BT is restructuring its struggling Global Services business
to focus on three separate areas after its"unacceptable performance"led to the group losing
more than £1.3bn.
BT Global Services recorded an operating loss of £134m. It lost
£1.2bn due to cost overruns on big contracts with the NHS and
Reuters and another £100m on other smaller contracts.
Robert Morgan, consultant at Hamilton Bailey, which advises IT
service providers, said BT was naïve when it signed these
contracts. He said the NHS deal in particular was troublesome
because of the hard bargain driven by Richard Granger when he was
head of the National Programme for IT in the NHS
"Richard Granger was ruthless in ensuring that all contract
winners stuck exactly to the contract terms," said Morgan. "This
was seen within the old BT management as the contract that BT
Global Services needed to take at all costs in order to illustrate
its capability to handle large and complex deals. The opportunity
to exit the contract with honour was ignored at huge cost and,
worse, they then chose to pick up eight of the Fujitsu NHS sites in
late 2008."
The Reuters deal was seen as a strategic reference site due to
its global nature and the US-centric delivery, he said. "But it
grossly underestimated the costs and programme management skills
needed to transition and transform the client services."
Morgan said BT Global Services also created problems by taking
on staff from its customers without understanding the true costs.
"Huge TUPE-acquired employment rights mean BT pays huge
compensation when reducing staff numbers, which it has had to do.
This is another example of a naïve service provider - lack of
experience when compared to the more savvy global providers."
BT needs to avoid the mistakes it has made in the past when
agreeing contracts and bring in more financial and contractual nous
to ensure it makes money, said one IT contract lawyer.
The lawyer said it would be difficult for BT Global Services to
bring these contracts to profitability. "It will face increasing
penalties, as it has with NHS Connecting for Health."
He added that BT needs to hire people with financial and
contract skills to ensure that it can make money out of contracts
before it enters them. "It is not very good at this."
The services division of BT was the only one of the telco's four
businesses that recorded a loss.
BT CEO Ian Livingston said: "Three out of four of BT's lines of
business have performed well in spite of fierce competition and the
global economic downturn." The odd one out was Global Services.
BT will now split Global Services into three businesses - one
focused on the UK and another working with about 400 multinational
customers. The third part of the business will focus on overseas
customers with specialist requirements in their own countries.
BT Global Services has built up IT and professional services
businesses in Italy, Spain, Germany, Benelux and across Latin
America.
"By creating the Enterprise unit, we enable our people to focus
more closely on the customers they serve. This greater focus will
bring benefits for customers, a simpler business model for our
people, and allow local innovation and specialisation within very
clear profit and cash targets," said a BT spokesman.
BT has also transferred some UK customers from BT Global
Services to BT Business.
Another source questioned the logic behind the restructure of BT
Global Services "Livingston will not last very much longer. He
inherited a difficult job, but he does not have much longer to sort
it out."
"He said he was probably brought in as a hatchet man so has done
his job by making cuts."
BT announced 15,000 more job cuts yesterday to add to the
15,000 it made last year.