Let them outsource
Telkom is engaged in one of the biggest outsourcing projects SA has seen. It could result in as many as four-fifths of its employees moving off its payroll. The unions are gearing up for a fight. But they are wrong to try to block it. Here’s why.
Though Telkom has agreed to postpone implementation of the multibillion-rand outsourcing project, known internally as “capability management”, the company is nevertheless forging ahead with what will be one of the biggest such deals SA has yet seen.
The delay, until April 2009, is meant to placate the unions, especially the Communications Workers Union (CWU) and the SA Communications Union (Sacu), which have come out against the plan. The project, if it goes ahead, will affect as many as 19 000 of Telkom’s 25 000 fixed-line employees.
“[We] will be working closely with our consultants to ensure we produce a viable alternative to outsourcing,” the CWU says. ” If management is of the view that operational expenditure is too high, we need to engage them to look at deficiencies and not just arrive at the conclusion of outsourcing. Outsourcing is too commonly used as a quick fix to every management problem.”
That may be true, but outsourcing is the most effective and least damaging way of ensuring that Telkom, which is far from the lean and mean organisation it needs to become, is ready to deal with the serious competitive challenges it will soon face.
Once Telkom has completed the outsourcing project, the idea is that what will remain is a marketing and strategy organisation that is flexible and responsive to the market and changing conditions. That’s the theory.
It’s the correct strategy. The UK’s BT Group (formerly British Telecom) got itself into trouble precisely because it didn’t take sufficient pain upfront and wasn’t fully prepared to deal with the rigours of competition (and regulatory pressures) that followed. The 1990s was a decade of painful retrenchments at BT. The last thing Telkom needs is to face a similar period of protracted pain.
The unions need to appreciate that new technologies and new competitors are making the telecom industry a much more challenging place. There will be no place for bloated, inefficient companies in the hypercompetitive industry that will rapidly emerge in the next few years.
There’s a bigger challenge for the unions: the membership base of Sacu and the CWU is made up almost entirely of Telkom employees. If most of those staffers’ jobs were to be outsourced, these unions could face obliteration. For the unions, it’s about survival. But they must think beyond self-interest.
Three front-runners have emerged to secure the outsourcing contract. They are Siemens, Alcatel-Lucent and Ericsson. The bidders filed technical submissions last week and financial submissions are required by year-end.
The three main contenders have already spent a small fortune on their bids. “If Telkom pulls the plug now, it will struggle to resurrect this in the foreseeable future,” says one industry insider. “I fail to see how it can stop it without doing damage to itself.”
These are times of heady change at the fixed-line operator. It is unbundling its stake in cellular operator Vodacom in a move that could transform the company into a converged communications provider. Now, if CEO Reuben September is able to pull off a successful outsourcing, he will have achieved more than any of his predecessors and helped steer Telkom away from the path of mediocrity and, ultimately, possible financial ruin.
If the unions are smart, they’ll support the project while seeking job guarantees from management while they can still negotiate from a position of strength. The alternative is a wave of BT-style retrenchments in the next few years as competition bites.
Telkom outsourcing discussion
First published as the column Technology & You in the Financial Mail of November 28 2008
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