This paper examines the relative merits of outsourced versus in-house employee training for telecommunications companies. Drawing on a qualitative and quantitative literature review, it evaluates key decision factors including total cost of ownership, staff capacity, and technology integration. The paper presents evidence from industry case studies—including Hungarian Telecom's e-learning program and computer-based training cost comparisons—to demonstrate that outsourced and computer-based training can reduce training costs substantially while delivering equivalent or superior outcomes. It also reviews emerging integrated HR performance management suites and concludes that a combination of outsourced and in-house training, with outsourcing as the primary approach, offers the most cost-efficient solution for telecom organizations.
The objective of this work is to examine outsourced training versus company in-house training for a telecom company. The pros and cons of each method will be evaluated, and a determination made as to which method is superior. Following that determination, this work provides information on how the preferred training approach would be undertaken by the company.
There are many factors to consider when a telecom company attempts to determine the most effective method of administering training to its employees. In-house training carries its own benefits, but so does outsourced training. The work of Mills (2003), entitled "Outsourcing Can Drive Profitability in Telecom's Tough Times," states that factors to consider include "costs," "the business model strategy … development partnering, time and timing, customer value, manageability, geography, credibility and track records," among others.
The following terms are used throughout this study:
TCO — Technology's total cost of ownership (Stein and Osten, 2005).
HR/BPO — Human Resources Business Process Outsourcing.
HRIT — Human Resources Information Technology.
Limitations of this study exist in the available timeframe for conducting research; however, these limitations have been addressed to a significant degree through a review of extensive literature in this area, drawing on the most recent updates available relevant to this study.
The methodology utilized in this study is both qualitative and quantitative in nature. The literature review component is qualitative, consisting of a descriptive and comprehensive study of material in this area. The quantitative component involves a review of cost and savings data drawn from other case study reports examined in this study.
The advantages of outsourcing training for the company include cost savings, reductions in training time, and more effective and efficient business processes. Business process outsourcing of HR functions—specifically training—is increasingly integrated with other HR processes through integrated HR performance management suites. These suites can be used in combination with other outsourced training processes to align the organization toward its goals while reducing the costs associated with information technology training.
No inherent disadvantages are noted in outsourced training for the information technology training needs of a telecom company, unless the software utilized by the organization is so diverse and lacks integration that specific in-house training needs are created by that deficiency in the company's business processes and IT applications.
Integration is widely acknowledged as the key enabler of efficiency and effectiveness in a company's information technology solutions. Studies have demonstrated that computer-based training initiatives require approximately half the time to convey the same amount of information as traditional classroom-based instruction. Specifically, forty hours of information delivered in an instructor-led classroom can be learned through computer-based training in approximately twenty to twenty-four hours. Research also demonstrates that considerable savings in training expenses can be achieved through outsourced computer-based training programs.
New technology for HR performance management, in the form of integrated HR management suites, is reviewed in the literature below. These suites allow for the integration of all HR management functions and enable simpler, more effective management of employees, including employee training. Effective and efficient management of HR training needs can best be realized currently through a combination of in-house and outsourced training, although integrated outsourced training solutions are the primary choice among today's companies, as the following literature review demonstrates.
Stein and Osten, in their work "Determining Whether to Outsource: Is It Time to Bring in Some Outside Help?" (2005), define outsourcing as "the practice of using outside vendors, consultants and other service providers to plan, implement, or evaluate an organization's technology needs." They identify five conditions under which organizations should consider outsourcing technology training:
(1) The organization is already committed to a tremendous amount of work and cannot dedicate the necessary staff time to handle a technology project in-house; (2) the organization has available staff time but lacks the required technical expertise to scope out and properly implement the technology project; (3) the technology's total cost of ownership (TCO) is lower when outsourcing; (4) the organization needs the technology project implemented quickly and cannot take the time to retrain staff or wait for staff availability; and (5) the organization needs a variety of technology projects implemented, and outsourcing to a vendor offers access to a wide range of technology expertise.
Stein and Osten note that these resource allocation, managerial, and human resources issues are not unique to technology projects. However, outsourcing technology work raises a specific set of issues: (1) even when a technology project is outsourced, an in-house project manager or team will need to manage the relationship with the vendor or consultant; (2) outsourcing typically involves a cash cost that must be properly budgeted—some contracts require upfront payment while others carry ongoing monthly or quarterly costs; (3) the organization must identify an appropriate vendor or consultant, often through a Request for Proposal (RFP) process, which can itself be time-consuming; and (4) a formal contract should clearly specify the scope of services, cost, dispute resolution, and termination terms. (Stein and Osten, 2005)
Stein and Osten (2005) also recommend that organizations consider the following questions before deciding: What is it about the current business system that needs improvement? How does the current system operate, and what are the steps in the proposed new system? Which parts of the system may benefit from a technology solution? And what specifically will work better, and what results are expected from the improvements?
Additional considerations for in-house versus outsourced training include: whether existing staff can be retrained for the technology project; whether upcoming staff changes or new hires could bring in the required skills; whether working with an outsourced provider would transfer skills in-house for future benefit; how outsourcing would affect the speed of implementation; and what the financial and staff-time costs of outsourcing are relative to going in-house. (Stein and Osten, 2005)
Marc Osten (2001), in "Total Cost of Ownership: The Hidden Costs of Technology," identifies the components of owning and operating technology as: (1) strategic planning for technology; (2) training; (3) hardware technical support; (4) software; (5) replacements; and (6) connectivity. In terms of strategic planning, technology integration is complex and requires investment to align technology initiatives with the company's mission. Regarding training, Osten emphasizes that it must be "task-specific and has immediate on-the-job application," and that short training sessions of fifteen to thirty minutes "are more valuable than hours of software training." (Osten, 2001) Connectivity—particularly speed and number of connections—is an area where outsourced training is likely to pay off in the long term.
Leifheit, Correa, and Fink (2001), in "The Continuous Education Solution for a Country Wide Telecommunication Company," note that competition among companies has raised challenges for training and development of human resources. Their research finds that online or distance learning systems carry low associated costs compared to commuting, and that employees do not need to leave work to attend classes—factors that "contribute to validate the investment in this methodology." (Leifheit, Correa, and Fink, 2001)
Campbell (2008), reporting on a study by AOTMP administered to 275 Finance and IT leaders, finds that telecom management plays a "critical role within the enterprise as communication flow and data sharing rely on the viability and flexibility of the IT and telecom systems." The study reports that 69 percent of CFOs and 67 percent of CIOs rank optimization of technology management as the top priority for their IT group, and that 63 percent of enterprises continue to place emphasis on aligning IT and business goals. Spending reductions on IT and telecommunications were among the stated priorities of management. (Campbell, 2008)
The interview with the Hungarian Telecom Training and Knowledge Management Directorate, published by Magyar Telekom as part of the Megatrends project case studies, provides a detailed account of distance training development at a major telecommunications provider. Hungarian Telecom began experimenting with e-learning in 1996 by introducing a rented WebCT Learning Management System. It later developed its own LMS and began creating e-content, e-books, and interactive help materials. Fully operational e-courses launched in 1999, and by 2005 the company had over 8,000 enrolments across approximately 150 courses. At the time of the interview, the distribution of online versus face-to-face courses taken by the company's learners was approximately 50-50. (T-Com, 2008)
"Hungarian Telecom e-learning and CBT cost study"
"Integrated HR software suites for talent management"
Mills (2003) identifies the basic factors of a successful outsourcing partnership: first, knowing "your core business and competitive value; outsource the other parts." Second, the company should "define your roadmap to move from outsourcer to in-house as the project matures." Third, the company should focus staff on ongoing long-term business. Fourth, the company should outsource one-time tasks. Fifth, excellent project management is essential. Sixth, "ethics are not optional." (Mills, 2003)
The evidence from the literature consistently supports outsourced and computer-based training as the more cost-effective approach for telecom companies. Computer-based training can deliver the same information in roughly half the time of instructor-led classroom training, and overall costs are substantially lower when travel, trainer wages, and opportunity costs are factored in. The experience of Hungarian Telecom demonstrates that a commitment to e-learning—supported by strong leadership, continuous assessment, and flexible contracting—can reduce training costs to as little as 25% of former levels while maintaining quality and flexibility. Where gaps remain, particularly in complex or highly specific technical areas, a targeted combination of in-house and outsourced training provides the most effective solution for meeting the evolving workforce development needs of today's telecommunications companies.
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