BT recently announced that the group’s profits were down by 4%. The two reasons given for this downturn were the costs for them to obtain the sports TV rights and its under-performing outsourcing business.
Much as I’d like to comment on the pros and cons of paying vast amounts of money for TV rights, most of which seems to end up in the pockets of a few dozen footballers, this column is mainly concerned with outsourcing and technology, so let’s look in more detail at Global Services, the division of BT that provides the outsourcing services.
The revenue for Global Services was £1.26bn, which is 10% down on last quarter, but the total earnings saw a drop of 39% to £81m. All of this was despite a round of cost cutting as part of a two-year restructuring so that its operations would become ‘simpler and leaner’. To date the restructuring, which also includes TSO (Technology, Service and Operations) and Group Functions, have incurred costs of £104m in the first half, removing over 1,500 roles from managerial and back office areas. They expect another 1,500 to go in the second half of the year.
A new CEO, Bas Burger, in June has yet to make his mark. His appointment followed a huge accounting scandal in the firm’s Italian business which forced BT to write down £530m.
There was talk earlier this year of BT selling off Global Services. BT’s Chief Executive said at the time that they were “prepared to look at a range of different options”. In the Q2 results just announced it says that they continue to “work on repositioning Global Services as a more focused digital business”. It goes on to say that their aim is to “shape Global Services so that it can deliver a global, scalable portfolio of our products and services from cloud-based platforms to our multinational customers across a global footprint.” If BT can’t manage to focus on digital business, you start to wonder who can. Whether this is positioning for a sell-off, only time will tell.
The market for global network infrastructure services is a limited one as it is. There are only a handful of credible providers that can cover the big, global deals. Competition is therefore fierce but the rewards are huge – just look at the deal that Royal Dutch Shell have done with AT&T (more about that next week). It would be a brave company to pick off Global Services from BT, but I imagine it would be a huge relief to the BT management and their shareholders.
Andrew Burgess has been the lead architect within several major change projects, including strategic development, IT transformation and outsourcing, in a wide range of industries across four continents. He has developed and implemented sourcing strategies for global organisations, running sourcing programs and helping re-organise IT departments to maximise their value from sourcing. Andrew was recently awarded ‘Automation Champion of the Year’ by the GSA, the industry association and professional body for the global sourcing industry. He is widely considered to be a leading expert in the growing Legal Transformation and Outsourcing market and has recently written ‘The Rise of Legal Services Outsourcing’ in collaboration with the London School of Economics (LSE). Andrew’s latest book, ‘The Executive Guide to Artificial Intelligence‘ has recently been published by Palgrave Macmillan. Andrew is a council member of the Global Sourcing Association and is Head of Consulting at HG Insights.