Development status of IT outsourcing in national telecommunication industry

As for the construction of telecommunication operating support system, information technology outsourcing has been widely adopted as a strategic tool to make good use of exterior resources and achieve the development goals of enterprises, it has been used widely to construct, maintain and perfect our telecommunication ventors' operating support system. The usual way of IT outsourcing is to firstly draw up an overall planning of the operating system by the telecom operator to outline the goal and major technical architecture, then each provincial company will outsource the whole or part of the operating support system to outsourcers to construct.

Compared with the foreign telecom operators' wide and deep outsourcing, our telecom operators hold a conservative and prudent attitude about outsourcing. Along with the dramatically increased users, huge amount of business operations and complexity of operation make the telecom operators find their burdens increasingly unbearable, information technology outsourcing is becoming a more and more popular strategic measure to obtain services of high quality, favorable financial returns and new business development opportunities. That is the reason why more and more telecom operators jump on the bandwagon.

But from the overall perspective, the reason why the domestic telecom operators choose outsourcing is mostly out of the consideration of cutting the costs. From the perspective of users choosing outsourcing, mobile telecom operators act more positively than traditional static telecom operators in business outsourcing.

Risks of IT outsourcing in telecom industry

In the telecom industry, IT outsourcing is the trend of the times. Although it, to some extend, has solved the problem of resources shortage faced by the telecom operators, risks also increase along with outsourcing.
　　
In today's competitive telecom industry, the complexity and surprising rate of development, together with telecom operators growing dependence on IT, trigger the birth of a variety of new programs, and make the new types and new levels of risks possible. Telecom operators must realize that outsourcers' operations, business managements, personnel and environment will possibly bring extra risks to the telecom operators. During the outsourcing process, if the cooperators couldn't effectively and reasonably cope with the risks, the consequences will be extremely significant, and may even affect the daily operation of operators. 　　

Depending on the operation risk model of Arthur Andersen and risk management model of J.P. Morgan, we will use a static analysis on the possible risks of operators' outsourcing operation supporting system. A modeled classification method will be used to summarize risk factors in OSS construction outsourcing, which is to provide references for the risk management of telecom enterprises.
　　
Environment risks

Environment risks come from the outside of the enterprises, including system risk, supervision risk, industry risk and market risk.

Market risk is the most evident one in environment risks. It refers to various factors that will introduce adverse impacts on outsourced project. These factors include immaturity of outsourcing market, changes of competition environment of the enterprise, uncertainties raised by innovation speed of new technology, as well as acquisition and merger, vicissitude in the financial market, economic restructure and etc.

Program risk & Runaway risk

Choosing IT outsourcing means the telecom operator transferring this part of responsibility to vendors, but due to the invisibility of outsourcer's activities, runaway risk will appear. For example, declined service quality, falling of end-user's satisfaction, outsourcer's act going against the intellectual property rights and copyrights regulations, to name a few. For the lack of IT outsourcing experiences, telecom operators will easily make mistakes on outsourcing strategy, outsourcing management and contract management.
　　
Lockedup risk

Lockedup risk means the disadvantage effective risk caused by excessive dependency on the outsourcing vendor or the company's situation of being bounded by the contract. The ultimate manifest is on the financial risk it brings. For example, the potential costs rise, outsourcing costs cannot be reduced with technological innovation, enormous loss upon termination of outsourcing relationship. On the other hand, telecom operators will become inadaptable to vicissitudes of environment changes. The eventual result of lockup risk is the unbalanced relationship between the telecom operator and the vendor, and the vendor takes the increasingly favoring position.

IT risk

IT risk comes from the inappropriate information technology applications during the outsourcing processes, such as incorrect memory access, undermining of system integrity as well as other related risks of telecom companies. Actually, IT operation itself is not immutable; the operation and development of it are always uncertain.

Integrated Risk

Integrated Risk means the risk caused by management blunders, mistakes in employment, lack of manpower, etc. in the outsourcing process, and it has significant adverse effects to telecom enterprises. It is a big misunderstanding for telecom enterprises to outsource the information technology simply as general merchandise outsourcing. For example, the key information systems which are developed by suppliers and established on the basis of professional knowledge are connected with the asset proprietary issue.
Once the supplier bankrupts or the relationship between the two sides breaks down due to some reason, the system is unable to maintain the existing level of services, and for the other provider, it will take a lot of time and effort to obtain enough knowledge of the system to replace the original supplier.

Decision-making Risk

Policy Risk

Policy risk refers to the risk caused by the unsuitable time of outsourcing, outsourced scope and other factors, which confront the telecom enterprises with the risk of Operation Support System outsourcing.

Talent risk
Refusing to outsourcing, which is due to the inadequate human resource of the economic organizations or the internal problems of telecommunications companies, has significantly adverse effects to the information outsourcing and the economic organizations themselves. For example, lack of adequate technology and knowledge to manage outsourcing, loss of the internal talent, and so on.

Risk of losing ability
In simple terms, it is that caused by the telecom enterprises' unwillingness to retain and train adequate IT capacity. Information technology outsourcing will fill some of IT capability gaps of telecom enterprises, but it will also make them lost some IT capabilities. Without the capabilities guarantee, the information technology and the telecom business outsourcing will be in a higher risk.

Assessment risk
Assessment risk means the risk of deeming the telecom IT outsourcing activity as a failure, because the standards or methods used to measure outsourcing returns are incomplete or inappropriate. For example, the lack of overall assessment of the related financial and management costs defeats the purpose of saving costs by outsourcing. In addition, the higher uncertainty of information technology makes a higher risk of new technology and application outsourcing than that of the matured IT technology.

Contract risk
Contract risk is due to the contract signed between the telecom enterprises and outsourcing vendors lacking reasonableness, adaptability, integrity, and so on, so that it makes telecom enterprises be in a disadvantageous position, and has significantly adverse effects to the outsourcing and even enterprises themselves.

To sum up, the risk of decision-making is that caused by the internal and external environments of telecom enterprises, and mainly reflected in the process of making outsourcing decisions, choosing outsourcing vendors and signing contracts. Thus telecom enterprises can implement an effective control of this kind of risk.