British Telecommunications Plc’s Customer Systems division the largest UK systems house that no-one’s ever heard of – has spent the past three years restructuring and now reckons it is set to take the world by storm. The systems integration company was formed by merging about 40 small independent firms, based in about 50 different locations round the UK. Following heavy rationalisation, it generated UKP200m turnover last year, and has turned around from being loss-making to earning profits that are less than the industry average. According to manager of finance sector marketing Bernard Uzzell, this is because it is not squeezing the business for maximum profits, preferring instead to re-invest cash in developing the organisation and in expanding overseas. He now claims that BT Customer Systems is the third largest systems integrator in the UK behind Electronic Data Corp’s EDS-Scicon Ltd and ICL Plc, specialising in nine vertical markets: manufacturing; retail; transportation; PTTs; civil government; defence; utilities; retail finance and wholesale finance.
Dealer Board
The wholesale finance wing is the only one to have had notable success outside of the UK so far, mainly as a result of its dealing room business, BT (CBP) Ltd. CBP offers two major products: its Integrated Trading System or dealer board, which provides traders with a telephone system enabling them to access multiple lines and conduct simultaneous conversations; and its Open Trading System, a software package that enables financial institutions to take in live data feeds from a number of information vendors and exchanges. The data feeds can also be integrated with in-house applications. Uzzell claims that CBP has a 32% share of the UK dealerboard market, a 27% share of the world market, and more than 300 customers in over 30 countries. This amounts to approximately 26,000 installed positions. And he is optimistic that Customer Systems, and the wholesale finance arm in particular, will benefit from this penetration overseas it should be able to generate business on the back of existing contracts, he reckons. Furthermore, he adds, the division is in a good position to drum up work in co-operation with or via its connection to BT’s facilities management firm, Syncordia, and its international network services organisation, Global Network Service. The aim is to make Customer Systems a top five world player by 1997. But Uzzell says this is unlikely to be achieved purely organically, and some form of overseas acquisition will probably be necessary. Other likely scenarios are non-exclusive partnerships, marketing agreements and joint ventures, vendors that could be worked with deal by deal. The wholesale finance department, for example, would be most interested in companies selling back-office systems, as it specialises in front-end business consultancy. Uzzell is targeting a 25% growth in turnover for wholesale finance, from approximately UKP45m last year to about $56m in 1993. But in his opinion, cause the telephony market is now saturated, the only way forward is via its systems integration business. And luckily for him, research from International Data Corp and Input indicates that systems integration is one of the fastest growing information technology sectors – Input predicts that the Western European market, valued at $3,300m in 1991, will be worth $7,900m by 1996. Conversely, IDC forecasts that the world market is set to grow at about 20% per year between now and 1996, by which time it will be worth $58,600m. Furthermore, Customer Systems strengths, obviously enough, lie in telecommunications and according to Uzzell, it will continue to focus on what it does best. Research shows that, while across the majority of industry sectors the average telecommunications content of any given systems integration project is approximately 57%, the proportion in financial sector deals is more likely to be about 71%. But, Uzzell reckons that the nature of the systems integration market is changing. First, customers are becoming more demanding.
By Catherine Eve
rett
According to Price Waterhouse, integrating business objectives with information technology is seen as the number one business problem, and organisations increasingly want to see tangible benefits from their investment in technology. As a result, customers are demanding not just expertise on information systems, but also effective project management and implementation skills, industry sector knowledge and suitable support services. Second, the information technology market is becoming increasingly complex. As more and more often barely distinguishable products and services come on the market, customers become increasingly confused about what to choose, and what will be best for their own particular organisation. So, they look to experts that can integrate different technology from different vendors, while creating a coherent strategy that will meet their business needs. Third, the market – and especially the financial sector – is becoming increasingly global in nature. As good communications are of the essence to remain competitive, companies are keen to have technology, especially software, that is integrated seamlessly from site to site, across national boundaries. Finally, the systems integration market is becoming increasingly competitive as everyone from hardware manufacturers to software houses jump on the bandwaggon to try and offer value-added solutions as opposed to simply raw product. Although Uzell reckons there are no real dominant players, he divides the competition into four main areas: computer vendors, such as IBM Corp and ICL, which he reckons have the geographical scope and financial muscle to deal with the global demands of systems integration projects, but are unlikely to be independent, are often too hardware-oriented and lack the relevant software expertise; management consultancies, such as Arthur Andersen and Price Waterhouse, which he believes do have the necessary business knowledge, but generally lack implementation skills and have little experience of large-scale project management; telecommunications suppliers, such as AT&T Co and France Telecom, which again he reckons are too hardware-oriented and short of software skills; and software houses, such as Electronic Data Systems Corp and Cap Gemini Sogeti SA, which he recommends for their independence and expertise, but feels that few are international enough or have the neccessary financial clout to handle large deals. As a result, Uzzell reckons that the market is likely to polarise over the next few years. This will take the form of a small number of very large global players and a large number of very small niche operators – niche in terms of both market and geographical coverage. But he places Customer Systems firmly among the global operators due to its relationship with BT and that company’s business partnerships. First, the division, as part of a telecommunications empire, has operations spanning a wide geographical area. Second, he claims, it has access to supplementary business, management and technical skills – for example, consultants can be brought in from a centralised pool for any particularly specialised work. Third, BT’s financial strength means that customers don’t have to worry about it still being around in five years time.
Risk-reward sharing
This also gives Customer Services the credibility to form strategic partnerships if necessary, and means that it doesn’t need to spend a fortune on research and development – it simply taps into the work done at BT’s Martlesham, Suffolk-based research centre. Fourth, although the division will obviously favour BT’s networking products in its deals, it is also keen to acquire licences or marketing rights to a broad range of other vendor’s products. Uzzell claims that BT is currently the biggest single customer of IBM, Digital Equipment Corp, and Tandem Computers Inc. Finally, following Customer Systems recent survey on industry trends (CI No 2,160), it has decided to implement a risk-reward sharing option. This is a new sales approach, designed to support the industry’s desir
e to link information technology and business objectives to gain the competitive edge: if a customer wants to increase market share by say 5% over a year, Customer Systems might, for example, agree to take a certain fee up front, and then link subsequent earnings to the achievement of the customer’s business aim. This, Uzzell reckons, has several benefits – it motivates his company to do the best job possible; it instills confidence in the customer; and, best of all, if targets are exceeded, both parties reap the benefits.
