@PCIA: Sprint Nextel outsourcing to Ericsson transforms both companies

NASHVILLE, Tenn. — Reducing costs is not the only reason for wireless carriers to outsource network management to telecom equipment operators, Johan Bjorklund, VP of managed services for Ericsson North America told attendees Wednesday at PCIA’s 2009 Wireless Infrastructure Show.
Fresh off its largest managed services contract to date with Sprint Nextel Corp. (a seven-year, $5 billion deal), Bjorkland said the transfer of 6,000 former Sprint Nextel employees to Ericsson employees on Monday went smoother than expected, without any major problems.
Wireless operators are increasingly using managed services from Ericsson to drive down costs, aid in technology migration and to offload the pressure of running the network so carriers can focus on subscriber-facing issues. “They don’t have the muscle to focus both on the customer and keeping up with the technology migration.”
Ericsson has invested $1 billion into business processes, systems and tools to manage various networks around the world. Ericsson’s scale – the TEM manages networks that collectively count 350 million subscribers – enables better operating efficiencies. Carriers can only benchmark against themselves, Bjorklund commented, while Ericsson can benchmark carriers against other carriers, keeping in mind regional differences. “We basically benchmark everything we do.” However, Bjorklund noted that a field technician in Brazil may have to take a boat through the Amazon River to repair a base station, while his counterpart in the United States may not face the same challenges.
The Sprint Nextel contract was a new direction for the nation’s No. 3 carrier, but also Ericsson’s biggest managed services contract and one that other carriers will watch closely. North American operators have been slow to embrace outsourcing managed services, but the trend is gaining traction globally, especially in Europe, where competition among operators is especially intense.
Changing the cultural relationship from personnel who were once colleagues and now vendor and client is something that will take some adjustment as the new organization transforms to one now focused on services-oriented culture. Bjorklund uses the analogy of cooking for your family, where maybe you can be a little messy, to cooking in a restaurant, where a commercial service is rendered in exchange for cash. The arrangement between Sprint Nextel and Ericsson is much more a partnership than a typical vendor/customer relationship, Bjorklund said. “This is a seven-year marriage,” and one Ericsson hopes continues beyond the seven-year deal. “The partnership always has a tremendous emphasis.”
Career opportunities
The 6,000 employees that join Ericsson’s 30,000 employees in the managed service space at the company have many more career opportunities as Ericsson operates in 175 countries, Bjorklund noted. Of the 6,000 employees sent offer letters to work at Ericsson, more than 99% accepted. Those new employees have a strong skill set using CDMA and iDEN technologies, he said, and will be able to develop more skills with Ericsson. Bjorklund added that the managed services business at Ericsson is technology agnostic. Indeed, the Sprint Nextel network does not include one Ericsson base station. Bjorklund said he couldn’t comment on how Ericsson would incorporate Nortel Networks employees to Ericsson because the deal is not completed yet.