BT's 21CN: implications for the UK IT services industry

Douglas Hayward, Senior Analyst and Service Manager

We recently attended BT's Q1 presentation and Q&A session with CEO Ben Verwaayen. There were no big surprises or announcements, but it was interesting to hear that BT added 230 non-UK corporate accounts in Q1, and that 'new wave' services (outsourcing, IT services, broadband and mobility) are set to account for 27% of all business revenues and 58% of revenues from major corporate accounts this year.

Two things stood out for us, from the point of view of software and IT services.

First, the 21CN project (21st Century Network - the multi-billion pound migration of BT's networks to an all-IP architecture) will have significant implications for the software and IT services industry.

BT isn't simply building a better and cheaper network, though that's part of the story. It is building a next-generation platform for combined voice, data, video and other digitised services. This is not news in itself, but we suspect that the software and IT services industry has not fully appreciated that that the implications of this could be enormous for business as well as for consumers. 21CN will allow easier delivery of existing voice/data applications, but should also enable new generations of application functionality that we haven't even thought of yet. And not just for BT, but for its partners and competitors, too.

The latter point is crucial - 21CN is effectively a new route for software and services suppliers to reach and service their customers, and with new products and services, not just established ones. It promises the long-awaited real convergence between voice and data, telecoms and software.

The other thing that stood out was BT's ambitions in the SME space. Verwaayen made it clear that BT wants to be the UK's leading supplier of ICT support services to SMEs, replacing local one-man bands as the provider of application and telecom support. BT, he said, is competing with 'Bob, the guy who lives around the corner'. That's arguably even more ambitious that building the 21CN, as SMEs are a tough market to service efficiently, especially for large suppliers.

But BT has experience of supplying mass-market services, and there's theoretically a good fit between support services and the applications and digitised services that BT wants to sell to SMEs and home workers. If BT can build an operation that uses automation and labour arbitrage to deliver scalability and productivity as well as delivering decent customer service, it's onto a winner.

Douglas is a senior analyst in the Holway@Ovum service that looks at the UK IT services industry. He covers the IT consulting and systems integration markets. He is also the service manager of Ovum EuroView, the information and advisory service.