Nevermind the tech, where’s the saving?
In the last decade, the convergence of IT and communications has seen telcos reinvent themselves as one-stop business technology providers. IP networks have provided them with a path into the IT heartland of organisations.
With a bigger role to play, companies like Eircom and BT are centre stage as businesses look to rationalise.
Colm O’Neill, managing director of BT business, has no doubt about what’s on the mind of his customers.
“A few years ago they might have thought about what technologies to invest in, but now they want to cut costs and become more efficient,” he said.
He said that there might be a role for technology in their pursuit of efficiency programmes, but there was no guarantee. It very much depended on the company. “Some are in a phase where technology isn’t going to help them, while for others it could be an enabler,” he said.
Even when a company identifies a role for ICT, it is not going to invest time putting together a complicated tender, according to O’Neill. “As a technology organisation we have to go in and really get to know how they work and then help them build the business case.”
He was quick to point out that the telco won’t take on projects where it can’t make money. This might sound like a basic rule of business, but the dire state of the economy has meant that some suppliers will go to any lengths to secure a deal.
“There are unsustainable propositions going on because people are desperate for revenue. We have been very clear that we will deliver value to our customers, but we will not undermine our business by taking on contracts that we couldn’t deliver well and profitably,” said O’Neill.
Silver lining
In BT’s experience, the hint of a silver lining comes from three types of customers who are still spending. There are companies that have made network investments and continue to look at ways of enabling their infrastructure.
“They may centralise into a data centre and use the network to deliver services out to its regional sites, for example. There is a solid business case for that kind of move,” said O’Neill.
“Similarly, IP telephony and unified Communications make sense or putting contact centre technology into the network.”
Organisations with increasingly inefficient legacy technology are also prepared to spend. It becomes cheaper to refresh and make themselves more efficient than stick with what they have. Finally, there are firms who make tactical ICT investments, companies, for example, that invest in conferencing solutions to save on business travel.
Frustratingly for all vendors, the technologies for cutting costs have never been so readily available. “At a time when technology has finally got its act together and delivers things that really do add value, people don’t have the money to invest in it. It’s the ultimate irony,” said O’Neill.
Stephen Mulligan, unified communications principal at Eircom, said he shared this frustration because he knew that the big driver was less about the latest technology and more about managing costs.
“That’s the conversation we are having with all our customers. The first engagement is never about the technology, it’s about the business problem they want to solve.”
He described unified communications as “the jam on the scone” when you have made a large investment in the network. It may help in terms of increasing productivity and a reduction in travel, but he said he knew that organisations wanted more tangible cost savings.
Managed services and hosting tick this box. One trend is managed infrastructure, where service providers like Eircom relieve customers of kit and connectivity issues that cost money and eat up internal resources.
“The return on investment on a hosted platform can be quite dramatic.
You no longer have to skill up on the different things that are required to run the infrastructure; you just pop it into a data centre and get the provider to work to agreed service level agreements.”
Danny Cole, solution principal at Eircom, said the speed of return is what appeals to customers. “Savings are there from day one because you no longer have to pay for power and air conditioning in your own communications room. And you get the asset off your books. It becomes operational rather than capital expenditure.”
Mulligan quipped that the downturn could actually have a positive effect. “Never let a good recession go by without transforming your company. It’s an opportunity to make your organisation leaner and meaner.”
