Sprint will continue to manage eight or nine call centers for its wireless and consumer long-distance units. A total of 21 call centers, including one in Nashville, will be outsourced to IBM and its 10 subcontractors. Sprint's long-distance call center in Dallas will be consolidated with the PCS call center in Fort Worth.

Sprint also will become the first Tier 1 carrier in the . to broadly implement IBM's Service Provider Delivery Environment (SPDE). This platform will be the basis for all the business process transformations and service delivery capabilities required by Sprint. Also as part of the agreement, IBM will begin selling Sprint wireless services to its enterprise customers.

"We are looking forward to working with IBM in this co-sourcing environment to dramatically improve customer satisfaction while reducing our operating expense," said Len Lauer, president and chief operating officer at Sprint. "This allows us to leverage the innovation we have in the marketplace and improve our price value."

Lauer may be the only one calling it a co-sourcing arrangement rather than one centered on outsourcing, but with a $100 million investment in IBM's SPDE, the agreement addresses more than customer care centers. The companies will work together using the new environment to convert all of its business processes around customer care as well as to develop and deliver new services.

"We will work with Sprint to transform the way customer service is done," said Doug Elix, senior vice president and group executive for IBM Global Services. "We are taking all the processes for a product-centric business and reorienting them to a customer-centric business. It is what our whole business transformation outsourcing initiative is all about."

The transformation will take 18 months. On the customer care side, IBM will use its On Demand Customer Integration Center (ODCIC) to add better functionality to the call centers. That added capability will include call routing, IVR capabilities that segment calls by customer type as well as the type of call, self-service, monitoring and management of transactions and customer service reps, skills-based routing, and an integrated desktop that will provide an enterprise wide view of the customer. The ODCIC will be implemented by the third quarter. At the same time, IBM will institute and direct new hiring and training practices for CSRs.

The preponderance of the transformation will be done by the first quarter of 2005, according to Dean Douglas, vice president of IBM's global telecom industry division. "We have to put in a whole new set of processes and capabilities around customer care," he said.

The transition of the call centers is underway. "We're already on the ground in Nashville talking to employees and making sure they understand the transformation and are on board," said Jack Freker, president of the Customer Management Group at Convergys.

Those on board will become Convergys employees on March 1. Freker said there are no current plans to reduce the number of call center agents or move them. "Our goal is to weave in our best practices we have built over a 30-year period," he said.

For Convergys, taking over the Nashville call center approximately doubles the amount of billing business the company already does with Sprint. Although neither company would provide financial details, Brian Bingham, manager of CRM and customer care research worldwide at IDC, calculated by the number of seats Convergys will gain that it could earn as much as $100 million per year over the next five years.

And based on the current outsourcing trend, more business will be available for the taking. Bingham projects the $30 billion to $40 billion market for outsourced call centers will grow at a compound annual growth rate of 14% to 15% over the next few years.

While 85% of all call center work is still being done in house, this trend already is having a big impact on the telecom market as its reluctance to outsource continues to wane.

"Carriers have pecked away at small increments of change, small increments of improvement," Freker said. "They should spend on their core strengths, not on the bricks and mortar and desktops of a call center that can be better staffed by an outsourced provider like Convergys."

Having taken the notion of outsourcing to such a grand scale has some experts wondering how far the outsourcing trend might go. "IBM is slowly chipping away at all the service providers and helping them realize that IBM has been in the business of systems and systems management since dirt was invented," said Karl Whitelock, program director of OSS competitive strategies at Stratecast Partners. "And they have been chipping away at those service providers to get them to outsource all of their operations management."

Both Lauer and Elix said that outsourcing operations is not in the cards, but IBM has done it before with O2 in the UK, and last year Qwest outsourced its IT infrastructure to IBM. Additionally, many traditional vendors such as Lucent Technologies have started pitching the concept of outsourced operations.

The other major outsourcing trend - moving all call center work offshore - also isn't part of the plan, Douglas said. "Besides, Sprint does this already. They have call centers in Mexico, Trinidad and Puerto Rico. We are going to take over those call centers, so there is an offshore component, but it is not a migration offshore," he said. "In fact, we are looking at ways that we can continue to invest in the ."

For now, the challenge will be in deploying the SPDE and transforming Sprint's business processes while trying to maintain service continuity.

"It is going to be a difficult road to hoe," Whitelock said. "But four years ago, IBM didn't even know how to spell OSS, and today they are getting in the door of every major carrier worldwide. That's an impressive statement."

IBM also did a similar, though less comprehensive, transformation at Nextel last year. Using IBM's integrated desktop and practices Nextel raised its customer care quality ratings from the bottom of the heap to near the top, and tied with Verizon, according to an August . Power and Associates survey, Douglas said.

Analysts say the $550 million Sprint hopes to save is a realistic goal. Lauer said the company could have transformed the business on its own and still saved money. "But working with IBM we get there faster and dramatically improve customer service, and the opex savings with IBM is greater than we can do on our own," Lauer said.

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