Slimline BT Global targets cyber and digital growth

BT Global, the managed network and IT infrastructure services wing of the UK telco, recently updated the market on its long-running restructuring programme.

While the business has benefitted from the surge in demand for collaboration and comms tech to support mass home-working, the leadership team continue to wrestle with the challenge of making BT Global an engine for profitable growth for the wider group. 

The operation is a lot smaller than it used to be. Sales were down by 9% in the quarter ending June, dipping under the £1bn mark for the first time in well over a decade. The business has disposed of its domestic operation in Spain, various assets in Latin America and expects to complete the sale of its French local arm to Computacenter by the end of the year. 

BT Global’s progress in recent years was not helped by the accounting scandal that impacted its Italian business, and this prompted a re-think of the operation’s place in the world at a time when it was seeing many of its legacy business lines – such as its once-mighty local government outsourcing activities – fade away or commoditize. 

One key decision has been to focus on a smaller number of large, profitable accounts among the Global 2,000 organizations, helping them run and modernize their international networks and help them harness technologies including SD-WAN and edge computing. BT Global has proved a safe pair of hands in delivering these kinds of deals in demanding environments, and recently announced extensions to long-running network management deals with pharma giant Bristol Myers Squibb and with broker group TP ICAP. 

One clear sign of progress has been an improvement in BT Global’s customer satisfaction rating, with its NPS now “north of 30,” – a very good result for any telco. Part of this may be down to a simplification of its structure and portfolio, but also substantially on the decision to put more focus on a smaller number of profitable and/or high-potential customers. Leadership claims that it has reduced the number of highly customised solutions by 30%, and slashed average project delivery time by more than a month. A tie-up with ServiceNow, which sees the two companies work together to automate telco-specific processes, is also starting to bear fruit.

BT Global’s management highlighted the restructuring of their business around two new operating units, currently referred to as “DigiCo” (broadly digital and IT services) and “ThreatCo” (broadly cyber security). While the emphasis of the group’s go-to-market is very focused on industry sectors, these two units, each with their own dedicated leadership, will drive a “platform-centric, data-centric” approach, delivering services that complement Global’s core network services, delivered by “NetCo”.

While much of recent restructuring has focused on internal efficiency, some areas of the portfolio are enabling the company to support changing customer behaviour. In the digital workplace area, it is helping customers put an integration and security framework around their collaboration platforms such as Zoom and Microsoft Teams which have proved essential during the pandemic. The company has launched a Zoom managed service that incorporates PSTN integration, end-to-end quality monitoring and interconnection with BT’s network to improve voice quality. Customers include banking giant HSBC. 

BT Global has had strong growth this year in its customer collaboration (contact centre) business. It helped one business to move 60,000 agents to a homeworking model at a time when many organizations have been experiencing increased volumes in inbound calls. One of the big trends in this space is the evolution of key platform players such as Genesys to a Software-as-a-Service delivery model, and BT offering an option where these solutions can be run from a stable core network to reduce the risk of service disruption. 

Another interesting area is the digital factory, where BT Global states that many of its clients are looking to scale their early pilot initiatives. One of the trends it sees across the manufacturing sector is that many companies are increasingly using the same virtualized infrastructure, networks and control layers across IT and OT, and BT Global is positioning to provide them with a single pane of glass view of performance and security management across the two environments.

BT’s ThreatCo not only develops, sells and markets cyber security services to customers, it is also tasked with protecting BT itself. BT itself represent a high-value target to attackers, since compromising the operators’ systems would give access not only to BT data but also its customers’ data. BT has therefore had to develop the capability to withstand nation-state grade cyber attacks (i.e. advanced persistent threats) – and while this will be overkill for most corporates, it will reassure most customers to know such capability exists. 

BT’s customer cyber security services focus on ‘three C’s” - propositions built around customer needs in the areas of Cloud, Cyber and Compliance. To help explain these internally and externally, they have been mapped to five common customer journeys: the need to secure a SD-WAN; embracing Zero Trust; protecting users and securing related data; securing a hybrid cloud solution; boosting threat detection and response. This helps BT’s customers locate themselves within a cyber-transformation spectrum, which helps them to prioritise which of BT’s advisory and managed security services is their next best step. 

PAC’s View: BT Global is both the smallest and the least profitable of the group’s four main operating division, and has long been talked of as a candidate for disposal. It represents less than 20% of group revenue, and has long been seen as the ‘problem child’ of the BT family. As part of the division’s efforts to tackle its underlying problems head-on, it dramatically declared in 2018 its intention to "reduce the customer base from today's 5,200 to the only largest and most profitable 800". 

While this is a long-term project, the results of this focus can now be seen in Global’s results, which provide a rare source of positive EBTDA to the BT Group. Moreover teknowlogy believes the division is likely to grow as a driver of margin for the Group, taking advantage of the capabilities SDN provides to deliver new network services without the need for new capital investments. At the same time the focus on digital and cyber shows that in the Global division at least, BT is focused on developing the modern services that really matter to its MNC target customers.

Nonetheless BT talked at almost alarming length about its internal structure, and its re-orientation around Digico, Threatco and Netco – an anomaly at a time when most briefings eschew details of internal structure, in favour of more customer- and ecosystem-focused announcements.

To teknowlogy Group, the big takeaway from the structural discussion was how difficult it is to run telco, IT services and cyber security organisations according to a single set of business rules. The investment requirements, payback periods and even the recruitment needs of digital and cyber businesses are very different from those of telco. Freeing the different businesses to operate like and be judged against their domain competitors gives all a better chance of success than a simple ‘one size fits all”. 

Although not spelled out by BT, we speculate that a key goal of the BU strategy would be to ensure clearer quantification of the performance of the three units, without the blurring that talk of pull-through revenues can bring. BT also clearly positions “DigiCo” as an “Over-the-Top” (OTT) platform that can leverage either BT’s own “NetCo” or third party partners. This move towards autonomy for DigiCo suggested to teknowlogy a possible future where DigiCo, NetCo and ThreatCo each operate autonomously - potentially even under separate shareholders, in the event that the financial markets seem favourable for a spin-out.