Speaking at a press briefing in London, BT Global Services chief executive Andy Green also said that the company is aiming to make 400m pounds ($756m) in cost savings over the same period by slashing its procurement costs and ramping up its use of staff in low-cost countries such as India.
Overseas growth has been the driving force behind BT Global Services in recent quarters, driven by s spate of international acquisitions in the last two years, including US network services firm Infonet, Italian company Albacomp, and former Reuters venture Radianz.
In BT Global Services’ financial year ending March 2006, the company’s UK’s revenue rose 2% to 5.5bn pounds ($10.4bn) while its global revenue shot up 48% to 3.3bn pounds ($6.2bn), which included organic growth of 18%.
Green said that while BT Global Services is considering further acquisitions outside the UK, particularly in India, China, and the US, it also expects new contract wins to help the company’s Italian and German units to each surpass 1bn euros ($1.3bn) within three years.
About half of the expected 400m pounds ($756m) savings are expected to come from a reduction in the amount it spends on third-party costs incurred by buying in technology from other vendors on large systems-integration projects.
BT Global Services expects to cut a further 100m pounds ($189m) by sourcing more work from low-cost countries. The vendor has been slower than some of its rivals, notably big IT services vendors such as IBM Global Services and Accenture, to ramp up its offshore headcount.
Green identified a number of golden opportunities for the company created by the convergence between IT and network services, such as CRM infrastructure and services, managed security services, and managed collaboration services, the latter of which it is targeting through a partnership with Microsoft.
He said: Clients need the expertise of an IT and a communications service provider to make things like this happen. He gave the example of the company’s mega deal with Unilever (worth more than $1.5bn) as an example of how many of its projects straddle both network and IT services.
Under the terms of the original deal signed in November 2002, BT manages the consumer products goods giant’s global voice, data, and mobile communications networks, but it has just announced a new 10.5m pound ($19.9m) contract win that will also see it manage Unilever’s firewall systems over the next six-and-a-half years.
Unilever CIO Neil Cameron said: In the past, we would have put this sort of contract out to tender, spoken with 20 different vendors and selected the cheapest one. However, we went straight to BT as we knew that they have the capability to deliver on a global scale.
Green talked up how BT Global Services had outperformed its closest rivals in the network space in recent quarters, citing results and analysts data showing that T-Systems, Orange Enterprise Services, AT&T Enterprise, and Verizon Information Services all posted revenue declines in the three months ended June 2006. However, all of these companies are also building up their international IT and network services delivery capabilities.
AT&T recently announced an agreement to acquire hosting firm USinternetworking in a $300m deal, and Verizon said it was expanding its hosting services to cover IBM’s AIX and HP’s UX operating systems. At an analysts briefing in Germany, T-Systems, the data and network services arm of Deutsche Telekom, said it aims to make 30% of its revenue from outside Germany by 2010, up from a current level of around 13%.
BT Global Services also gave unprecedented details of how the company makes its money. It said that 1.6bn pounds ($3bn) of the 8.8bn pounds ($16.6bn) sales it logged in its most recent financial year came from captive work for its parent organization. Of the remaining 7.2bn pounds ($13.6bn), the UK government sector was the largest vertical market, accounting for an 18% share, ahead of financial services at 17%, and brands at 15%.
Green also gave a positive update on the company’s work on the troubled modernization of the UK National Health Service’s IT infrastructure. He said the company has been on target with roll-outs of its broadband backbone since summer 2005, and insisted that the company still expects to make a profit from the project in the future.
BT Global Services does not typically make a profit from long-term large network and IT management deals until the third year of the deal, but despite the large number of big deals signed by the company in recent years, BT Global Services CFO said that only a single-digit percentage of the company’s current deals are not profitable.
