Saturday, 31 January 2009

IT Services Tittle Tattle

BT is not the only IT services company where contracts are too complex to manage. There's also a colourful services company, a subsidiary of a Telco, operating mainly in France, Germany, and Switzerland that can't do a P&L for each contract. It just takes the revenue it collects, assumes a 10% net operating margin and calls the rest 'costs'. How quaint! I wonder how long this lot will stay in business?

Which leading IT services provider in the UK involved in government contracts, where security is a must, has a boss who has lost several Blackberries full of sensitive information?

Is business too complex for some?

Baring Bros, Northern Rock, AIG, Fannie Mae, Freddie Mac, Soc Gen, Lehmanns, and BT. What do they all have in common? All had people in positions of influence to make big decisions impacting the whole company yet many of their bosses didn't know just how complex and how much out of control they were.
For Barings you could say that was because the dear old buffers in London were caught napping by a smart operator, Nick Leeson, at work 7,000 miles away in Singapore.
For Northern Rock you could say an aggressive and persuasive CEO led the board by the nose.
For Soc Gen yet another smart operator got away with bad complex trading, a' la Leeson.
But why are BT in this lot I hear to ask? It's because like the others BT got involved in business BT did not understand and let aggressive and persuasive people have their own way. BT's Mr Livinston has even said they were in big contracts that were too complex and they did't understand them. If that's the case why did the over sight committees and non-execs not step in and call time? As a result of this BT's share holders have a seen a slump in the value of their holdings, with even the dividend under threat. Therefore change is needed.
As it was BT Global Services that caused the problems while the other business units are still doing well, and as BT GS is an entity not well understood by and alien too the BT way of businsess would it not be wiser to hive off GS and for the BT to stick to becoming a world class carrier and provider of internet access.? After all the UK, and much of the world, is short of high quality, large scale internet and wi-fi carrier. There's more than enough work here for a focused business team to build up substantial profits from.