We recently held our 2nd Telecom CIO Forum in Barcelona where I moderated a panel on IT outsourcing & offshoring and came out of it with a few observations.

The panelists (three European telecom operators) have been able to drastically reduce the number of time and materials contractors as well as their IT costs. Time-to-market has not suffered as a result of outsourcing & offshoring but actually has  improved. And while the telecom operators have reduced costs, they have created scalability, meaning they are able to better adapt to demand variations.

There are also some challenges that need to be carefully managed. One is the cultural change such outsourcing creates, both within the organization and in dealing with offshore staff. Some regions, for instance, need to carefully consider the effects of language barriers. Another challenge is the effort needed to reshape the organization when a totally different set of skills is required (e.g., the need for fewer or perhaps no developers but a rising need for a good vendor managers). Often such skills are not readily available in house.

I think it was a convincing discussion. Telecom operators may be on the cusp of more outsourcing & offshoring. We’ll see what 2010 brings.