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Outsource magazine: thought-leadership and outsourcing strategy | August 24, 2017

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Nokia outsources R&D

Outsource Magazine

An R & D outsourcing contract for mobile phone giant Nokia Siemens Network has been awarded to Finnish IT company TietoEnator.

TietoEnator will provide R & D services for Nokia Siemens Networks’ IP multimedia systems and mobile intelligence networks. Around 230 employees will be transferred to TietoEnator as part of the deal, which is expected to be completed at the end of the month.

“This agreement is good for TietoEnator and for the employees of Nokia Siemens Networks,” said Mika Vehvilainen, chief operating officer of Nokia Siemens Networks.  “It reduces the need for layoffs, five Nokia Siemens Networks additional flexibility and transfers people to a strong partner where their competencies will be a natural fit.”

“This is excellent news for TietoEnator, “ said Dominique Raveat of Ovum. “The deal is key for TietoEnator as it expands its relationship with two of its three main telecom equipment manufacturing clients This news therefore confirms that TietoEnator stands well in one of its major markets and in fact is able to expand its relationship. This one deal should be quite big – the number of transferred staff is similar to the March 2006 contract. Meanwhile, TietoEnator has won smaller contracts with Siemens in Italy around mobility and recently purchased an Ericsson R&D centre in Denmark and a centre from BenQ in Poland.

“Competition around telecom equipment manufacturers has heated up with the arrival of Indian offshore vendors. TietoEnator has opted not to develop a strong Indian presence and has favoured a nearshore presence in the Baltic countries, Poland and Russia (through a partnership with MIRA). As a result of the Indians, prices are under pressure and cost savings are still very much on the agenda of the main clients. Nevertheless, Q1 2007 results suggest that TietoEnator’s nearshore strategy was vigorous enough to restore profitability. Indeed, the EBIT margin of the telecom and media business unit reached 9.2 percent, up from 6.8 percent the previous year. This is good news but we will need to see how it performs in the next three quarters in order to make a definite statement.”

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