Universal Music signs five-year network outsourcing deal

Computerworld - Universal Music Group (UMG) has signed a five-year communications outsourcing deal that it hopes will save 10% or more on $20 million in yearly networking costs to operations in 48 countries.

The outsourcing deal with Paris-based Equant, a unit of France Telecom, will allow UMG to focus its IT resources on recording-industry IT applications instead of networking needs, said Scott Belmont, executive vice president and CIO of UMG in New York.

“From a music standpoint, our market is evolving rapidly, and it’s enough to keep up with that technology,” Belmont said in an interview last week. “At the same time, we felt we needed to hand over the network needs to somebody who does that for a living.”

A big advantage of working with Equant is that the outsourcer can handle big spikes in network traffic, meaning UMG would not have to build its network to handle the largest spikes in traffic, which would be a costly prospect, Belmont said. “It’s like getting one seat on the bus, versus paying for the whole cost of the bus,” he said.

The deal, signed March 1, will cost UMG between $13 million and $19 million a year, he said, adding that the company still expects to save money.

The contract gives Equant responsibility for all of UMG’s communications infrastructure, including a global WAN and LAN, managed voice and IP telephony, and Web hosting, Equant said.

UMG has about 9,000 internal users on its network in addition to thousands of people who work for its business partners. Fifteen IT staffers will be transferred from UMG to Equant, although they will continue to work on UMG’s network needs, Belmont said. A vice president and a project manager within UMG’s IT unit will be retained to oversee the Equant deal.

Working with Equant means UMG will be able to move quickly to voice over IP, something UMG has wanted to do, Belmont said.

The decision to outsource was conceived over 18 months and included bids on the project from Sprint Corp. and MCI Corp. (which offered individual proposals prior to their merger). But Equant was “found to have the most credibility in what they expressed they could do,” Belmont said.

In fact, one of the lessons he learned in the process was how important it is to examine how trusted a vendor is. “You have to look very carefully beyond objective facts and look at issues [of] trust and competency that can’t be laid out on a spreadsheet,” he said. “There are intangibles.”

The other lesson is that big communications deals require plenty of time, something IT executives should plan for, Belmont said.

Such deals like the one Equant reached with UMG are becoming more common, with competitors such as BT Group PLC, AT&T Corp. and Verizon Communications Inc. announcing their own customer wins lately, said Mark Winther, an analyst at IDC. “Companies will outsource the management and operation of their networks because those tasks are just complicated and hard to do -- especially when multiple countries are involved and [with] all the risks of network downtime and the costs involved,” Winther said.