HP (NYSE: HPQ) is seeing an increasing trend in Latin American telcos to outsource their IT environment to third parties both for financial reasons and because it allows them to concentrate on their core business, HP’s country manager for Mexico, Leonardo Mendoza told BNamericas.

From a balance sheet perspective, outsourcing does not appear as a capital investment but as more of an operational investment, Mendoza said.

On the other hand, the telecommunications industry is undergoing a consolidation process, and aggressive players need to concentrate their internal resources on business growth and less on operational tasks that could be done by third parties.

“That’s why we see a trend in the telcos. As they move to converge traditional services with media, competition between those that are left will be quite strong,” he said.

“It’s a trend that’s increasing. It’s not as standard as in manufacturing, where most understand that IT is not their core business and so they outsource it. Some telcos still insource most of their IT, but that’s changing,” Mendoza said.

HP Enterprise Services announced in February an agreement with Latin American digital trunking provider NII Holdings (Nasdaq: NIHD), which operates under the Nextel brand, to manage its applications and technology infrastructure support services in Argentina, Brazil, Chile, Mexico, Peru and headquarters in the US.

Key elements of the managed services arrangements include applications development, management and testing services and management and support of server and storage environments at NII data center sites.

HP’S STRENGTH

According to Mendoza, working with HP will have a major impact for Nextel operationally and from a cost perspective. And as HP has an extensive footprint across Latin America, the IT firm will be able to support Nextel if it wishes to expand.

“On the applications side, we bring experience we’ve had in telecoms for a long time with clients in Latin America and Europe. We can bring knowhow to maintain and improve the applications Nextel uses for its business – billing, back office, CRM, etc,” Mendoza said.

According to the executive, a little known fact is that HP has a lot of intellectual property in the telecoms area. In particular, HP has a special division that produces software for telecoms networks, for mediation for example.

HP already has an important presence in outsourcing in the Latin American telecoms sector. Out of the company’s Latin American revenues, 28% comes from communications, media and entertainment companies, and outsourcing makes up a sizeable part of that amount. Including Nextel, HP has three accounts, Mendoza said without giving the names of the other two but adding that they are “large telcos.”

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