IT managers say they will assess their service provider options and long-term networking plans following Monday's announcement that Verizon Communications will buy MCI -- the third major merger or takeover in the industry in recent weeks.
"Our staff is going to have sit down and assess it all, with all the changes," said David Kozlowski, vice president of technical services at Euler Hermes America Credit Indemnity in Owings Mills, Md.
The US$6.7 billion deal involving Verizon and MCI doesn't seem to have surprised too many networking managers at major companies, coming as it does on the heels of other similar moves by other telecom companies. Two weeks ago, AT&T agreed to sell out for US$16 billion to SBC Communications. That announcement followed Sprint's decision in mid-December to merge with Nextel Communications in a US$36 billion deal.
Now is the time for networking managers and IT shops to knuckle down and assess how they will work with network service providers over the next five years, said Eric Paulak, an analyst at Gartner.
Paulak said the recent merger announcements might push companies to consider a whole raft of smaller providers, or even foreign telecommunications companies. But he doesn't see any need to panic.
"There's no reason to jump out of a contract, because where are you going to jump to?" Paulak said. He estimated that about 99 percent of all large U.S. companies have been using MCI, Sprint or AT&T, all of which will vastly change their operations or disappear within the next year or so.
"You don't have to jump right away, but it is time to put in place a plan of possibly using someone else," Paulak said. "You have to do your homework."
Another option for some companies might be to hire a large systems integrator, much as Bank of America has done in hiring Electronic Data Systems.
The renewed combination of local service providers with traditional long distance companies looked to some IT managers like the same telecommunications entities that were separated 20 years ago are being put back together. But the prospect of a bigger Verizon working with MCI's enterprise accounts wasn't seen as all bad.
"Enterprises will be better served in the long run with such mergers," said Bob Pojman, senior vice president of network services at BISYS Information Solutions, which provides financial applications outsourcing to 250 or more banks, and has relationships with more than five service providers.
With the newly merged entities, there will be fewer handoffs between separate network services providers, reducing the complexity associated with provisioning new services, and the attendant pricing confusion. "There will be more ubiquitous pricing," Pojman predicted, something he sees as a positive development. "The mergers give us more options, not fewer."
Still, BISYS has been building its systems so it can handle any drastic changes with its service providers, including their planned workforce cuts. Automatic systems for reporting trouble in the network and for setting up new service can help reduce the pain when a service provider cuts staff and leaves a region with inexperienced staff or none at all, he said.
Analysts said enterprises will need to be prepared for changes affecting those who handle their accounts, new faces handling their accounts or the loss of employees at telecoms with whom they may already be familiar.