In contrast to British Telecommunications Plc, which is laboriously building a software and computer services business largely from its own resources, state-owned France Telecom has assembled a portfolio of mainly partly-owned partners with its its software and services division – but like its UK counterpart, it is aiming high. Having combined all its computer-related operations into a single unit, British Telecom now claims to be third behind Electronic Data Systems Corp and ICL Plc in systems integration in the UK market, with business of about UKP180m in the year to March 31, and firm says it aims to be a top five player in the worldwide market. And by 1996, France Telecom Logiciel et Integration de Services intends to hold 10% of the European market for value-added services and to be one of Europe’s five largest software and systems integrators, says Michel Huet, president of the subsidiary, in an interview with the French journal Logiciels & Services. France Telecom Logiciel would not weigh in as one of Europe’s top five software and systems integrators on its own, Huet added.
Married
With software, the idea is always to have a partnering strategy, and not only by taking a majority share, which is an important distinction, he said. Partnering is critical since, in Huet’s view, the science of building an information system and constructing a network remain separate skills, despite their apparent merging in the market. I believe that these two worlds will remain married on a large number of projects, but recent history has shown just the same that they are two different disciplines, he said, adding I insist on that last point, which is not to say I believe they are two worlds moving apart: they have learned how to work together with their complementary skills. A dozen separate software and value-added companies make up France Telecom Logiciel, which splits its business into three major areas – software, professional information services and value-added services. Unlike some of his competitors, Huet is happy to leave it that way. I believe that the notions of complete integration and vertical integration have shown their limits and don’t correspond in every case to the strategy of France Telecom.
Databases
We don’t aim to integrate our various telecommunications and information technology partners, he said. In the realm of software, France Telecom Logiciel has Telesystemes SA, SCBF SA, and IBSI SA, which it controls, GSI Tecsi SA and GSI Erli SA. Professional information services are provided by two former subsidiaries of Telesystemes-Questel SA, which specialises in databases – France became very worried four or five years ago that all the major information databases seemed to be American-owned, and UFAP SA, which specialises in business directories. Value-added services at France Telecom Logiciel come from Eucom, its joint venture with Deutsche Bundespost Telekom, Edival, which is a construction industry specialist, Telefact and Facitel, electronic payment companies, and Edifret, a joint subsidiary with Societe National des Chemins de Fer, the French state railway company. Revenues from all the companies of France Telecom Logiciel total $740m, of which $500m comes from the companies where France Telecom Logiciel has a majority stake, Huet said. France Telecom Logiciel’s total revenues represent a meagre 4% of the telephone monopoly’s business, he noted. Huet said France Telecom does not account for the bulk of the revenues generated by the companies it controls. At Telesystemes, he said, France Telecom accounts for about 30% of revenue and about 10% only at IBSI. In any case, he said, there are no, and will be no, captive revenues. The objective is to maintain such revenues at a maximum 25%. France Telecom Logiciel will continue bringing other companies into its orbit, Huet said – and there are strong hints that Sema Group Plc could be the next to join the club. It’s clear that we are going to extend our partnerships in a significant fashion. That was one of the reasons for creating France Telecom
Logiciel, he said. France Telecom Logiciel was created, he recounted, when its parent company Cogecom SA found that half of its subsidiaries were in the business of developing software. Software answers important needs for telecom operators, for two reasons, said Huet, who began his career with France Telecom at the Centre National pour l’Etude de la Telecommunication researching a videophone.
Welcome mat
The first, he explained, is that software provides the network’s intelligence. The second is that it enables France Telecom to provide the kind of information system users demand today, namely, one that can handle data and telecommunications. Finally, he noted, being in the software business provides France Telecom with quicker access to foreign markets than if the company were pursuing only telecommunications. He says that France Telecom intends to develop its business in other European countries, where partnerships with the likes of Sema, and even the gran’daddy of the European software industry, Cap Gemini Sogeti SA would help it to realise its ambitions. As for the US, France Telecom must first solidify its position in Europe, says Huet, refraining from mentioning that anyway, they don’t exactly put out the welcome mat for foreign state monopolies.
