Some telecoms commentators have commented that the skill-shortage in India will mean higher wages and consequent deployment to Eastern Europe. Tony Kalcina, Chief Product Officer, Clarity, explains how India is already overcoming these potential dangerous obstacles.
For over a decade, outsourcing to India has provided Western companies with a means to cut service development and maintenance costs, deal effectively with the peaks and valleys of demand and focus their own efforts on more strategic work. Tony Kalcina, Chief Product Officer, Clarity, reveals the strategies needed to see off new and difficult challenges.
Both India’s government and the relevant entrepreneurs were quick to take advantage of this growing trend, attracting multi-national after multi-national to outsource their business services. In 2008, Indian ICT and business outsourcing services employed four million people and accounted for 7% of India’s gross domestic product, according to Nasscom.
And yet, the extent of outsourcing in India is likely to decline over the coming years. The cost advantage used to be at least a 1:6 return but this has now dropped to less than 1:3. The demand for workers in the ICT services industry has now outstripped the supply of labour to such an extent that a worker shortage is being created, driving up wages and pushing Western companies to outsource to Eastern Europe and elsewhere.
Technology commentators have also pointed out that low value-added and easily automatable work should disappear over the course of the next decade. This has led some industry analysts to claim that India is facing an economic backlash, as Western companies take their business elsewhere. For example, if India is to continue to thrive economically in the twenty-first century, she will need to diversify into developing her own products and services, rather than simply acting as a support for others. To this end, she will need to create a stable and advanced communications infrastructure to support her growing and highly skilled workforce, with experience spanning IT, finance and telecoms.
Fortunately, this is a path India has already started down.
The Indian telecoms market presents substantially different requirements to those in Western Europe or North America. The Indian market is also extremely lucrative, with OSS Observer (Emerging Markets Outlook, February 2008) forecasting revenue growth in emerging markets at 11% from 2007-2012.
Even so, the development of India’s communications infrastructure will be a long and difficult process. Indian telecoms companies face the enormous logistical challenge of a rugged landscape covering over three million kms and a huge, largely rural population. For Indian operators, the key will be in accessing their large and often rural populations that typically have low tele-density; 70% of India’s 1.1 billion population lives in rural areas with tele-density of around 2%, according to Reliance.
Operators can then support business models based on rapid growth and high customer subscription. While the opportunity for customer growth is clear, the automation and intelligent management of manual activities to generate operational efficiency will be critically important when maintaining services for such a large volume of subscribers spread across a huge area. One Indian operator is currently supporting a 1:1,750 staff to subscriber ratio.
Anyone who believes that Indian operators will only need to provide a basic level of customer service is also in for a rude awakening. It is a common misconception that subscribers in emerging markets do not expect a high quality customer service experience. In reality, any providers who do not scrupulously maintain and improve their Service Level Agreement (SLA) face extinction.
Subscribers in emerging markets are technology literate and competition from other operators is relentless. Indeed, competition is a major reason why India has some of the lowest mobile rates in the world, at just two cents per minute.
This need to defend market share and capture new subscribers is also driving innovation in service offerings. In addition to coping with rapid subscriber growth, operators in India must reduce the time-to-market for new products, since demands for 12-15 new products and features per year are not unheard of.
Another challenge facing Indian operators is their comparatively low Average Revenue Per User (ARPU). The estimated ARPU in India is around US$8 per month, which is slightly lower than Indonesia, the Philippines, Malaysia and China. However, this is only around a tenth that of some Western European operators.
While operators in developed markets usually grow their networks with demand, the Indian market required a different approach. One Indian operator invested around US$9 billion in its network – projected to be able to support 135 million subscribers – and then focused on achieving high utilisation through customer growth. This allowed them to garner an early market share (through high performance from day one) but also meant that they needed to see a rapid return on their investment.
To tackle these problems, Indian operators have once again shown their ability to innovate by opting a single Unified OSS. Modern OSS has been shaped by developed markets, culminating in a “Best of Breed” approach potentially unsuited to emerging markets. “Best of breed” approaches to OSS cost more money due to the need for integration and data synchronisation, as well as latencies.
In contrast, a Unified OSS allows for the simplification and consolidation of end-to-end services – improving and stretching the supply chain wherever possible, from equipment supplier to end customer. This presents operators in emerging markets with sophisticated OSS without the associated long lead times and high costs, and has meant that some Indian operators are now seeing increases of a million customers per month and are rapidly expanding their offerings and rolling out next-generation services.
It is also important that OSS providers in emerging markets empower their clients to take control of their OSS and work with them in partnership. Often, Indian operators’ cost constraints are such that they can only maintain their OSS in the long-term by doing it themselves, supported by the product vendor as needed.
The OSS vendor must put in place knowledge transfer strategies that will gradually introduce the operator’s IT staff to the system. Achieving complete transfer of responsibility within a few years is realistic and proven, where supported by the product vendor.
Advanced convergent network management is also now being deployed by Indian operators, so that they can manage both their fixed-line and mobile services through their OSS. This allows operations staff to be multi-skilled with 30% of them implementing both fixed and mobile processes: it results in a reduced number of management platforms through the consolidation of the core network, while effectively equating to a 30% reduction in staff, which reduces out-going costs.
For many Indian operators, next-generation technologies are not a long-term aim but a starting point, since NGN systems actually provide solutions to many of the problems facing them. From a technological standpoint, these Indian operators are not merely creating networks that rival those in Western Europe but that actually surpass them.
Indian operators are currently deploying broadband fibre-optic networks, completely bypassing the copper lines still used in many developed countries. One Indian operator has the world’s largest IP-enabled fibre-optic cable network with 230,000 km now laid. Copper wiring is becoming increasingly expensive and is also subject to theft (which can be a serious problem in the rural areas of developing countries, which may lack rigorous law and order). Since optic fibre cables have no intrinsic value, it makes more sense to lay them than copper.
Other operators are deploying WiMAX and IMS systems to provide an instant broadband service. Wireless broadband is an excellent means of reaching rural or transient populations and coverage “black spots”. Unlike copper cable, wireless broadband equipment can be secured against theft and removes much of the cost of laying and maintaining hundreds of kilometres of cable infrastructure.
Indian operators are also increasingly wary of equipment vendors “giving away” their equipment and technology aligned management solutions. Instead they are investing in the longer term use of flexible, multi-technology and multi-vendor OSS platforms, providing holistic network management, future-proofing for evolution and customer-centric perspectives.
As their telecommunications infrastructure becomes more advanced, India will be empowered to source new services and products, not just outsource the operations of others. It will not be long before India’s resource of highly trained workers is matched by a 21st century communications network.
With ARPUs falling worldwide, operators are now desperately adding value to their services and, increasingly, medium- or high-ARPU countries may feel the bite of revenue reductions on their operations and question whether their network is providing them with the necessary tools to exploit economies of scale. The Indian approach to these problems can teach us valuable lessons about the challenges that developed markets have not yet had to contend with, but may soon find themselves facing.