Telcos make a case for outsourcing

31 Jul 2003

The received wisdom in business at this time is that companies should focus on what they do best and outsource everything else from cleaning the floors to running the car parks. However, the definition of what constitutes a core service is getting narrower all the time. For instance, IT could be considered a core competence in banking, yet Bank of Ireland recently signed a deal with Hewlett-Packard for that company to manage the bank’s computing resources.

Telecommunications too is now being seen as something that businesses can best leave to the experts and all of the leading telecoms providers offer some form of managed services solution.

“The managed services option covers a multitude, from managed connectivity to hardware and hardware environment management and includes managing the applications running on that hardware environment,” points out Fintan Lawler, director of internet service provider hosting and managed services at Eircom.

Gary Cobain, general manager solutions at Esat BT, expands: “The majority of managed services would be based around telecoms and datacoms infrastructure and we would build services around managing a company’s private branch exchange or LAN [local area network].”

Both are agreed on why companies would opt for a managed services approach: cost. According to Lawler, companies such as Eircom can offer the economies of scale that smaller business simply cannot achieve. “Having your own assets available 24/7 is expensive but by leveraging a pool you can reduce costs by about 30pc,” he estimates.

Businesses also have access to skills processes and support. “In terms of technology refresh, we are managing a number of applications and application environments that are similar across clients so we can do updates seamlessly across customers,” Lawler adds.

Cobain points out that by using a managed services solution, a company’s resources are liberated for more productive work. “As the network becomes more and more critical to businesses, more and more internal resources become tied up,” he says. “What we offer is a shared service so that they get economies of scale and best-of-breed solutions. They also get 24/7 cover or European cover that they cannot necessarily afford themselves.”

The European aspect is one that becomes more important as companies try to develop export markets and set up overseas offices. “We are finding that many companies based in Ireland don’t have appropriate IT resources outside their local geographic areas so one reason they move to a managed services solution is that they cannot manage the LAN or telephone system in France or Germany. So we offer services where those things are managed from here or from the UK,” Cobain explains.

Another advantage is that the managed services provider can give companies a better indication of how efficient their networks are. “What we find with some customers is that they have no idea, for instance, how their phone systems’ costs are broken down,” says Cobain. “Some want us to give them interdepartmental reports. Others want us to manage their inter-site traffic and perhaps to analyse what the traffic is. Should they push some of their traffic off PSTN [public switched telephone network] and onto a data network, for instance?”

Esat BT also manages LANs. “What we find is that companies can have bottlenecks on their LANs,” adds Cobain. “If we are managing them, then given the tools we use we can identify issues and carry out monthly review meetings at which we make recommendations. So it’s not just a case of plug it in and we’ll fix it. We take a proactive approach and we will tell a company when it is time to upgrade its network to best suit its needs.”

Another advantage of outsourcing telecoms is increased reliability. The managed services providers can often provide levels of redundancy and backup that would be prohibitively expensive for an individual business. “When it comes down to physical environment we are the only company in Ireland with a triangulated data centre capability,” says Lawler. “That means we have three physical locations in different parts of Dublin. If any one environment fails we have full links to the other two sites.” Eircom, he says, uses hot mirroring, which means that all data is copied to two or three sites in real-time and is thus guaranteed to be secure. “If you operate from a single site, you can make it the best you can but your dependency is on a single site,” he adds.

Managed services offerings can go beyond simply managing voice and data traffic. “We also provide services on SAP, Oracle, JD Edwards and so on,” says Lawler. “We deliver these services to 1.6 million locations throughout Ireland. No matter the size of your company we have the skills to manage large- and small-scale environments.

Nor are such services restricted to landlines. Esat BT, says Cobain, has just launched a service for managing mobile communications. “We found that a lot of companies are using different mobile operators in each country in which they do business,” he continues. “This can be difficult to manage. Mobile devices are becoming more and more critical to businesses so if someone loses his or her mobile phone while travelling, there is a cost to the business while that person is off the air. Part of what we offer is a replacement service. We define the countries where our client would need cover and we negotiate terms with one or two operators on his or her behalf. Our buying power is greater than many companies and we pass the savings on.” Esat BT, he says, also has tools to monitor how mobiles are being used. Not every company wants to pay for downloaded ringtones or parking in Dublin.

“The move to managed services is significant,” concludes Cobain. “People are seeing the benefits. In their total cost of ownership calculations one of the things people may not consider is down time. They say ‘I’m running a network and it’s only costing half a person’. But what happens when the network goes down for several days when the person running the network goes on holiday?”

By David Stewart