Telecom Companies Become Integrators

elecommunications companies are increasingly expanding into the integrator market, signaling a potential tectonic shift in the multibillion dollar market for complex systems integration and infotech consulting.

"Data communications is growing by leaps and bounds... and telcos do not want to get left behind," said Scott Smith, a Pacific Bell spokesperson. To remain competitive, telecommunications companies must look at providing more than just transport services, Smith said. And with the continuing convergence of telecommunications and computing -- of which the Internet is perhaps the most prominent example -- the definition of just what an integrator is seems headed for change.

Additional services telecommunications companies are considering providing include equipment, or monitoring and troubleshooting networks -- services that in many cases build on existing skills and resources.

For example, in September 1994, MCI set up a division to capitalize on services that it had been performing internally and for its largest customers, said Dave

DeSimone, MCI's director of marketing for its Integrated Client Services Division. The division was not "invented" at that time, rather there was a recognition that business opportunities existed for services that previously had been offered on a limited basis, he said. By drawing the services together, MCI was able to devote more resources to them than it would have if they had not been formalized, he said.

The division is split into three business units: professional services, which focuses on local and wide area network management, transaction services, which validates credit and debit card transactions, and call center processing, he said.

Call center services offers the biggest growth potential, while professional services -- the system integrator area -- is the fastest growing, DeSimone said. He attributes the growth to customer desire to move to distributed networks and away from mainframe networks.

Within the professional services unit, MCI offers three types of services. The first is network management, where MCI monitors a network for problems and will enact corrections. The second is business consulting, where MCI helps a company reengineer their systems through a one- or two-day brainstorming session. The third is technical consulting, where MCI will help customers change their computer configuration.

For strategic purposes, MCI is looking to go down to the desktop level, but the company currently starts at the wide area network level, DeSimone said. For example, while MCI would make recommendations on what kind of router or server is best for a business, it does not yet do so for software or computers on the desktop, he said. But MCI will offer these services as it seeks to expand its market.

Telecommunications companies want to expand their market opportunities, but they view their role in the integrator market differently.

To some extent, that may be because there are differences in how people classify integrators, said Bob Dornan, vice president of Federal Sources Inc., a federal information technology marketing services firm. One company might consider a system integrator to be someone who takes care of the network, without touching any hardware or software. To others, this is really a network integrator, he said.

Bell Atlantic views itself primarily as a network integrator, but it is starting to compete for more traditional system integrator contracts on the federal level, said company spokeswoman Mary Hecht Kissell.

One contract Bell Atlantic currently is a stiff contender for is the Integrated Systems Acquisition Product, said Dornan. An award is expected shortly for this contract that will supply 5,000 users at 1,200 sites with off-the-shelf software as well as support services. Bell Atlantic is actively involved in pursuing this system integrator procurement, Dornan said. However, the number of federal contracts that Bell Atlantic is pursuing or has expressed interest in is only 29 out of approximately 500, he said.

For some companies, such as Bell South, which has moved out of the federal arena, the way the government packages its requirements may make federal contracts less than desirable, Dornan said.

Meanwhile, the judgment that broke up AT&ampT places some limits on what the seven regional Bell operating companies can do. For example, they cannot enter the long distance market or resell wireless services from subsidiaries. This makes it difficult to meet all federal requirements for network procurements, Kissell said.

The greatest disadvantage from the judgment is that the regional Bells are regulated and can't offer new services or change prices easily, said Pacific Bell's Smith. The company, which sees itself as a systems integrator, "is going after all business," but its primary market is companies with wide area networks, said Smith. PacBell provides network transport services and also works with vendors to recommend and provide hardware and software, Smith said.

Still, pending legislation that would free the Baby Bells to pursue new markets with few regulatory strings attached could change all this. But telecom companies will face other challenges. Learning to team and work with other vendors that may compete for the same contracts is a new experience and one that may be culturally difficult to get used to, said PRC's Korin. Systems integrators have traditionally engaged in "co-opetition" -- they cooperate on one contract and may go head to head over a different one later in the same day, he said. Telephone companies historically have had a monopoly where they don't need to compete, but that has changed and they now are effective competitors with each other, he said.