BT aims for global dominance

BT Global Services saw out 2005 with another huge contract win, coupled with another tactical acquisition. The corporate IT and network services arm of the UK's incumbent telco will provide Italian automotive giant Fiat with managed telecom services in 40 countries. As part of the deal, it will also acquire Altanet, a Fiat subsidiary providing telecoms services in Italy to the car maker and others.

The Fiat deal, worth €450 million over five years, is a prime example of the new, redefined BT Global Services' strategy. Since Andy Green became CEO in November 2001 the "networked IT services" provider has re-structured, returned to profitability and claimed some of the largest and highest profile deals of their kind. Top of the customer list are a $3 billion network services contract with information provider Reuters, and a lead role in the NHS' Connecting for Health project (formerly know as NPfIT), worth £2.15 billion.

Green depicts BT Global Services as "a new breed of services organisation", even if the name has a familiar feel to it. But Green thinks he can distinguish the company from rivals, notably IBM, through its initiatives such as building a global IP network. BT, says Green, will be positioned in the "sweet spot" as companies begin to converge IT and communications infrastructure.

Networked IT services generated £8.2 billion for BT in the 12 months to 30 September 2005. BT Global Services now accounts for around 35% of the BT Group revenues, making it the biggest corporate business. The unit's revenue grew 16% to £2.1 billion in its fourth quarter, stretching to 20% outside the UK, with particular growth in the US. However, that growth looks less impressive when the revenues from its Albacom and Infonet acquisitions are excluded – just 5% year-on-year.

Clearly, acquisition is a key component in pulling together BT's consulting and systems integration capability. Infonet, which BT bought in November 2004, strengthened its managed network services capabilities, and was followed in December that year by BT's buyout of Italian services provider Albacom. Other acquisitions have included Radianz, a financial services specialist which came from Reuters as part of an eight-year, $3 billion deal inked in March 2005.

Acquiring network assets at the same time as new services contracts is a sensible strategy, says Ovum senior analyst Richard Mahony, especially as BT chases larger pan-European deals. The economies of scale and increased points of presence can make for a more competitive bid in a market in which price is a key differentiator, he adds.

"Making the best of IT in a networked world is really where our strengths lie," says Green. He says he expects to make smaller-scale acquisitions on a "month by month" basis, such as the November 2005 deal for Irish services group Cara; larger deals will be considered once the integration of the "big three" – Infonet, Radianz and Albacom – is complete in 2006. Local area network (LAN) services are of particular interest as LANs are "the point at which convergence is delivered to the end user".

"Making the best of IT in a networked world is really where our strengths lie."

Andy Green, BT Global Services

As the Radianz acquisition shows, Green has re-shaped the 30,000-strong organisation to be driven by industry vertical or geographic sector: "As you move from being a product-driven telecommunications company to being a local services company, you have to adjust the way you do business."

That change from product-oriented shops is intended to simplify its offering and "make us easier to do business with," says Green. This means presenting standardised platforms to customers in a defined sector. The real benefit of operating in this manner is that it allows for closer interactions with customers, with more service repeatability to keep costs low, and develops deeper industry-specific knowledge – key elements in differentiating services, he adds.

With a similar customer focus in mind, BT saw in 2006 with the "re-engineering" of several support and networking departments into a new customer service and network operation (CS&NO) organisation. This aims to cut lead times for new projects and to push up first-call problem resolution from 45% to 90% within two years. BT will also cut costs, with some redundancies.

Green says big deals like Fiat are his organisation's best way of explaining his philosophy to customers. In that light, the high-profile troubles experienced with its NHS contract could provide a counterweight to successes elsewhere. But Green is adamant that BT is making headway with the NHS project: "Any big change problem will have difficulties and the NHS project is one of the most ambitious anywhere in the world."

Customers should be reassured that when projects do falter, BT absorbs the blow, says Green. For him, any contract needs to balance the risks and rewards: "Big deals can go wrong and indeed if you don't get one big deal that goes wrong you're probably not trying hard enough and you've probably got your risk management in the wrong place. There are going to be some contracts which fall below the line although you want the bulk of them falling above. It's a risk business."

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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