BT will not sell off its IT services arm, after the unit’s performance improved due to a re-organision that followed disastrous high-profile contract failures in 2009.
In 2009, the Global Services business unit reported losses of £1.2bn due to cost overruns on big contracts with the NHS and Reuters, and a further £100m on a selection of smaller contracts.
According to a Telegraph report, a BT spokesman said: “BT has no plans to sell its Global Services division. It is a much-improved part of the business and we are pleased with the continued progress it is making.”
The decision reportedly followed discussions about selling off the unit to raise about £10bn.
So where is the business today, compared with the dark days of 2009?
KPMG management consulting partner Lee Ayling said BT Global Services was not alone in experiencing difficulties in 2009. Five years ago, he said, all the big service providers were experiencing quite big write-offs, and were entering five- to seven-year deals that were not very profitable.
“All the big infrastructure suppliers were going into deals offering ‘your mess for less’ type services, but they did not have a good grip on lowering costs for customers over time,” he said.
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But GT Global Services is no longer buying deals, he said, and “has a better understanding of how to take costs out of customers’ operations”.
Outsourcing consultant Robert Morgan said BT Global Services was naïve in the past and held back by its legacy working methods.
“The best thing BT Global Services did was to get rid of its datacentre and use third parties. The workers in these datacentres were the dinosaurs of the dinosaurs – highly unionised and inflexible about how they worked,” said Morgan.
He said this added time and inevitable cost to customer transformations: “It was the manpower and management approach that drove the inefficiencies and extra delays. The single decision to get rid of the datacentres put a lot of competitiveness back into the business.”
Morgan said there has also been a change in the sales mentality, with a newer generation of sales representatives more successful in mid-market deals. In the past, he said, there was a “hero culture” among BT sales reps, who would chase the biggest and best deals. BT cut 30,000 of its staff in 2009.