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Summary

BT continued a series of market-unit briefings with an update on Global Services. Management outlined organizational changes underpinning a new focused go-to-market strategy. Driven by last year's operational restructuring, Global Services seems intent on putting the past behind it and getting on with a new business model to carry it into the 2020s.

What Global Services is doing

In a briefing in London to financial and industry analysts, senior management at Global Services gave an update on progress with the operational restructuring announced last year, but with more time devoted to organizational changes and services development. Five items stood out for us:

  • Headline financial targets have been shifted to 10% return on capital employed (ROCE) within two years, from 15% EBITDA margin target previously.

  • Go-to-market strategic focus has switched from regions to verticals.

  • Product portfolio has been refined from Cloud of Clouds to Cloud & Network plus Cloud Collaboration. Security is a big focus going forward.

  • Ten internal strategic programs in areas from portfolio to security via systems, services, and sales aim to accelerate GS's own digital transformation.

  • Customer G2M has refocused to the top 200 global MNCs, plus 600 other large MNCs, to create a Focus 800, with another 4,400 customers classified as regional enterprise.

What Ovum thinks

  • It is very hard to get consistent EBITDA margin in global services, as any telco with a global B2B services division will tell you, so maybe it is time to look for a better measure. But is ROCE just an easier option because it is at near zero now?

  • Retail and media do not get their own sales units, although these have been success stories for other global telcos. BT is subsuming retail within a new resources, manufacturing, and logistics vertical unit, and media is a subsector within the technology, life sciences, and business services vertical. GS's strong concentration in finance sector/banking, tech, sciences, and supply chain logistics could be a first sign that global telcos are prepared to play for big stakes in some sectors.

  • All bets are on software-defined networking, unified communications, and security. Other global telcos have similar messages on portfolio. But there is little detail on AI/automation in the enterprise customer requirement yet.

  • This is the life of the global services telco now – a process of constant reinvention. Big decisions on disposals or network/services sharing have yet to be taken or shared.

  • This makes good sense; GS customers are multinational corporations, not countries. There are still some questions around sales approach, strategies, and incentives.

What's missing, apart from the news on network or sales channel assets that might be up for grabs to other service providers as part of the operational restructuring already in motion? This is not a definitive list; there was more, but we didn't hear anything about strategic alliances with emerging hyperscale providers such as Alibaba. GS did highlight existing technology partners like Cisco, Microsoft, and Oracle, but working relationships with cloud hyperscalers, and global systems integrators around them, will surely need a more detailed framework than arms-length "co-opetition." In the meantime, credit to GS for some incisive thinking on how it can best serve the global enterprise.

Appendix

Further reading

BT Group Update 2018, GLB007-000112 (August 2018)

Global Services Outlook 2018, TE0005-000964 (December 2017)

BT's Best Option for Global Services: Deutsche Telekom, TE0005-000955 (June 2017)

Author

David Molony, Principal Analyst, Enterprise

david.molony@ovum.com

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