DTH

The more or less challenge - the role of outsourcing

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 SINGAPORE: With the broadcast industry rapidly going digital, broadcasters need to provide new services on their existing cost bases to achieve operational efficiencies to drive in business changes.

So, besides other seminars on going digital, the third day's afternoon session at Broadcast Asia focused on how broadcasters need to focus on their core competencies by outsourcing in other areas.

Some of the important issues that were raised included - why outsourcing is relevant to the broadcast industry and what benefits it can bring. And most importantly what are some of the ways in which outsourcing can be delivered.

Throwing light on the rapidly accelerating changes in the broadcast industry, Siemens Business Services Media head Saleha Williams said, "Broadcasters have to grow out of their traditional operating models which are no longer working, because of rapid technological changes and business models. Outsourcing can also save us from various revenue pressures which have come in with lots of competition with more platforms, audience fragmentation and increasing churn and new advertising models."

The seminar brought out five core elements to the technology change

o Broadband

o Mobile

o PVR

o HDTV

o Increasing competition from gaming and other forms of non broadcast entertainment

Some of the regulatory-led change are:

o Digital broadcasting (analogue switch off)

o Deregulation

Willaims gave out some pointers on how outsourcing can help broadcasters

o Outsourcing in broadcast markets as much about innovation as cost savings.

o Solving new problems, such as distribution to emerging platforms.

o Outsourcers act as a catalyst, enabling broadcasters to transform ways of working. At heart of every outsourcing relationship.

o Economies of scale, improved operational effectiveness and off shoring.

o Typically savings of 20-30%, but depends totally on the nature of the service.

Williams also listed out some of the benefits achieved by outsourcing other parts of the world.

o Outsourcing in broadcast markets as much about innovation as cost savings.

o Solving new problems, such as distribution to emerging platforms.

o Outsourcers act as a catalyst, enabling broadcasters to transform ways of working.

· Significant technology investment needed to compete in changing broadcast market.

o Outsourcers can help broadcasters smooth their investment profile.

o Pay an annual charge i.e. from capex to opex.

o Outsourcers and their partners provide greater specialisation.

o Apply learning from working with other broadcast organisations.

o Sometimes easier to measure and incentivise services provided externally.

o At heart of every outsourcing relationship .Economies of scale, improved operational effectiveness and off shoring.

o Typically savings of 20-30%, but depends totally on the nature of the service.

o Allows broadcaster to concentrate more effectively on its business strategy.

o Reduces the level of management attention required for non core activities.

o Hands problem over to a third party.

· Driven by cost savings and risk transfer / reduction.

· Embeds outsource provider in broadcaster's organisation.

o Provides transformational change.

o Driven by risk sharing / reduction and cost savings.

o Flexibility

Three Principal Issues

o Not understood initial cost base or level of savings achievable in house

o Not factored all costs into deal e.g. transition, management and termination

o Maintain outsourced services in house (pay twice over)

o Efficiencies change over time i.e. cost efficient process in 2006 may be an expensive one by 2010

Reasons and Observations

o Both actual falls and perception that service levels have fallen are important

o Broadcaster culture - problems need solving at once even if not "on air"

o Require realistic service levels to be agreed and communicated to all users

o Broadcaster and outsourcer need to understand each other's business drivers

o Need to protect competitive strengths and strategic identity. For instance, a company outsourcing technology may decide to keep enough of its technology strategists in house to be in control of its technology vision.

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