Are telcos new drivers of outsourcing industry?

The recent TPI Index from TPI highlighted an interesting trend where a few very large telco-to-telco contracts--instances where one telecommunications carrier outsources its network operations requirements to another telecommunications service provider--accounted for more than 30 percent of the Broader Market's total contract value (TCV).

Given that in 2008, the telecommunications vertical was #1 in terms of ACV (annual contract value) we have two successive years where that industry is having a significant impact on the global sourcing industry.

I should note that the telecoms vertical ACV was less than 75 percent of the ACV for entire financial services verticals (banking, diversified financials and insurance) but did exceed any individual one of the financial services verticals.

What could be driving this?

• Is it just a decline in financial services given the global financial crisis?
  
• Is it the increased business being done by these firms in Asia-Pacific, a strong and growing region?
  
• Is it the increasing importance of connectivity to both businesses and individuals?
  
• Is it the sign of a bubble like we saw a number of years ago where underseas cables were driving spending to an unstainable level?

While the answer may not be clear yet, increased attention on the telecommunications vertical is certain to continue.

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Michael Rehkopf

Michael has more than 20 years of experience in operations, strategy and sourcing covering all major parts of the globe. He has also worked for Australian, Canadian, German and Japanese companies in both business process outsourcing and IT outsourcing.
Michael's industry experience includes the financial services, manufacturing, telecommunications and travel sectors. He leverages this diverse industry experience and his university background in accounting, IT and his Master of Dispute Resolution, to assist clients in the development of business strategies and the implementation of sourcing strategies. These include the associated evaluation, negotiation and organizational change.
Michael is currently a partner at TPI, the world's oldest and largest sourcing advisory firm. Prior to joining TPI, Michael held leadership positions with Siemens Business Services, OpenPlus International, Mitsubishi Electric and Netron.