How IT Transformed BT

The latest New Wave out of London has nothing to do with skinny neckties, synthesizers or bad haircuts. New Wave is the term used by BT Group to categorize revenue derived from its businesses, including networked IT, broadband and mobile services–offerings the telecommunications giant needs to drive growth as its legacy phone business ages.

The transformation of the venerable company once known as British Telecom is a dramatic story: the remaking of a former state-owned monopoly built on 19th century technology into a dynamic global enterprise. It involves the overhaul of a sprawling and inefficient tech organization and the strategic and cultural shift across an enormous company, all enabled by the development of a global IP network and services platform, and inspired and led in large part by a small group of technology executives.

A key architect of the transformation has been Al-Noor Ramji, BT Group CIO and chief executive of BT Design. (The company reorganized itself last year into two operating divisions: BT Design, which develops services, and BT Operate, which delivers them.) “We said, let’s do it first in IT, that’s closest to what we want to do with the firm,” says Ramji, who likens the significance of BT’s transition to IBM’s move from hardware to software and services.

So far, the results are promising. New Wave accounted for almost £7.4 billion ($14.6 billion) of BT’s £20.2 billion ($40.2 million) in total revenue for the last full fiscal year reported, ending last March. It also grew much faster than the legacy business, increasing by 17 percent over the previous year vs. 4 percent growth for the company as a whole.

The most recent quarterly results, for the period ending December 31, show New Wave making up an even larger share of total revenue: £2 billion ($3.96 million) of £5.1 billion ($10.1 billion) overall, and growing more than seven times as fast on a percentage basis as the top-line number.

BT has “found a winning formula in the market,” says Mike Cansfield, an analyst with the British research firm Ovum, who has followed the convergence of information and communications technologies for several years. In a recent report on BT, Cansfield praises the company for its leadership in the field of networked IT services, citing several large contracts it has won in Britain and Europe, including a major deal with the British National Health Service. (See “Healthy Challenge” on p.26.) Cansfield cautions, though, that BT’s continued success may depend on expanding the range of services it offers.

At the heart of BT’s growth strategy is its global IP network, dubbed 21CN, for 21st Century Network. The network alone doesn’t provide New Wave revenues, but it allows the convergence of skills and culture to flower around the world. The platform lets the company offer software-based services including managed Software as a Service, outsourced networks and self-service provisioning in 167 countries around the world. “If you attach to the network from Paris, Texas, or Paris, France, you get the same service,” says George Nazi, the managing director for 21CN Core Convergence and one of the earliest advocates of BT’s transformation.

“BT has taken the IP bull by the horns,” says Dean Bubley, a London telecom analyst. “They have settled into a leading role as a next-generation provider of services, taking technology that’s sometimes not even mature and pushing the standards process toward their own usage needs. They have a very good vision of where they’d like to be.”

Reaching the point where that vision became a reality took years of effort, not just on the technology front but in every phase of the business.