Telcos to call on Canadian brains?

Canada is in the fortuitous — or perhaps ill fated, depending on your point of view — position of being both a destination for telecom offshoring and a jumping-off point for homegrown telcos looking to offshore work currently done here.

This two-way opinion comes courtesy of Deloitte, the global business consultancy. Its recent report on offshoring in the communications industry offers divergent scenarios for this country’s telecom sector.

On one hand, Deloitte points out that Canada is something of an “offshore haven” for telcos operating in other countries. This nation’s well educated workforce and its research and development tax credits for firms engaged in such activity make Canada an up-and-coming destination for foreign work. The country joins China, the Czech Republic, Ireland and South Africa in the “Tier 2” group of nations with “moderate offshoring capability,” according to Deloitte’s report, Making the offshore call: The road map for communication operators. Tier 2 countries trail the one and only Tier 1 nation, India, which has “good experience with offshoring.”

But as Deloitte suggests foreign telcos should consider Canada for offshoring, the firm also advises this country’s telcos to send some work overseas, so they can reap the cost savings associated with employing less expensive workers, particularly in the application development and database management arenas.

“Our telecommunication companies are going to be more efficient if they can offshore some of the low-expertise areas,” said Andre Vincent, a Deloitte analyst in Montreal. “In some cases, development is being done in India at much lower costs.”

What do Canada’s biggest telcos think of this double entendre for the industry? Telus Corp. said it couldn’t come up with an appropriate spokesperson by deadline. Bell Canada did not respond to Network World Canada’s request for comment.

But Sid Shniad certainly has an opinion. He’s the research director at the Telecommunications Workers Union (TWU) in Burnaby, B.C. Shniad said offshoring from Canada is a bad idea.

“I think there’s a tendency on the part of companies, financial analysts and reporters to look at anything that reflects positively on the bottom line as good for the industry,” he said. “But we’ve got a situation here where a third of the workforce has already been laid off and offered early retirement.” Shniad was referring to Telus’s payroll purge a few years ago, when the firm sought to cut more than 6,000 employees from the human resources roster.

“That’s had a catastrophic effect on the surviving workforce. It’s had a devastating impact on the economies of towns throughout British Columbia. If you look at the broader picture, it’s not so rosy.”

Vincent from Deloitte said Canada’s high-priced workforce is a detriment to its offshoring aspirations. As a result, only brain-intensive, R&D work would come here, rather than the lower priced development work that other nations are known for.

“If I’m a telco, and I need to develop a product for a cell phone, I have four months to do it. Am I going to go to Canada, with its unionized workforce, to do it? Or am I going to go to Argentina?”

Shniad didn’t seem to care for that line of thinking.

“That’s why unions are there, to impose inflexibilities….We want inflexibilities. We don’t want them to have the flexibility to pursue this relentless race to the bottom.”

Vincent said Canada might garner some work in the application development arena as a member of a global team, a group of developers working on a project that, thanks to its worldwide makeup, could work around the clock.

That seems to make sense for Iain Grant, a Montreal-based telecom industry analyst at SeaBoard Group.

“Thanks to IP telephony and the integrated workforce, it doesn’t really matter where people are. You can think the big thoughts in Hyderabad or Manotick (Ont.) and still collaborate with all your colleagues in Palo Alto or Tokyo. That might mean we’ll have many more discreet researchers working in the future than we have research parks.”

Shniad saw things somewhat differently, however.

“If the goal is 24-7 (development around the clock), that’s one issue. But if Canada is still the high cost end of it, why should this effort of the development be done here?”

According to Deloitte, telecommunications firms worldwide expect to offshore five per cent of their workforce by 2008. The firm surveyed 42 telecom operators to get the results.

Vincent said Canada is in a different position than the U.S.

“We’re trying to get it both ways. In the U.S. it wouldn’t be the same thing. The tax incentives are not as generous. It’s difficult to bring the work in. They mainly talk about outbound advantages as a cost reduction or for speed of delivery.”

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