Orange, Vodafone try outsourcing route to beat the crunch

Orange and Vodafone have both announced they are outsourcing maintenance and operations for their mobile networks, in what analysts have described as a cost-control exercise.

The companies announced the deals separately on Wednesday. Orange is to outsource its mobile-network operations and maintenance for five years to Nokia Siemens Networks (NSN), which in turn will subcontract first-line maintenance to an as-yet-unidentified provider. Vodafone is to outsource both operations and maintenance to Ericsson.

Orange will transfer around 230 of its staff to NSN, with another 240 or so employees moving over to the maintenance subcontractor. Around 350 Vodafone employees will move to Ericsson.

Vodafone's chief technology officer, Jeni Mundy, said in a statement regarding the company's deal with Ericsson, the arrangement represents "a strategic long-term relationship, offering real operational and financial benefits allowing [Vodafone], over time, to reinvest savings in delivering new products and services for customers".

Vodafone expects the deal to result in overall cost savings of around 25 per cent over the seven-year period, a spokesperson for the company told silicon.com sister site ZDNet UK.

The deals fit in with an ongoing trend towards using network-equipment providers as managed-services providers, telecoms analyst Dean Bubley, of Disruptive Analysis, told ZDNet UK on Wednesday.

"There's some precedence in the IT industry, with IBM and others going from product businesses to services businesses," Bubley said. "The question is, who will end up the real beneficiary? I imagine that, in the current economy, the negotiating power is on the side of the operators."

Both NSN and Ericsson have recently felt the bite of the recession. Ericsson announced in January that it would lay off 5,000 workers, although that decision was largely based on poor performance from its mobile-handset joint venture, Sony Ericsson.

At the time, Ericsson president and chief executive Carl-Henric Svanberg said the company's infrastructure business had been "hardly impacted at all" by the economic downturn, but warned "it would be unreasonable to think that this would be the case also throughout 2009".

Also in January, Nokia released results that showed a drop in sales within NSN, itself a joint venture that was set up between Nokia and Siemens in February 2007.

Original article: Orange and Vodafone to outsource operations from ZDNet UK