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Managed services: Playing away from home

October 2, 2006
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(Total Telecom Via Thomson Dialog NewsEdge) BT is reinforcing its status as a global force just as other incumbents in Europe are wrestling with their domestic strategies. Last month the UK operator announced plans to double its revenue in key IT services markets over the next three years by looking further outside its UK and Western European bases.



Other incumbents might do well to follow BTs lead, or even take more radical measures. Australias Telstra, struggling for ways to grow in its home market, is showing signs of reinforcing its play in Asia (see p.26). Analysts even hint that it could pull back from its domestic commitments following deadlock with the regulator. Deutsche Telekom is having troubles at home too, as our cover story shows, and admits that it will need to turn increasingly to international revenue growth.

Some analysts say BT has benefited from pulling back from its earlier stated ambition to compete directly with big integration companies such as IBM and Accenture. They are now being more realistic, said Chris Lewis, enterprise practice leader at Ovum. In its initial statement about ICT, it was aiming for the stars. What theyve got, is closer to the sky.

BT declined to comment on what percentage of its Global Services business is pure IT services, but says it has won just under 1,000 new customers in 15 months.

Key growth is expected in the US, Japan, India and China. Those markets currently are worth some 750 million to the company said Andy Green, CEO of BT Global Services. He added that one of the largest sources of growth is among South Korean companies looking towards global expansion.

BT forecasts its German and Italian markets will generate revenue of E1 billion by 2009. BT acquired Fiats telecoms subsidiary Atlanet for E80 million last December and announced a global services contract with the Italian car manufacturer worth E450 million. Also last year, BT took full control of Italian network operator Albacom from partners including Eni and Mediaset. BT said Albacom generated some E650 million in revenues last year.

One of BTs biggest managed services contracts, with multinational retail company Unilever, was extended in September through a new global managed firewall deal worth 10.5 million. BTs original contract with Unilever for voice, data and mobile, awarded in 2002, was the first billion-euro managed services contract for a telco in Europe. In May, BT was awarded an extension to the original seven-year outsourcing contract, worth around 270 million over an extra three years.

BT says Global Services revenues grew by 4% in the first quarter of 2006, to 2.2 billion. Other significant contract wins include Reuters, the National Health Service, the Ministry of Defence, Hertz and Philips.

BT is anticipating 15% growth year-on-year, driven by global services. That will be achieved by organic growth and some acquisitions that will help us or our geographic capability, said Green.

BT says its global 21st century infrastructure will be a key differentiator. It expects to have IP services in 160 countries by the end of 2007, up from 128 at present. The number of dual points of presence in cities will increase from 12 to 28. There is no interest to have separate pockets of MPLS, said Green. Global companies want end-to-end service management.

Under the terms of the new agreement with Unilever, BT will take full control of the companys firewalls, which are spread throughout 68 countries. The current regionally managed model will be brought under one operation in the network IT services operation.

Unilever says it has made cost reductions of 20% since it first signed an agreement with BT, which has now changed from being a supplier to a partner according to Neil Cameron, chief information officer at Unilever.

Cameron said Unilever did not re-tender the contract. We could have got it cheaper, but price is not the only importance, he said. We need to know that they are going to deliver.

To prise Unilever away from BT is now I would say well nigh impossible, said Janet Watkins, director of Telemark Services, which tracks customer care performance of managed services providers. BT is prepared to put so much into the arrangement, and that is down to Andy Green.

BT Global Services also aims to deliver annual cost savings of 400 million by the financial year ending March 2009.

Green said the reductions would come from reduced third party costs of around 200 million. A further 100 million would come from taking advantage of a global workforce; eliminating the duplication of jobs will save 50 million as well as securing repeat contracts, he said.

Green cites Orange, AT&T and Verizon as key competitors in the global services market.

Copyright 2006 Terrapinn Ltd


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