The telecom in many European countries has been a playing field of fierce competition over the past decade. Traditional,state owned telecom companies have been privatized and new players have entered the field. The period of unprecedented growth for mobile phones in many European markets has come to an end;as new technologies and applications have become more mature, value propositions have become more alike moong the different providers, enabling consumers and businesses to shop around fof the most attractive prices and rates. This is facilitated by the Internet, where consumers have better access to benchmark information, enabling them to go for the best rates and best rates and deals. This has put significant pressure on the fat margins of the providers, who as a resuit are desperately seeking for opportunities to slash costs. Moreover, most of them are are seeking for opportunities to improve their cash position due to their careless decisions in the recent past to win govemment initiated tenders to obtain new technology licenses (such as UMTS and GPRS). the participation in these tenders, requiring billions of euros, has consumed most of the cash of these players.
Against this background a major telecom player in Europe looked for drastic measures to both reduce its operational cost dramatically and improve its cash position. After a careful selection of projects it decided to outsourcing all of its IT-activities and call centres. The outsourcing deal for IT,which was closed some years ago with one of the iarge IT-providers encompassed the sale and lease back of all hardware, peripherals and other IT-infrastructure and all software. The IT-provider, which was selected after a competitive tender, also had to take over most of the company's IT-staff. The future relationship was based upon a thorough long-term, service-level agreement, which consisted of a detailed description of the activites to be performed by the IT-provider, and the costs and rates that could be incurred.Of course the agreement described the impressive sum of money to be paid to the Telecom company. It was agreed that rate and fees would be paid to the IT-provider based upon a limited number of critical key performance indicators(KPIs), which would be monitored and discussed on a monthly basis between the parties involed. For this an impressive communication structure was buit up a both organisations,involving several working groups,technical committees and steering plat froms,
After two years it became clear to the telecom Account Team that things had not worked out as intended. First of all,the IT-provider was dissatisfied about the sums that were paid; in hind sight,since prices of hardware and software had gone down significantly, the IT provider thought it had paid for far too much when buying the hardware and software. In order to secure ist margin and and recoup past of the invesment it started to cut costs in its services to the telecom company. By putting inexperienced, lower paid staff on crucial service functions (such as help desks) the service level to the telecom's internal staff developed to a surprisingly low level, leading to all kinds of disruption in simple, but crucial operational processes. Next, although the contract stipulated the use of leading edge technology and although investment schedules were agreed upon,the IT-provider postponed investments in new solutions. Furthermore, there was a constant debate about extra allowances, rates and fees to be incurred by the IT provider. The final development was that the IT provider warned that if bills were not paid by the telecom provider in time, this would lead to disruptions or even temporary stoppage of services. This all led to a situation where internal staff constantly stared to challenge the outsourcing decision that was made. Most of the staff felt that the IT-provider was not up to its tasks and wanted to in-source most of the IT-activities again