Saturday, 8 November 2008

What is BT Global Services for?

(By Richard Holway) The many readers of UKHotViews who either work for or are interested in BT Global Services should read two articles in Saturday’s FT Axe set to fall amid BT cost cutting and Mixed fortunes at Global contracts.

The problem I have with the analysis is that even the FT and its observers fall into the trap of thinking that BT Global Services does the same the world over. It does not. It is quite a different company in the UK (where it is much closer to the ‘conventional’ definition of an IT services company) to its international operations (where it manages networks for corporations) The problem is that network management is a cut throat, low margin business. Goodness knows, many of BT’s competitors are virtual operators unburdened with networks of their own. On the other hand, BT Global Services UK operations could be much higher margin – except that they are higher risk too. Something that BT Global Services knows to its cost with its NPfIT contracts. Do you remember when BT won these contracts and Sir Christopher Bland (BT’s Chairman at the time) described this as “a dog which had chased a car, to its surprise had caught it and now wondered what on earth to do now!”.

Now is the time for BT, once and for all, to decide what BT Global Services is for. My hope that BT would do a ‘reverse takeover’ of a really big global IT services company is now probably dead given BT’s current share price. Now is the time to look at the opposite option. Now is the time for BT to seriously consider disposing of its IT services operations (OK, I could have added “yet again”). The obvious buyer would be HP – afterall there have been strong links between the companies for ages and these still exist at the highest level. The fit with EDS (“an HP company”) in the UK is pretty good too. But I’m sure there would be other interested parties (including Private Equity) just to make the bidding process interesting.

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