To print: Click here or Select File and then Print from your browser's menu

This story was printed from silicon.com, located at http://www.silicon.com/

Story URL: http://www.silicon.com/research/specialreports/offshoring/0,3800003026,39121366,00.htm

Inside offshoring: India's telecoms infrastructure
A potential deal breaker?

By Tony Hallett

Published: Wednesday 16 June 2004

Central to most offshoring arrangements or, lest we forget, reasons not to tap this model of doing business, is the quality of another country's infrastructure. Tony Hallett looks at whether the quality of telecoms services in India cuts the mustard.

For anyone making the tricky decision of moving certain work or creating new work in an offshored environment, local infrastructure must be a key consideration. More often than not, it is a primary reason not to offshore, although this evaluation can be viewed as an aspect of risk management, covered elsewhere in this series of articles.

It used to be a given that services such as television, telecoms and even power in India were unreliable, given to sudden, inexplicable periods of unavailability. But how far has telecoms advanced in what is now a deregulated market?

"There's a big wave of investment going on with a lot of money going in," says Neil Tomlinson, marketing and business development director at signalling and switching equipment company Tekelec. "We will see [telecoms in India] advancing a lot."

Others point to consolidation among service providers as another sign of a maturing market. For example, a look at a list of cellular mobile operators in the country as of the start of 2001 compiled by consultancy Analysys shows over 20 names, although admittedly many present are limited, regional operators. Now that market is coming to be controlled by a handful of players led by Bharti, Hutchison, Reliance and increasingly BSNL, the fixed line incumbent, and more merger activity is expected.

For many companies, however, offshoring - wherever it might happen - is still all about collaboration with staff and facilities back in the UK. That ultimately means reliable, reasonably priced, leased lines and other fat pipes. Carrying voice is relatively simple - though hardly unimportant, given how much offshoring is about farming out complete business processes such as customer care through call centres - but data connectivity must also be robust.

Indeed, this is something that has become more of a factor as user organisations and their customers have insisted on data remaining within the EU, for example. While a voice connection may be straightforward, calling up customer records from afar depends on the quality of connection.

To add another layer of complexity, factor in modern applications for customer relationship management from vendors such as PeopleSoft, SAP and Siebel. These are often now browser-based. Got a poor network? Expect a knock-on effect on customer service.

One piece of good news, however, is that while India's and most developing countries' telecoms infrastructure is improving - also aiding non-offshore-related trade, it must be said - prices are falling. According to figures from Pyramid Research, business voice is falling much faster than residential internet, residential voice or business internet but they are all on a steady down curve.

In mobile, average revenue per user is declining too, pointing to an increasingly mass market. Mobile connectivity will be more and more useful for many companies doing business in India but it should be noted that while growth is strong, the forecasts point to mobile penetration remaining the lowest and slowest growing in Asia, relative to overall population.

A recent Pyramid reported noted: "Even at the current accelerated levels, it will be years - if not more than a decade - before India's market potential is as effectively tapped as China's."

There are still big deals to be done for established suppliers. Vendors such as Kyocera, LG Electronics, Lucent and Motorola have all supplied GSM and CDMA equipment.

Meanwhile Hutchison's Essar and Tata Indicom have in the last few days announced they have beaten most of Asia to new push-to-talk services which allow walkie-talkie style one-to-many communications.

Indeed, silicon.com's experience of a data card supplied by Reliance and based on CDMA 1x technology from Qualcomm, when plugged into a laptop, was a good one. Service across four Indian regions was consistent and as fast as most GPRS data services available through cellular in Europe.

It is clear that cellular services, along with wireless technologies that give more localised data services, are moving forward. For those setting up offshore facilities, working with partners in India or visiting on business, they and the quality of connections from hotels, for example, are good enough.

Those companies whose business it is to prove India a top location - the likes of domestic giants Infosys, TCS and Wipro and Western vendors with software development and R&D out there - will also point to their own cutting-edge facilities, often as good as anything elsewhere in the world.

Even when the issue turns to the risk of natural disasters or war in countries such as India, the savvy offshoring experts will have an answer.

GK Prasanna, VP technology infrastructure services at Wipro, told silicon.com: "Customers are concerned. We had an option to build our network operation centre in India but we didn’t. We built it in the UK and US, with multiple links and service providers and multiple routes. There are many cases where India got knocked out but this centre didn’t get knocked out. We shut down the centre for 18 hours here and we still made service levels."

In general, telecoms services have come a long way in India, as they have in most prime offshoring locations, but despite the sight of widespread mobile usage in the streets of big cities, it is wrong to talk about a developed mass market on the same level as Japan, South Korea or, for a comparable size country, China.

Fixed line and internet links too are largely good enough in pockets but not universal.

The question is: How much of that matters? Plenty of European countries can't boast about universal broadband or even nationwide cellular coverage. It is likely decisions to offshore are much more likely to be taken on issues of data security, skills available and then, given all those things, whether it really makes business sense.

Sometimes it won't - though that's not likely to be for reasons of telecoms.