Sprint has announced a seven-year, $5 billion contract to outsource management of routine network functions to equipment maker Ericsson (News - Alert). The unusually broad agreement goes further than previous outsourcing deals by spanning virtually all of Sprint's wireless and wired networks. 

 

Think of it this way: Sprint (News - Alert) believes network management no longer provides strategic benefits. The move also highlights the changing role network equipment and software suppliers play in global networks. Where service providers once solely managed their operations internally, they gradually have been outsourcing non-core elements of their operations.

 

For the first time, a major carrier has concluded that network operations are "non-core."

Sprint retains full ownership and control of its network assets, and solely owns network strategy and investment decisions.

 

Customers will continue to work directly with Sprint employees as their primary contact, as Sprint retains full control of the customer experience, customer technical support and services review.

 

Sprint also retains technology and vendor selections.

 

Ericsson assumes responsibility for the day-to-day services, provisioning and maintenance for the Sprint-owned CDMA, iDEN and wireline networks.

 

Transferred Sprint employees will become part of Ericsson Services Inc., a wholly-owned Ericsson subsidiary based in Overland Park, KS, a move that retains jobs in the United States. No force reductions are currently contemplated as a result of this agreement.

 

Yankee Group (News - Alert) analyst Camille Mendler says “the North American telecom market has finally cracked." Owning a network still provides strategic value, as do customer-facing operations, the move suggests. But network operations do not. 

 

Mendler believes Sprint’s deal is a game changer. “Until today, North American telecom operators had proved unwilling to outsource network functions on such a large scale," she notes.