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Outsourcing Emerges as Vital to Cable

Assembling a skilled, reliable team of construction crews, technicians, designers and engineers to build and maintain the sophisticated new networks that promise the full package of consumer and business services is proving to be a costly and time-consuming exercise for many MSOs.

Intense competition for expected revenues from services such as Internet access, high-speed data and Internet-protocol telephony is pushing operators to the limit to get new services to market and demanding faster deployment, smarter networks and skilled people who can design, build and maintain them.

Finding and keeping skilled workers-from splicers and installers to network designers and information-technology professionals-is a constant battle for operators, which routinely admit that the lack of skilled people is slowing their critical time-to-market schedules.

Consequently, the outsourcing of entire construction projects-from design and installation to long-term plant maintenance-is gaining momentum as a go-to strategy for operators. With it comes the creation of an entire new industry.

"Lots of companies just haven't invested in training people to do these jobs, so we're getting more requests," said Scot Roberts, general manager of U.S. operations for Expertech Network Installation Inc., a telecommunications network installer spun off from Bell Canada in 1996.

"There's lots of frustration over losing revenue and adding costs because 10 different contractors are being used instead of one or two," he added.

Studies show that network-planning and construction projects are expected to jump from 24 percent outsourced to 34 percent by 2002. Operations-support systems will rise from 20 percent to 28 percent, and outsourced network-integration projects are expected to rise from 16 percent to 22 percent-a clear sign that a growing number of MSOs and multi-service providers are looking outside for help.

"Cable operators are hiring and training, but just enough to meet their basic needs and then outsourcing the rest. But when peaks occur, they just don't have the resources," Roberts said.

Those resources are now being provided by a burgeoning segment of the cable and telecommunications industries-network-outsource companies-which are expanding their services to include the design, installation and management of electronic-commerce, high-speed-data, IP-telephony, cable-modem and Internet services, in addition to traditional plant-construction work.

"The subcontractor community is now very fragmented regionally, with very thin margins, and they just can't respond to the new MSO needs. This means MSOs can't expand into other markets because of the [lack of] subcontractors," said Craig Russey, president of ViaSource Communications Inc., an integrated service and technology company that recently acquired several outsource firms, including Communication Resources Inc., RTK Corp. and Telecrafter Services Corp.

As the footprint expands for new services and technologies and bandwidth demand grows, the outsourcing of rebuilds, upgrades and new builds is expected to gain momentum as a viable alternative to in-house construction, installation and plant management.

Said Roberts: "Fiber rebuilds and reinforcements are the biggest projects for us. With the competition, companies must look at ways to reduce their rebuild and fiber-installation costs, and operators are now determining what capital investment they'll make internally and what they'll outsource for, like skilled workers and construction costs."

Finding those skilled workers and training them to design, install and construct an integrated, complex cross-section of technologies, applications and equipment is a monumental task.

With unemployment hovering at under 3 percent and the demand for skilled technicians, engineers and construction crews far exceeding the supply, broadband-service providers are scrambling to recruit, train and retain employees in those disciplines, and they are looking to an expanding group of outsource companies for assistance.

"The issue for broadband-service providers isn't technology-it's deployment. Installation is less forgiving today, and it requires a broad set of skills," said John Woodruff, CEO of FatPipeU, a recruitment, training and placement firm.

FatPipeU recruits, trains, certifies, places and advances technicians and other skilled employees in the cable and telecommunications industries. Growth is driven by the fierce demand for quality employees, which Woodruff insists are plentiful if you look in the right places and change the way you train them.

"There is a vast pool of underemployed people who would love to get into [telecommunications] industries, but there's never been a good way to train them. For instance, manuals for engineers are written by engineers. They should be written at a lower level," Woodruff said.

MSOs, he added, should take a hard look at how they teach and train their technicians. "MSOs train by platform learning and lectures with only a 15 percent retention rate. That doesn't work. We've completely rewritten our materials with the intent to instruct. Technical terms don't have three different definitions, and we identify people who need different types of learning. That is the fastest way to train."

In the new era of outsourcing for employees, FatPipeU determines which skill sets are needed by an MSO or multiservice provider and if installers need to be trained to upsell. Background checks on safety are also required, and the company philosophy is taken into serious consideration.

Said Woodruff: "We're not a temporary labor service. We have to know the company's culture. If we can create a new generation of installers without interfering with a company's infrastructure, that's very valuable."

That value seems to be growing. By year-end 2001, 60,000 installers will be needed to complete the backlog of rebuilds, new builds and upgrades scheduled for the cable, tele-communications and Internet-service-provider industries as providers rush new services to market, according to research by The Yankee Group and Merrill Lynch & Co.

According to Communications Workers of America, 75 percent of BellSouth Corp.'s field technicians will reach pension eligibility this year-a clear indication of the acute and accelerating need for skilled technicians, engineers and installers.

"The real question is: Can companies get deployed? Whichever industry can get its services to market fastest will win, so the work-force issue is huge," Woodruff said.

Winning the recruitment war is vital to getting services to market, experts said, and it is fundamentally changing the way the cable and telecommunications industries have recruited.

"We have to recruit differently than in the past," said Austin Schanfelter, president of MasTec Inc., a company that designs, engineers, builds and installs network rebuilds and upgrades.

"We're not just a cable contractor anymore, so we ask recruits to be part of the building of the e-world. They want to be with a company with vision, and we offer them all of the benefits they'd get at an MSO," he added.

MasTec, he noted, travels the country conducting two- to three-month training programs for 60 to 70 new hires who will end up being fully employed by the company. Yet the search for the elusive skilled worker is difficult and frustrating.

"We're being asked from all sides to grow. Two years ago, it was upgrades and splicers. Today, it's all aspects of builds, and recruiting is getting tougher, even from the military," he said.

Most outsource companies are encountering the same pressures in finding skilled workers. For example, 85 percent of Expertech's employees are considered full-time, yet the company faces constant recruiting challenges. "We look for recruits at colleges, local job fairs and from retired military and other sources-wherever we can find them," Roberts said.

The tedious, time-consuming and costly job of finding and hiring trainable people is prompting a shift in strategy for many outsource companies and pushing more of them into strategic partnerships.

"We've stayed within the headend-to-home segment and, through acquisitions, have added people who can facilitate new services. It's very hard to just go out and hire people, but new skill sets must be picked up by companies like ours," said Dave Woodle, president and CEO of Corp., a company that designs, builds and maintains complex broadband-communications networks.

Woodle's firm has recently acquired or partnered with several similar companies: Advanced Communications Services Inc.,, Finisar Corp., Fortress Technologies Inc. and WorldBridge Broadband Services Inc.

Yet the new skill sets will likely come from a variety of sources, and no one company is likely to step forward with a "we-can-do-it-all" promise of building a network from scratch and maintaining it.

Said Russey: "We can't get it all. This is not a construction-company play, and it isn't about just laying cable. It's being in the home, wiring services and products for customers, so we need to do it with our own employees, not subcontractors."

The spiking demand for new skill sets and the critical shortage of applicants possessing them are driving cable operators and the emerging outsource industry into the arms of partners and strategic alliances.

Mix in the intense competition within the cable, ISP, telecommunications and telephone industries to recruit the elusive skilled employee and the costs to train and retain them, and acquisitions become a staple to the outsource business and a vital part of its growth strategy.

"With the rate of change today in the Internet business, partners are vitally important. Clearly, we are partnering to bring the technology and people to cable, and the acquisitions bring in a good base where we can swing 20 percent of our work force to a certain project, " Woodle said.

He cited the company's recent agreement with Fortress, a security company, as a classic example of partnering with a company to strengthen its position in the cable space.

"We put $3.5 million into a security company for Internet-protocol packets, and it's a great market for cable modems. But for us to learn the security business would be very difficult, so acquiring an equity position in a security company meant that we could tailor their products to the cable industry," Woodle said.

Just who will end up installing those products, where they'll come from and how they'll be trained is up for debate.

What's clear, however, is that thousands of new, skilled employees with the rare combination of interpersonal skills and technological savvy will be needed to build the broadband network's future. And outsource companies are scrambling to meet that demand.

Concluded Woodruff: "We're finding people all over the place, from church groups to flipping burgers. But we're also finding a 21st century industry using 19th century education and training methods."