Take an iron fist to telecomms deals: expert

IT managers and CIOs should drive dramatically harder bargains to force better service and prices from their telco vendors, according to Keith Willetts, chairman and founder of 400-member communications industry consortium TeleServices Forum. And that's when he's being timid.

Visiting Australia at the behest of Hewlett-Packard to invigorate debate on the telco sector, Willetts is forecasting imminent death by red ink for large incumbent telcos unless they immediately overhaul their operations and services model - but warns that sacking more staff is not the answer.

"You can't keep doing what Telstra and the others have done. You can't just keep firing guys [because] you get down to the point where you have taken off all the fat and are cutting into bone.

"The quality of the network and customer service declines; you lose market share and profits . . . and have to fire even more. You get into this spiral of decline. You lose more customers and you disappear down a rat hole," Willets says.

At the core of these problems is the fact that companies like Telstra have not really changed, despite massive downsizing, Willets says, arguing that all downsizing has achieved is the preservation of a flawed model "in microcosm". The result is burgeoning operational costs caused by disparate and, at times, antiquated architectures that need to be replaced.

Willets claims that this is an area where the IT industry must show leadership by offering integrated solutions, rather than making money from attempting to integrate fatally flawed systems.

"The IT industry has to show the telco industry how to automate the way they did in financial services and manufacturing [and] show up at the door with much more highly integrated technologies than they do today. You don't want 10 vendors with 10 standards.

"IT infrastructure of telcos is going to have to be rebuilt around a much more integrated model. At the moment it's a history of IT, from mainframes running Cobol through to Dot.Net. Of $US35to $40 billion a year spent by telcos, half of that is spent on no useful purpose integrating a gazillion dissimilar systems. Perversely, the telco industry hasn't eaten it's own dog food," Willetts says.

As for exactly when the spiral of death starts for Australia's largest incumbent telco, Willetts will not say other than "it only takes one serious competitor to push prices below operating costs" before the red ink starts to run. Just as perversely, it is not Telstra that seems to be bleeding, rather its competitors like Hutchison.

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