Ovum comment: BT restructures to take the next step

Ovum/Mike Cansfield
25 Apr 2007

BT today announced a major restructuring. A new Group Strategy and Operations function has been created to be lead by Andy Green (currently CEO of Global services). The new unit has the role of designing, building, operating and maintaining services for the customer facing divisions (Retail, Wholesale, Global Service, and Openreach). The new division will include what is currently in Exact (the IT division) and the management of the network including 21CN. Francois Barrault will take over from Andy Green as CEO at Global Services.

Ovum telecoms practice leader Mike Cansfield comments:

BT's performance has been consistently good - as it likes to remind people, 19 consecutive quarters of growth. BTs consistent strategy and stable structure have both contributed to this to a large degree. But we have been concerned for some time that this organisational stability needs to adapt to the new world in which BT operates.

Today BT has shown that it is mindful that it does need to evolve the organizational structure, so we applaud this move.

What BT has done this is radical. Taking the network out of Wholesale is, in our view, probably overdue. This is not a criticism of Wholesale, but recognition that in the post TSR and in the 21CN era there is a need to focus on fully leveraging the opportunities these create.

This restructuring brings greater clarity to Wholesale's role going forward, and probably strengthens the representation of the channels to market within BT.

And what of the new division itself‾ It brings together 21CN and One-IT programmes into one division. We have long said the latter is just as important as the more famous NGN programme.

These two programmes are the motors driving the internal transformation of BT from a calls and lines business into a solutions and services one. When CEO Ben Verwaayen puts up his famous strategy slide it has been clear who is responsible for defending traditional, and growing the new wave. We now know who is responsible for the transformation.

It is a popular business school idiom that 'structure follows strategy', and yet one that is often overlooked as companies rationalise putting square pegs in round holes (apologies for mixing metaphors with idioms).

In our view the future of telcos (particularly incumbents) is dependent upon their ability to reinvent themselves in this new era of hyper competition. Putting someone in charge of transformation is hugely significant as it illustrates that BT understands this imperative.

So, all-in-all we think this is the right thing to do and a bold move on BTs part. Our only real concern is whether this upsets the balance that has existed in BT over the past few years. The new division will be a very big battalion, with a very challenging remit. The transformation necessary will not be easy and will cause tensions. We will watch this with interest.

Mike Cansfield is a research director with over 17 years' experience in the industry, and now also leads Ovum's telecoms strategy practice.

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