Nextel Outsources To Stay Focused On CustomersNextel Outsources To Stay Focused On Customers

Nextel Communications Inc. is turning to outsourcers to cut costs and speed delivery of new products. The wireless communications service provider last week signed a five-year, $234 million IT outsourcing pact with EDS; a week earlier, it reached an eight-year, $1.2 billion outsourcing arrangement with IBM Global Services and TeleTech Holdings.

The deals are expected to save Nextel more than $1.1 billion over the next eight years, senior VP and CIO Dick LeFave says. But saving money wasn't the only objective for the $5.7 billion-a-year Reston, Va., company. "We're putting our focus into developing new products and putting more Java apps on our phones," he says. "I didn't want to build a new IT infrastructure to support this."

Nextel uses Sun Microsystems' Java technology in its wireless phones. It hopes to have 1 million Java-enabled handsets in the marketplace by the end of March.

The deal with EDS calls for the outsourcer to manage Nextel's corporate data center, database administration, help desk, and desktop services, and take on about 290 Nextel IT workers.

The IBM and TeleTech deal is even more far reaching. The two companies will handle Nextel's customer-management operations and absorb about 4,500 Nextel workers. Nextel's rapidly growing customer base made it difficult for the company to keep providing high-quality customer service, so the company decided a year ago to bring in outside help, says Cathy Bradley, Nextel's chief service officer and senior VP.

"One of our main focuses in wireless is to keep customers happy," she says. "It costs us a lot less to manage existing relationships than find new customers."

IBM and TeleTech will begin to provide phone and Web-based support services to Nextel's 9.6 million worldwide customers this quarter. TeleTech will hire, train, and supervise the 4,500 Nextel customer care-employees, who'll work out of Nextel and TeleTech facilities. IBM will host key parts of Nextel's customer-care applications at its data-center facilities in Colorado and North Carolina and distribute information to the customer-care employees.

Nextel also plans to work with IBM Research to develop new voice-recognition applications and Web self-service technologies to improve customer service and handle additional growth.

Nextel now outsources more than 60% of its IT operations, including its billing systems to Amdocs Ltd.