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August 25, 2005

BT says IT services and telecoms crossover will continue

Reports this week that Deutsche Telekom AG is considering acquiring Atos Origin SA, are further evidence of a convergence between telecommunications and IT services vendors, according to BT Global Services.

By CBR Staff Writer

The data and network services operation of BT Group Plc, which made revenue of GBP8.2bn ($13.9bn) in its most recent fiscal year, said it competes as often with IT outsourcing vendors as it does with rival telcos.

John Leigh, head of marketing at BT Global Services’ outsourcing division, said: Convergence is real and it is well advanced. The network is absolutely the ground where the next wave of ICT will be fought.

Leigh said he was not surprised by Deutsche Telekom’s reported swoop for Atos, but believes a takeover would not be a foregone success. He said: Whether they could integrate the two business cultures together is a different matter. The cultures of services companies tend to be baronial. People are their major assets, and people are mobile. Acquiring services companies is very challenging.

BT also said the competitive landscape in outsourcing is becoming more global. Leigh said: We used to talk about globalization in the services sector, but it was always a few big US players that dominated. But BT is regularly competing, and winning against these vendors, and we will eventually see far-eastern competitors starting to challenge.

Leigh said BT will continue to work alongside other IT services vendors, particularly given the current trend towards multi-sourcing. He said: The tendency to hand over everything to just one vendor is in decline. Clients want best-of-breed suppliers for their network management, and are also drawing up shortlists for the best suppliers for desktops, servers, and applications.

BT Global Services announced an alliance with Hewlett-Packard Co in May 2004 to provide IT and communications services, but has yet to announce any joint wins. Leigh said: We are pipeline rich and signing poor. But deals have long gestation periods of 12 months or more, as we have to explain the alliance to potential clients. I expect things to come through in the run-up to Christmas, towards the end of Hewlett-Packard’s financial year.

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