Users have more choice than ever in the volatile world of European
telecoms. Mergers have ensured content is combined with delivery,
changing the whole structure of the industry We look at how to
decide which firm is best for your organisation
The transition of the European telecommunications market from a
series of national monopolies to an integrated and competitive
marketplace may have a long way to go, but the shakedown has
started and users have more of a choice than ever before on
telecoms services and carriers.
However, this brings its own headaches. In theory, we can shop
around for telecoms services and suppliers to find the best deal.
But, in practice, the nature of the market means that it is very
difficult to compare like with like on telecoms services, not least
because of the dramatic changes in market conditions in the
communications sector thanks to technological progress - chiefly
"convergence".
Where once the communications industry was characterised by
separate sectors which specialised in providing distinct services -
voice telephony, data transmission and broadcasting - over a
particular network to a specific device, today's digital networks
carry multiple services over any network to any device.
So we now have cable TV operators offering Internet access and
voice telephony, digital TV broadcasters offering Internet access
and interactive services, telecoms operators offering Internet
access with stakes in broadcasting companies and everyone offering
mobile Internet access. Some have Europe-wide networks of their
own, while others use a network of affiliates and partners.
Mega-mergers among suppliers, for example, between Vivendi and
Seagram and between America Online and Time Warner, reflect that
content is combining with delivery, changing the whole structure of
the telecoms industry.
"Most observers expect consolidation in the next 12 to18 months as
financial markets' focus has shifted from growth to profitability,"
says Kevin Power, chairman of the European Competitive
Telecom-munications Association. "Scale will be required to combat
the technology impact of lower costs for bandwidth and the effect
of a multitude of players which are funded and competing in the
market. This is inevitably leading to consolidation within the
telecoms sector where synergies will have to be realised rather
than identified. This will affect both the fixed wireline and the
wireless sectors of our industry."
A report by Pyramid Research suggests that the price elasticity for
bandwidth at some point could be negative for telecoms firms,
accelerating moves toward consolidation. Meanwhile, a recent report
by Forrester Research predicts that in the midst of the
third-generation networks licensing phenomenon and the booming
growth in cellular subscribers, consolidation will leave only five
groups serving all mobile users by 2008.
It is the luckless communication manager's sorry task to wade
through this volatile marketplace, telecoms procurement chequebook
in hand, knowing that his or her every move is being watched by
business colleagues expectantly planning applications that exploit
broadband services running at lightening speeds and very low cost.
Certainly, European multinationals have money to burn. The average
communications and IT budget for European multinationals with more
than 2,000 employees was $40.7m (£29.2m) in 2000 and 33% was spent
on international IT and communications services, according to a
Yankee Group survey published in April. Nearly half of respondents
increased international communications spend by 13% last year. This
year, the average budget is $44.4m, with 37% being spent on
international IT and communications services. In 2001, it is
predicted that nearly 60% of respondents will increase their
international comms spend by 14%.
By service type, from 2000 to 2002, European multinational users
will decrease their spend on communications applications from 16%
to 13%, and fixed voice from 36% to 33%, while increasing their
spend on mobile voice and data from 12% to 14% and on fixed data
from 27% to 35%. Expenditure on voice over managed/private IP
networks will grow from nothing in 2000 to 7% of communications
spend in 2003.
However, there is no telecoms firm selling "everything telecoms" at
bargain prices. So how can you avoid buying a pig in a poke?
First, tackle the big decision of which telecoms firm to consider.
Here, it is very much down to the big boys. The easiest way to
narrow down the field is to look at the hottest in telecoms
services demand at present - broadband services, combining video,
voice and data services - and who is providing them, then take the
advice of the experts.
There are about 20 supplier contenders worth betting your business
on for buying all of your future broadband needs. To narrow down
the field, Computer Weekly asked research firms IDC and Ovum and
the independent users' organisation the Telecommunications Users
Association (TUA), for their recommendations. The combined result
is a list of the top six telecoms operators. These are, in no
particular order, BT and AT&T subsidiary Concert, Cable &
Wireless, Deutsche Telekom, Global One, Telecom Italia and
Telefonica.
Do not be fooled into thinking that one carrier can necessarily
satisfy all your telecoms needs. "All of these providers will be
looking to partner with other telecoms companies and cable operator
providers which are experts in their fields so there won't be one
incumbent that can give you everything," says Nicky Walton,
European telecoms research analyst with IDC. "And it doesn't matter
if they use affiliates and partners across Europe instead of their
own companies to provide a Europe-wide network - that is not an
issue, it is more a case of what services the company specialises
in. Choose those that have been in the market a while and don't
overlook the incumbents across Europe."
Before any further move, be sure that you are clear what you need
from your new telecoms system. "It is the first point we make to
all businesses, because if you don't, they either end up being led
by the market or not being aware of new telecoms developments and
being uncertain about what such changes mean in practice," says Vic
Davies, research consultant at the TUA. "We always advise users to
work out their telecoms strategy to begin with. If you want to
develop your international connectivity and look at overseas
suppliers, ask yourself 'am I geared up internally - not just
externally - to cope with that?'"
When you know what you need a telecoms service for, and that it is
capable of delivering on the expectations of the business, then
assess the reputations and network reliability of various telecoms
operators, advises the TUA.
It recommends that users invest in the services of network testers,
who discreetly check out the claims of telecoms companies in
relation to the speed and level of reliability of their networks,
as well as their quality of service. TUA members can access a set
of benchmarks to check telecoms companies against. The association
suggests users look at their worst case scenario - a new product or
service selling like hot cakes and stretching internal systems to
full capacity. Users should ask themselves; what does that mean in
terms of bandwidth capacity and then plan that need into the
service level agreement.
Network availability should be 99.9% or above and most telecoms
firms offer this, according to Jane Parry, a consultant with Ovum.
Planned network maintenance should have a specified timetable so
you can ensure it does not coincide with the busiest periods.
On outages, service recovery targets should be between
three-and-a-half and five hours, though this can differ according
to the product on offer. Also, beware of mean times quoted in
contracts as they show the average response time over a year, not
the actual time taken in what could be a dire business emergency,
she warns.
Parry recommends looking for firms that offer proactive fault
notification as part of their service delivery package - preferably
also self-healing networks that spare the user from knowing there
was a problem until the weekly report on the network's performance
lands on their desk. "The technical expertise of the telecoms
firm's helpdesk should also be considered, plus, if you are a
multinational, whether it offers in-country helpdesks," says Parry.
"How the carrier deals with its customers is also very important -
most are moving towards Web-based tools to let customers interact
with them online. A lot of carriers are focusing more on such soft
measures as customer satisfaction, for example, conducting good
customer communications on flexible service deliveries."
Surprisingly, cost is only a fifth or sixth consideration for users
buying telecoms services, according to the TUA's research, which is
just as well because it is very difficult to compare like with like
across Europe, though the arrival of the euro in the UK will make
this easier in future.
"From our research, users' concerns are rightly focused more on the
telecoms firms' understanding what they want to achieve and having
a very good 'after sales' quality of service," says Davies. "That
is absolutely critical if you are dealing with a network that is
geographically spread over a wide area."
He adds, "The euro will enable users to look at a level playing
field, because with one currency you can look at what your own
specification is and what a supplier says it can deliver without
being confused by exchange rates. This will flush suppliers out
into the open - they will be transparent. That is when the focus
will turn on to the technology, how good it is and whether it has
been tried and tested."
Quality of customer service is also a key differentiator between
telecoms companies. You can decide on this before trawling the
market and then insist specific levels are built into the contract.
Contracts should also be flexible, not locked down for three years,
advises Camille Mendler, director of the fixed telecoms team at the
Yankee Group. "You need the facility to negotiate at the end of the
year - for example with the change in bandwidth prices, some
companies are getting twice the connectivity for the same price."
It may be that your chosen telecoms provider does not have all its
ducks in line to deliver broadband services yet, but this is fine
if you build in to any agreement guarantees to deliver what you
need by specified dates.
As Davies concludes, "When you are buying the technology, you are
buying it to be more competitive and efficient - it is not a lady's
hat for Ascot. Know your business needs to begin with then work out
your procurement strategy. Telecoms is a big place."
Top broadband service suppliers
Aircom
AOL/Time Warner
Broadnet
BT Spain
Callahan Associates
Cable & Wireless
Carrier One
Concert (BT and AT&T)
Deutsche Telekom
First Mark Communications
France Telecom
Global One/Equant
Infonet
KPNQwest
Level 3
Ntl
Telecom Italia
Telefonica
UPC
Worldcom
Source: IDC, Ovum, TUA
Guest editor's opinion
The complexity of the global
procurement process challenges organisations, and telecoms
procurement is currently the most complex area of IT, writes
Annemarie Wolfe. IT Managers increasingly need to improve their
professional telecoms resources within the IT team to maximise
opportunities. At Grey, we've taken a radical approach, quickly
changing our procurement process. By amalgamating our spending
power and resources across the group, we are making better, more
informed purchasing decisions. We treat our telecoms services
management as an ongoing process, carefully reviewing any contract
to maintain our flexibility. So we adopt new technologies and we
integrate technical operations, while reducing our costs.
AnneMarie Wolfe took the helm as guest editor for the 21
June issue of Computer Weekly. Wolfe is CIO, EMEA at marketing
giant Grey Global Group. She played an active part in all stages of
editorial production, reflecting CW's commitment to addressing the
needs of UK IT professionals.