Outsourcing haircut likely for Telecom Technology

Labour's Clare Curran suggests Telecom Technology and Shared Services will bear the brunt of management job cuts

Telecom’s recently-announced IT infrastructure management re-jig could have wide implications and bite deep into staffing numbers at the telco if outsourcing of the Telecom Technology & Shared Services (TT&SS) support unit goes ahead.

Named the Technology Future Mode of Operation, the billion dollar project is led by new chief innovation officer David Havercroft and was initiated in September-October last year, with approval by management in December.

Computerworld understands that one of the project aims is to outsource TT&SS with nearly 2000 permanent employees.

Telecom spokesman Ian Bonnar confirmed last week that the Technology division of the TT&SS is currently reviewing its partnership arrangements. This, Bonnar says, is part of a larger programme of work to ensure that the TT&SS has the right people and partners to allow it to support Telecom’s overall objectives.

Bonnar said that the process is in a relatively early stage and that no decisions have been made as to what sort of partnership model will work best for Telecom, or how and when it could be implemented.

He said “no decision on this is imminent and we don’t have a deadline for implementation.”

However, after this week's announcement of 200 management redundancies and a restatement of earnings, Labour ICT spokeswoman Clare Curran posted to her blog suggesting TT&SS would bear the brunt of the job losses.

"I understand those jobs are being axed mainly from Telecom Technology and Telecom shared services. It is my understanding that the 200 managers axed represent a workforce of between 1000 and 2000. There are a myriad of projects and other jobs within Telecom that will be affected," she writes.

"Rumours have been circulating that Telecom is using the pressures of operational separation as a smokescreen to mask its plans to outsource and ultimately offshore up to a third of its workforce in the long term."

Recently, the Dominion Post reported that IBM, Hewlett-Packard and an Indian outsourcing firm were shortlisted for the contract. The contract was worth $1.5 billion in 1999 when it was awarded to EDS, which has then been bought by Hewlett-Packard.

All three shortlisted providers have the ability to offshore considerable volumes of work as HP, as incumbent, has in moving work to India-based unit Mphasis. Telecom already outsources much of its Next Generation Telecom development work to Indian firm Tech Mahindra.

According to Bonnar, “any comments about impact on jobs or other parts of implementation are sheer speculation.”

ICT Minister Steven Joyce was contacted by Computerworld for comment on whether Telecom had consulted with the government on the outsourcing. A spokesperson for Joyce’s office said Telecom had not spoken to the minister, and Bonnar says the telco isn’t “aware of any comment from the government regarding this [outsourcing] programme.”

IDC’s research manager of telecommunications, Rosalie Nelson, says cost cutting initiatives are absolutely to be expected and very much in line with what the analyst firm is seeing internationally as well.

According to Nelson, IDC’s draft forecasts show “a very flat to slightly declining revenue profile for the market”.

This is primarily due to the fact that the largest revenue/profit areas of PSTN and mobile voice will be under intensifying pressure over the next five years not least due to regulatory changes, Nelson says. These will not be offset by new revenue sources which will grow, but from a much lower base.

At the same time, traffic and actual subscriber/connections will continue to grow, Nelson says.

This will lead to continuing demand for increased capital and operational expenditure to manage that traffic, for companies to remain technologically competitive and retain market share.

In Nelson’s words, “something’s gotta give”.

TT&SS supports the other Telecom units such as Retail, Wholesale, Chorus, AAPT, Gen-i and Telecom NZ International in crucial parts of the telco’s business. These include accounts and billing, procurement and supply, provisioning, operations and information management and engineering.

Amongst its big projects recently are the replacement of the old landline voice telephone, and building the new XT WCDMA 3G mobile networks. TT&SS was headed by Frank Mount until February this year, when resigned after a spate of failures for the XT network.

Mount was replaced by David Havercroft, whose past role at IBM included managing outsourcing arrangements for Asia-Pacific telecommunications firms.

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