Asset-light future as BT Global Services consigns wholesale voice to ‘legacy’ business

14 January 2019 | Alan Burkitt-Gray

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Bas Burger, the sixth CEO of BT Global Services in 15 years, wants to shift the division to growth sectors and to park traditional areas such as voice in the legacy category. Interview by Alan Burkitt-Gray

Global wholesale voice is firmly in the “legacy” category, according to the new CEO of BT Global Services. For Bas Burger, who took the job in mid-2017, legacy is something to ease customers away from – towards what he sees as growth areas, cloud-based services connected via dynamic network services.

“We will still do global wholesale voice, until people stop talking,” he tells me. BT Global Services has existing wholesale voice agreements, and it’s not going to cancel them. But it’s not out to win substantial new business. “We’re not going to create a market,” he says.

This is a significant step for the international services arm of BT, which makes about a fifth of BT’s total revenue.

“We’re aggressively moving what’s legacy into the new world,” says Burger. “For example we have customers with on-premises contact centres. We don’t sell them any more, and we will help customers move to cloud contact centres.”

Moving customers to the cloud means that “we could make less revenue but we will still do it, because the customer gets a more stable environment – and we can innovate and it’s more future-proof.”

Burger came into the top job at BT Global Services at a difficult time in what’s long been something of a problem child for the BT group (see panel, below), culminating in 2017 when it had to write off £530 million after what the company called “inappropriate behaviour” in BT Italy. The head of BT Europe and the CEO of BT Italia both left.

The person then at the top of BT Global Services, Luis Alvarez, fell on his sword, but was not implicated. Burger was flown in from the US to take charge of the operation. He’d been in BT since 2008 but had been president of BT in the Americas since 2013, well away from Italy.

In June The Times ran a story that BT had appointed Credit Suisse to find a new owner for BT Italia. Are you selling Italy, I ask Burger. “It’s one of the options,” he says. He was quick to point out that “no countries will be discontinued” from the company’s operations. “We have the option of selling assets, but we will not sell countries. We will mainly focus on fewer areas and on becoming more effective.”

In October 2018 it sold a German unit, BT Stemmer, which had been in the Global Services group since 2008. Will there be more sales? “We’re actively looking at others,” says Burger. “We have assets – we did buy assets in the past. Our strategy is not to build fibre into cities. We’d rather use Colt. We buy fibre from Zayo and other companies. We own a lot of network between countries, but in-country we use local companies.”

He adds: “The way we’re going to be fitter and leaner is by focusing on technology that allows us to be asset-light. We don’t need all those assets. We’re actively looking at what to do with those assets.” The process will reduce Global Services’ 17,000 staff now by about a third – in line with the whole BT group’s planned reduction.

BT will close its data centres, he says. “We are not a data centre company. We have got 52. Some are very small and easy to wind down.” The load will be moved to BT Global Services’ preferred cloud partners, Microsoft Azure and Amazon Web Services. BT will “move people out and close” its data centres.

So it’s clear that any activity that’s not one of Burger’s priorities faces sale or – as looks likely in the case of international wholesale voice – simply being kept trundling along in the background for an indefinite period. “In some cases we’ll stop doing the activity.”

Burger says the legacy business in BT Global Services represents around 20% of its sales – which puts it on roughly £450 million in the last half-year. “Voice, including voice conferencing, sits in the old technology category,” he says.

What’s mature, in Burger’s view, includes conventional MPLS-based services that many international carriers offer. That’s 60%, he says. The final 20% includes three growth areas that Global Services is focusing on – cloud, security and dynamic network services.

“We are aiming to become a much more lean and fit future-focused organisation with some very specialist areas,” he says, adding that the unit is focusing on “top 800 multinational companies across the world”.

The first of these growth areas is dynamic network services, including software-defined networks and network virtualisation plus services such as bandwidth on demand. “This will connect into where customers have their applications: cloud, data centres – their own or third-party – plus machines and live people.”

Second is cloud services, including cloud-based unified communications. The third category is security, “to help customers protect their organisations from cyber threats”.

As well as three vertical portfolios, there are three teams within the division, each addressing separate vertical markets. There’s one for finance and insurance; one for areas such as manufacturing, resources, oil and gas and logistics.

The third includes pharmaceutical and media – led by Jennifer Artley, Burger’s successor as head of BT Americas. One of Artley’s team, Dallas-based Dave Disley, is taking on the legacy wholesale voice business, in succession to Damien Staples, who left BT at the end of October. “It’s a simpler structure,” says Burger.

On security, Burger says: “We do firewalls and perimeter defence and they’re important but lots of others do that.What we do really well because we are spread across the world is that we see incidents early.” He means malware and distributed denial of service (DDoS) attacks. “We see them coming and we can defend you before they hit your firewall.” The problem is “expanding at a rapid pace. Every day there are more bad people.”

The company also runs a number of security operations centres (SOCs) around the world. There’s one just outside London, and others in India, Australia, Spain and the US “and a new one in France”, he adds. “Security is the fastest growing area for the industry and for BT as topic.”

People are an essential part of SOCs, he notes. Much may be automated, “but eventually there is a human who analyses what’s happening. Cybersecurity skills are definitely in high demand, and for a cybersecurity specialist we are a tremendously cool company to work for. In BT you work with a network that spans more than 180 countries.” 

Six CEOs of BT Global Services in 15 years

BT Global Services has had a bumpy decade or so. In 2003 the then CEO, Andy Green, told me that one of its most prized customers was the UK’s National Health Service (NHS), for which it was building the IT infrastructure. BT Global Services made a loss on the NHS project of £1.26 billion in 2008-09.

Green’s successor was François Barrault, previously head of BT’s international business. When he left in October 2008, BT had to give a profit warning about the division, but paid him his salary and bonus. A company official said at the time: “We are disappointed at having to make the payment to François but BT honours its legal and contractual obligations.”

Group CEO Ian Livingston said: “During the year we have changed the leadership of BT Global Services and started to turn the division around.”

Barrault’s replacement at Global Services was BT’s group CFO, Hanif Lalani, who left suddenly at the start of 2010, after just 15 months. Livingston said: “Hanif and his team have firstly stabilised and then started to turn around the business.”

The quick replacement, announced on the day of Lalani’s departure, was Jeff Kelly, who’d spent his career with IT services group EDS. “My job is to build on these [Lalani’s] foundations,” said Kelly. He left at the end of 2012, and Livingston said he had “transformed” the division.

However, Lalani had been implicated in an insider trading deal. Back in October 2007, BT bought two-thirds of a listed Paris company, Net2S, from its founder shareholders in a deal valuing the company at €68.5 million. In 2012 the Autorité des marchés financiers, the stock market regulator of France, fined Lalani €1.5 million and five members of his extended family a total of €4.6 million for insider trading: his relatives had bought Net2S shares in anticipation of BT’s bid. Capacity put these matters to Lalani by email, but we received no comment from him.

Kelly’s successor as head of BT Global Services was Luis Alvarez, promoted from president of its operations in Latin America plus Europe, the Middle East and Africa, a role he’d had since 1999. Alvarez survived until June 2017, when he was overtaken by the Italian scandal, though Alvarez was not implicated.

Bas Burger is his successor in the top job.