and the economic situation in the offshore country can change – meaning businesses should be prepared to repatriate the work if necessary, Deloitte says.

Shirish Patel, technology, media and telecoms partner at Deloitte, said that companies shouldn't rush headlong into any offshoring decisions.

"There are a variety of options available to operators and offshoring should not be considered a panacea for all business ills. In some cases, it may be more efficient to fix a process, such as billing, rather than offshore. No matter what strategy an operator chooses, offshoring is a complex business decision that requires careful analysis to understand the relevant business risks, benefits and opportunities," he said in a statement.