The top 5 myths of international voice outsourcing

Source: Capacity Magazine, January 2012

Move past these common misperceptions to see how today’s sourcing models can unlock value for your voice business.

 
Strategic sourcing has become an established feature of the international voice industry landscape. A handful of prominent deals now have multiyear track records, while smaller agreements span segments and services.

But, even as sourcing grows familiar, these five myths have remained surprisingly persistent. A truer picture of the business case for strategic sourcing can help voice managers create durable and profitable international voice revenue.

MYTH 1: Outsourcing helps the bottom line only

REALITY: Today’s sourcing strategies can provide top-line revenue growth with solutions including inbound aggregation and fraud detection.

Traditionally, outsourcing is associated with cost centres, not revenue streams. Voice executives fear that sourcing means giving up on future top-line growth, or even risks shrinking the often substantial contribution of international voice to gross revenues.

In fact, sourcing and revenue growth can be an excellent fit. Through reciprocal partnership with a leading international voice traffic aggregator, providers can augment terminations into their home network footprint, growing top-line revenue, and improving return from existing network assets. The aggregator benefits from predictable quality levels, supply and operational costs.

Sourcing can also reverse revenue leakage from fraudulent activities such as SIM bypass, False Answer Supervision and hacking. Reducing fraud improves the end-user experience, boosts customer satisfaction, rewards high-quality suppliers with traffic growth and improves network efficiency while avoiding risky traffic streams.

MYTH 2: Outsourcing requires giving up control of my business

REALITY: Done properly, sourcing will increase traffic visibility and business control.

International voice touches many divisions within an organisation, supporting retail operations, competitive differentiation, revenue profiles and more. Providers fear that one-size-fits-all sourcing arrangements may reduce control over critical functions.

While careful road map and strategy alignment between partners is an important success factor, sourcing should deliver more traffic and business control, not less. Sourcing can provide access to advanced routing tools, and more efficient, granular pricing, costing and reporting systems.

Many international voice managers struggle to stay on top of pricing changes, currency risks, fluctuating inventories, outages, congestion and other operational complexities.

Meanwhile, lack of visibility can create exposure to fraud, arbitrage, pricing mismatches and supply shortages.

By reducing risk, removing uncertainty and increasing ability to execute, voice sourcing better aligns goals and results, placing managers more firmly in control.

MYTH 3: Outsourcing is an all-or-nothing deal

REALITY: Sourcing solutions can cover specific routes, regions, or functions, as makes sense for your business.

Sole-supplier sourcing deals grab headlines and industry attention, but these agreements are the exception, not the rule. The majority of sourcing arrangements cover just a segment of the provider’s international voice traffic.

Popular strategies include exiting regions with less appealing margin profiles, or taking a partnership approach for the “long tail” of low-volume termination destinations. Other providers source infrastructure while controlling routing – or vice versa – and deploy as‑a‑service back–office or trading tools.

By addressing challenging routes and functions, sourcing allocates resources away from fixing problems, and towards multiplying successes.

MYTH 4: Outsourcing reduces competitive differentiation

REALITY: Smart sourcing will increase resource availability for competitive differentiation, while shoring up capabilities in non-core areas.

With tight margins and commoditisation already concerns, many providers worry that sourcing will accelerate price competition by reducing perceived advantages between suppliers.

Because sourcing allocates resources away from reactive problem-fixing, it is more often the first step to improve competitive differentiation. A few providers conclude that international voice is entirely non-core; more focus on attracting inbound traffic, building regional specialisation, or strengthening sales and support.

Mobility, cloud services, IP migration and convergence are exciting growth opportunities for innovative voice providers. Ensuring agility and focus to navigate this new environment is critical for success.

MYTH 5: Outsourcing is complex and risky

REALITY: Voice sourcing is a powerful tool to manage risk and complexity.

Previously, healthy growth in total international traffic volumes cushioned against many business risks. But recently, volume growth has slowed while business and routing complexity have ballooned. For providers facing more intense competition and more execution challenges, the riskiest decision may be to do nothing.

Significant up-front investments are needed to migrate to next-generation IP infrastructure, and upgrade routing engines to handle number portability, codec interoperability and converged services.

Invest, and providers may find that within a few years, over-the-top players and next-generation services have eroded traffic volumes and ROI. But providers that delay investing will be vulnerable to fraud and arbitrage, and unable to deliver premium-quality services. Sourcing provides a third path forward within the voice business.

Is Sourcing right for you?

In a highly competitive environment, providers cannot afford to miss opportunities to increase flexibility, improve efficiency, or augment revenue growth.

Tata Communications has partnered with several voice providers to overcome operational challenges and improve business results. Talk to us to understand your potential business case for voice sourcing.

About the author:

Michel Guyot
President, Global Voice Solutions
Michel Guyot is the President of Global Voice Solutions at Tata Communications. In this role, he is responsible for worldwide voice activities for the group, encompassing the management of domestic voice operations in India. Mr. Guyot has over 30 years of international telecommunications experience and has held a number of key executive positions. Prior to taking on his current position, Mr. Guyot is Chairman of the Board of Directors for the Telecommunications Executive Management Institute of Canada, and has served as the Canadian Representative and Council Member for Canada at the Commonwealth Telecommunications Organization. He holds a Bachelor of Commerce Degree from L’École des Hautes Etudes Commerciales, Université de Montréal, and is a member of the Certified General Accounting Association of Canada.