Telstra reels in TES

Telstra has announced that it will absorb its Telstra Enterprise Services (TES) business, formerly Advantra, into the mainstream Telstra business. However, ARN has learnt that not all of TES will be brought back into the fold.

The telecommunications giant figures that the move will give its customers a clearer picture as to who is managing the services provided to them. It is also expected to enhance Telstra's managed services capability. At present, Telstra offers managed Web hosting, storage, security solutions, WAN, LAN and desktop services, as well as Internet and voice connectivity.

Mike Foster, chief of business sales for Telstra Retail, claimed that the telco is the "largest desktop service provider in the country".

Melbourne-based Telstra Enterprise Services started life as Advantra, a joint venture between Telstra, Lend Lease and IBM. Telstra bought IBM and Lend Lease out of the business in February 2000 and changed its name to Telstra Enterprise Services in September 2001. The next step for the telco is to bring it in-house.

Sources close to TES have told ARN a group of TES employees will remain separated to serve one particular contract that for legal reasons cannot be handled by Telstra proper. Also, several contractors and staff at business units that are being absorbed will be cast off from the company.

The surviving component of TES includes those working on the Group 5 whole-of-IT Government contract, which requires the provider to remain a separate legal entity from Telstra. This is because the Group 5 contract serves the needs of several Federal Government departments (the Prime Minister's office is rumoured to be one of them). The contract states that these services must be outsourced to a third party that is external to Telstra.

"Until these issues can be resolved, we have to comply with our obligation under the contract and not integrate part of the TES business with Telstra," a Telstra spokesperson said.

The Group 5 staff will remain with TES while others will receive offers from Telstra. The rest will be offered redundancies. All TES contractors - a large percentage of TES staff - currently have their contracts under review.

A Telstra spokesperson strongly denied rumours that business managers have been asked to target an additional 5 per cent of their employees for redundancies.

"Any suggestion that there has been some sort of target set is ridiculous," the spokesperson said. "Certainly there will be some redundancies as we remove duplication between the two groups, but talk of any targets being set is simply not true."

Focus on managed services

The integration of TES into Telstra creates a particularly strong managed services capability for channel companies to compete with. Services such as Web hosting, storage, security, LAN/WAN management, Internet, voice systems and even call centre services will now be provided by a company that has significant numbers of skilled IT staff at its disposal.

Commenting on how the IT services market is shaping, Paul Geason, director of enterprise services and products for Telstra, claimed the telco has a unique advantage in having pre-existing relationships with just about every corporate in the country. Nevertheless, price degradation and product migration is seeing its traditional customer base offered new-generation services from several challengers. "We have to show customers the value of an ongoing relationship with Telstra," he said.

Even with the competition closing in, Geason does not expect to keep corporate Australia wrapped up by competing on price. "We are not going to play that [price] game," he said. "We will price at a premium and justify that premium to our customers."

What Telstra will offer instead is a breadth of products that can be bundled to meet most of an organisation's communications needs. The telco has already released a product set called Connect IP, which bundles a router, frame relay access, connectivity to Telstra's IP network, a managed, firewalled gateway to the Internet, and support. These solutions are also being offered by a group of Telstra resellers.

Telstra: The channel strategy

As Telstra ramps up its managed services offerings, it is also looking to focus on an indirect sales model to meet the scale that will make such services profitable.

"We are certainly not going to be hiring more direct salespeople," said Mike Foster, chief of business sales at Telstra. "We see our growth in the indirect channel."

Foster said there are still several opportunities for channel companies to work with the telecommunications giant. For a start, the major systems integrators are safe. "We are not a total outsourcer," he said. "We do not intend to offer mainframe services, complex systems integration or application development. Instead, in those areas we will work with a partner who does that as their core competency."

For example, Telstra currently has contracts with the likes of IBM, Deloittes and EDS for the development of billing and customer relationship management systems.

Foster said Telstra is looking to streamline its channel to offer its voice-centric resellers the same products and services as its data-centric channel. The telco currently separates its channel into wholesale and ISP customers (of which there are 600-700), relationships with several large retail chains, data-centric channel partners that bundle and sell its data products, and its FixedNet (voice) resellers. The FixedNet channel traditionally offers services based around PABX systems, PSDN and ISDN connectivity, but Foster said they are demanding to be introduced to next-generation data services. Telstra is currently ironing out a plan to certify these resellers to sell Telstra's managed data services.

For all of these resellers, Telstra only provides margins for the sale of the product or service. Foster said Telstra will always hold the billing relationship and take the first support call, regardless of which channel partner has signed the customer.

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