TALLINN (WiMAX Day). Norby Telecom AS, the leading WiMAX service provider in Estonia, this week announced an innovative outsourcing agreement with IBM. Under the terms of the agreement, IBM will facilitate for Norby the installation, logistics and maintenance of Alvarion’s BreezeMax customer premises equipment (CPE).

While the acquisition of, and relationship with customers will remain with Norby, all the actual fieldwork related to the CPE will be done by IBM. This relationship will allow Norby to focus on customer acquisition and network operations.

In a press release issued by Norby this week, Oleg Shvaikovsky, Chairman of the Board of Norby Telecom AS said “Being a telecommunications company we no longer have to deal with the resale, installation or maintenance of hardware, instead we can concentrate on the main field of activity – offering fast data communication solutions and high-level IP telephone service in the Baltic States.”

Fuel for expansion
Norby presently intends to expand its WiMAX service to Latvia and Lithuania. The company is now in negotiations to acquire companies with spectrum licenses in these countries, which according to Shvaikovsky should close soon.

An expansion into Latvia and Lithuania would be a big boost for Norby. While both countries are larger than Estonia, and are growing rapidly, their telecom networks are much less developed, and they have a greater suburban and rural population. There is also little competition for WiMAX in these countries.

Such an expansion could be costly and time-consuming for Norby. However, the relationship with IBM will allow Norby to expand more quickly, and remain focused on just that. With the benefit of using IBM outsourcing, Stanislav Ivanov, Global Services Manager for IBM Eesti, commented that as an outsourcing partner, “IBM will be able to support Norby with its growth plans in Latvia and Lithuania, and that should make their expansion much more easy.”

The rationale for outsourcing
The agreement between Norby and IBM is one of the first of its kind for WiMAX service providers, but no doubt will soon be the first of many. One of the key points of an outsourcing deal for any company is the effect it can have on operating margins.

IBM is one of the leading providers of technology outsourcing and integration, and has earned its skills working with many of the world’s conglomerates. In its vast experience, IBM has seen that companies that outsource key IT and logistical functions have better long-term performance and outperform their industry peers.

A recent study made by IBM (Business Impact of Outsourcing, 2006) further illustrates that there is a measurable long-term impact of outsourcing on key financial metrics. For example, most of the companies that IBM studied who outsource IT had a significant reduction in operating expenses compared to industry peers. Many companies that IBM studied also had considerable increase in their return on assets (ROA), and some had an ROA of 8.6 points higher than comparable companies.

Success in Estonia
Norby Telecom operates the largest WiMAX network in Estonia using 3.5 GHz spectrum. While spectrum licenses are still being awarded for a few remaining regions, in the next few months Estonia will me fully covered with WiMAX. The only close competitor to Norby is Elion, a subsidiary of TeliaSonora. Between the two companies, over 100 WiMAX base stations have been deployed in Estonia.