Friday, 21 August 2009

BT In Trouble - Still

This week's Economist magazine has a special article that picks at the flaws of BT in the usual Economist insightful manner. But it seems to miss what we consider to be some key points.
Firstly when BT devolved itself of its mobile business it tacitly accepted that it is a renter of fixed land line services, and not a communications company. Thus condemning the business in the long term to low value, low growth land line markets that are being surrounded and bypassed by mobile and radio telephony.
Secondly it started Global Services to move up the 'value chain' and become a services supplier to major corporations. If it had done so based on Telco services perhaps it would have made it. Sadly BT thought it could manage client data centres, desk tops, and write applications too. As history has shown, and we have previously blogged, it got this badly wrong.
Thirdy, it completely failed to create a management team, not just close to the board, but down through the organisation capable of facing a more commercial world.
This is why we continue to believe that BT must get back to basics and become a communications business again. One that can deal with the modern fast paced commercial less regulated world. We forecast that over the coming months Global Services will 'discover' more problems with major contracts, like NPfIT, and will be taking more write downs.
Unless radical steps are taken by Ian Livingston and his leadership team, on the current track it looks like BT will become rather like British Airways (a much Knighted, much Lorded flying pension fund) in that BT will become a copper cable pension fund with a value based on metal exchange prices, with more Knights and Lords of its own. Good for them. Bad for shareholders and staff.

Footnote: Speaking of capable IT Services management. Many Global Services managers now work for other IT services companies. They were probably hired when BT GS ruled the roost and their personal value was high. Now their new employers must be wondering if they have brought in the right sort of people given that they contributed to GS's downfall. But there again, perhaps the new employers like; Logica and HP/EDS, have not woken up to this one yet?

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