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Ericsson sees growth in managed services
By Liu Baijia (China Daily)
Updated: 2004-07-19 09:25

Enterprise telecommunication outsourcing will become one of the fastest growing businesses for Swedish telecommunications equipment giant Ericsson, said a company executive.

Peter Ditmar Hofman, general manager of the professional services unit of Beijing Ericsson Communication Systems Co Ltd (BEC), said that managed services, namely telecom service outsourcing, will account for 40 to 50 per cent of the firm's business, one of the two major manufacturing facilities of Ericsson in China, in three years.

It is estimated that managed services will contribute to 12 per cent of the company's total business this year.

Hofman said there has been a rising trend among companies to outsource their organizations' telephone services to professional service providers.

As every industry in China becomes increasingly competitive, especially after the country's accession to the World Trade Organization in 2001, companies are focusing more on their core business, with outsourcing becoming increasingly popular.

Huge demand will soon exist for enterprise telephone outsourcing business, as many Chinese companies still use telephone equipment purchased 10 years ago and they may have to replace the equipment soon.

Ericsson China, which has outsourced all its telephone services to BEC, is estimated to cut the monthly cost of its telephone system by almost two-thirds from 1.56 million yuan (US$188,000) to 553,000 yuan (US$67,000), while it does not have to establish a special maintenance team, but always uses the latest equipment.

According to Hofman, his company will target all industries in China, but the service sector may be a priority in the near future.

Last summer, BEC was approved by the State Administration for Industry and Commerce to become the first company to engage in enterprise telecommunication outsourcing in China.

Ericsson China is BEC's first customer in China, but Hofman said its position as the biggest will be taken by another client soon.

It also signed a contract with Scandinavian Airlines and operates two service centres for the aviation company.

Plaza Asia, a professional business plaza management company based in Hong Kong, is BEC's third customer. The two sides signed a three-year contract under which BEC will provide enterprise telecommunication service for its branches in Hong Kong and on the Chinese mainland.

Hofman said BEC is currently negotiating with 12 companies on enterprise telecommunication services.

The Ericsson subsidiary will also work with some local leasing firms to provide financial assistance to customers.

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