One of the most important considerations for companies moving into international operations is understanding the conditions in the market they’re entering. That understanding, coupled with some flexibility, can set the stage for enthusiastic acceptance, according to Carl Pitasi, consultant, COMPASS America, Inc.
“Sometimes you can be a big hero by investing a little in the local carrier’s local infrastructure,” said Pitasi.
As an example, he offered his experience building a plant in rural Mexico. The facilities from the town to the backbone network were adequate for the project’s needs, but the local infrastructure lacked adequate capability to link Pitasi’s plant to the central office. He solved that problem by purchasing digital microwave equipment and giving it to the local telcom, along with training for two of their personnel. Then he paid the telcom as if they had provided the service.
“To American ears, that sounds awful,” said Pitasi, “but in exchange for spending $30-40,000 on the infrastructure, I got the communications services I needed, I did it legally, and I was a hero with the locals because they could then operate the way they wanted. You can bet anytime I needed anything, they were most cooperative.”
Knowledge is Golden
That understanding of the local marketplace can not only uncover opportunities, it can help companies and their outsourcers avoid problems.
“If you’re going to build a plant or hire a lot of people in a new country, “said Pitasi, “before you do it, you should go in and negotiate with the local telecommunications authority. You need to be sure you can import whatever hardware and software you need without paying exorbitant duties.”
He stressed that companies also need to know what communications facilities exist between the company being entered and the U.S. or any other company where a critical communication link is going to be needed.
“Don’t assume that you can call up the local telco and order a 56-kilobit line,” said Pitasi. “They probably will take your order, but if you haven’t made arrangements in advance, it may take them two or three years to install it.”
Pitasi offered advice to companies considering outsourcing for their international telecommunications needs. A primary consideration, he said, is to understand the geographic strengths of the various providers. He noted a lack of progress among vendors in terms of ‘projecting their ability to help users outside the G7 countries.’ “This is disappointing because most of the growth in telecommunications is outside those areas,” he said.
Splitting the Traffic
Because the vendors’ experience and expertise can vary from one region of the world to another, he recommends that companies not give all of their telecommunications’ traffic to one carrier.
“The worst decision they can make is to give it all to one carrier,” said Pitasi. “Each carrier has strengths in certain geographic and technical areas, and each carrier is totally helpless in other areas. To give it all to one is to ensure that part of the exercise will be poorly executed.”
He added that the awards should be in separate contracts, rather than pulling them together in a multi-vendor arrangement.
“Companies have nothing to gain by doing that and everything to lose,” said Pitasi. “We all know that there’s almost no volume sensitivity in telecommunications pricing anymore, so they don’t gain anything by bulking it. They lose the flexibility of choosing the most effective vendor in each one of the territories.”
Dividing telecommunications work between two or more vendors also gives the customer leverage, according to Pitasi. That leverage, he said, is one way for a company to ensure that their account retains a first-class account management team, one of the vendor’s scarcest resources. Pitasi noted that those teams are frequently used on ‘troubled accounts’.
“As my dad used to say, the squeaky wheel gets the grease,” he said. “Better you should be the troubled account.”
Look to the Internet
Addressing the cost-savings issues, Pitasi said companies should look to the internet, which he called ‘the most ubiquitous data tool out there right now.’ “If they’re sending faxes to their offices overseas, they should be slapped,” he said. “They should be using the internet to do that. It will save them a ton of money.”
Companies also should familiarize themselves with existing regional services, according to Pitasi.
“For example, there are a couple of excellent VSAT (very small aperture terminal) offerings in South America to help get around the infrastructure problems there, especially between South American countries,” he said.
Companies also can save money simply by checking bills from their vendors against the contracts, according to Pitasi. He said few of the vendors have effective mechanisms for getting all of their custom discount packages connected to their billing systems.
“Again and again, we see clients negotiating decent contracts for discounts on international voice traffic but getting billed at the straight rate and not realizing it,” said Pitasi. “So audit your bills.”
He followed that with another strongly worded bit of advice. “Don’t sign long contracts,” said Pitasi. “Anybody who signs a contract for longer than three years ought to be fired.”
Lessons from the Outsourcing Primer:
- Understanding the local marketplace can help identify opportunities and avoid problems.
- Match the outsourcers’ geographic strengths with your needs.
- Don’t award all telecom traffic to one carrier.
- Take advantage of the benefits of the internet.