Houston, June 7 (PTI): Telecom providers will outsource services worth more than US$ 1 trillion over the next five years in order to remain profitable, according to Insight Research Corp.

With increased competition and lower-margin products cutting into their profitability, wireline and wireless carriers will be spending nearly USD 1.4 trillion over the next five years on outsourced services in order to reduce costs, according to Insight's newly-released market analysis report titled "Service Bureaus, Outsourcing and Telecommunications Networks 2007-2012."

By the close of 2007 alone, the carriers will be spending more than US$ 198 billion on outsourced services worldwide.

Until now, carriers have considered outsourcing to be little more than a tactical form of reducing the cost of acquiring ancillary services, but the lower margins associated with voice over IP is forcing them to focus less on achieving incremental cost improvements and instead use outsourcing as part of a transformational strategy, according to the report.

"Before the advent of VoIP, outsourcing was used by carriers to gain incremental cost improvements in the 10 - to 20 - per cent range," said Robert Rosenberg, president of Insight.

"However, the lower margins associated with IP communications as well as increasing competition are forcing carriers to rethink their entire strategy. Carriers are unbundling their value-chain and using outsourcing as a transformational strategy to achieve cost savings between 30 and 60 per cent," he adds.

The study, which evaluates outsourcing expenditures for wireline and wirless carriers for eight geographic regions, suggests that the most frequently outsourced functions are billing, training, directory services, operator services, network management, customer care, SS#7 interconnection, and OSS interconnection.