The outsourcing dilemma

1. The outsourcing dilemma Andreas Hipp, Epsilon CEO

2. Out.source - defined 1. to subcontract (work) to another company 2. to buy in (components for a product) rather than manufacture them • Outsourcing in its basic form is viewed as the contracting out of a business function to an external provider. In this sense, two organizations may enter a contractual agreement involving an exchange of services and payments.

3. Industry Buzzword Chart Cool Factor NaaS Bandwidth Trading SaaS Voip Cloud Outsourcing IPX Popularity

4. Weighing up the scenario! Reward Cost savings Focus on core business Knowledge Contract Operational Expertise Reduced time to market Scalability Risks Quality risk Delivery Risk Productivity Language skills Security Qualifications of outsourcer Transparency &control • The pros and cons of outsourcing need to be clearly and objectively laid out and analysed. • Must ensure that the benefits gained from the process are real and substantial and that the risks either do not exist or are manageable

5. Evaluating the outsourcer • What experience and capability does the outsourcer have? • How extensive is the reach of the outsourcer? • How many products does the outsourcer control? • To what extent does the outsourcer actually control the product? • How do I ensure the outsourcer is not outsourcing – big difference in outsourcing and reselling! • Desktop studies are all well and good – proof is in the delivery, how do I taste before I buy? • How flexible is the outsourcer to scale with my business? • What local support mechanism does the outsourcer possess? • How cost effective is the outsourcer? • How scalable is the outsourcer?

6. Make the relationship a success? • Thorough understanding and core focus in the discipline of the outsourcer • Clear understanding of the customers objectives and expectations • Ability of the outsourcer to deliver solutions and not products and services • Best technology fit to the customers requirements • First class customer support in region • Setting the right expectation throughout the process – sales, presales implementation and support • Ability to respond quickly during expedite situations • Richness of connection options locally and internationally • No conflict of interest between the provider and the outsourcer

7. International networking - Trends • Many international cables being implemented opening new markets and increasing capacity in existing markets. • Declining prices in both GIA and voice revenues require increasing volumes to maintain revenues and contribution margins but unlikely to continue – “all you can eat” models. • Increasing costs in co-location services • The rise of the “Exchanges” – Threat or opportunity • Traditional wholesale play under pressure – rich, scalable and cost effective interconnect options are required for: • 1. Voice • 2. GIA • 3. Data

8. International Networking Questions to ask! • Is my current international network and PoP setup, cost effective, scalable and in the right location? • Do I have to own capacity and network equipment or better lease it? • Do I need overseas offices and support personal? • Do I deal with every requirement in-house or pass on to a global partner who does not compete with me? • Rise of “exchanges” globally – Carrier Ethernet Exchanges, Internet Exchanges, Virtual Meet Me Models etc. – hard to decide which ones to join and it's not economical to be in all of them – which one does most for my needs? • Uptime is a core focus – requirement to access restoration services in a rapid period of time during global events – how do I build this redundancy cost effectively. • How do I ensure that I meet the vast array of modern day Telco challenges?

9. Main infrastructure services to outsource • International Co-location services. • Operation of International Points of Presence. • Transmission services • Switching services • Routing services • Metro and long haul network services. • Local access network services. • System Integration and Maintenance. • Billing Services.

10. Why has and will international network outsourcing become so pivotal? • Increasing capacity and competition culminate in constant pressure on margins • Lead-times and Class A support become major differentiators in service delivery – realising revenues as early as possible. • Increasing technical complexity requires technology layers to merge providing flexibility and choice of interconnect options. • New ways of interconnecting require fresh thinking from the legacy approach – Network exchange hubs. • Difficult to maintain own infrastructure and interconnect base at the required cost points to remain competitive and flexible due to lack of scale!

11. What to keep in mind about the outsourcer! • Important prerequisites of the outsourcer • Does not compete in your core business segments – carrier neutral. • Overseas outsourcer can provide an integrated solution – single source for co-location, network and engineering services. • Has a well established and connected global network. • Can offer diversity and choice. • Has efficient centralized processes and service management but strong local presence and knowledge.

12. Thank you