AT&ampT Unit Bolsters Network Management

Since its inception, AT&ampT Solutions has snagged some major contracts and built its staff by raiding its competitors' ranks

Almost a year ago today, Victor Millar, president of AT&T Solutions, the telco's infotech consulting and computer networking arm, predicted his new division would reach the size of Electronic Data Systems or Andersen Consulting in five years. While that's a tall order to fill, Millar's aggressive strategy has pushed him closer to that goal.

The division was off to a good start when AT&T kept Solutions under its brand name when it broke into three parts, also one year ago. Since then, Millar has built a team of 11,000 people, based in Washington, D.C. The market, too, is expanding enormously: network management outsourcing will grow from $2.1 billion in 1995 to $6.4 billion in 2000, according to Input, a market analysis firm based in Mountain View, Calif.

Solutions is targeting the "global 2000," big companies that need advice and expertise as computers and communications merge and change faster than ever. "To achieve leadership in a global economy, businesses must completely re-evaluate how they deploy information technology," said Rick Roscitt, AT&T Solutions' managing partner for outsourcing.

But many other companies are fighting for the same market share. So above all else, the contracts that AT&T Solutions have snared in the past year speak best for its achievements. Solutions offers what Allie Young, an analyst with Dataquest, Westborough, Mass., calls "full service capabilities." The company creates by consulting, builds through systems integration and manages through outsourcing, Young noted.

Earlier this month, Solutions signed a $1.1 billion, 10-year deal with Textron Inc., Providence, R.I., one of the largest such contracts ever awarded to one company. AT&T will upgrade and manage Textron's communications system, which runs through 25 branches around the world.

"Around the world" is an important part of the deal. Solutions is selling itself as a global telecom integrator in a market where international competition is vital. Textron expects to draw 35 percent of its revenues from outside the United States by 2000, according to William Gauld, vice president of corporate information management at Textron.

Financial services companies, an important component of global commerce, are also becoming Solutions customers. In April, Solutions inked a multimillion-dollar deal with MasterCard International to build a transaction processing system that will work in 30 countries. Merrill Lynch hired AT&T Solutions in May to design and manage the Trusted Global Advisor platform, a frame-relay network of 630 branches worldwide. That is a $500 million contract over five years.

Also in May, AT&T Solutions became part of the Pinnacle Alliance, a consortium including Bell Atlantic, Computer Sciences Corp. and Andersen Consulting. The $2 billion agreement stretches over a period of seven years and calls for the group to create a global network operation for J.P. Morgan.

That alliance, which brings together some arch rivals, highlights the importance of strategic partnerships in the outsourcing world.

Analysts, who have watched Solutions closely but guardedly, are finally coming out with their opinions of the division. Solutions won points for the spring launch of its Global Client Support Center in Durham, N.C., in the high-tech region known as Research Triangle Park. The center cost $14 million and is expected to add 300 to 500 jobs to the area that pay $40,000 to $60,000 each. It acts as a network control center for Solutions and runs 24 hours a day, seven days a week. Solutions plans to build more of these mission-control centers in other parts of the country.

"It is clear that AT&T top management regards AT&T Solutions as a key strategic element of future company success," said a recent report by the Yankee Group, a market research firm. That seal of approval included details on Millar's recruiting. He has raided the ranks of service units in AT&T, Digital Equipment Corp., Electronic Data Systems Corp., IBM Integrated Systems Solutions Corp. and Global Product Network, Perot Systems and Unisys to name a few, the report said. "During the past year, virtually every senior executive in every important information technology or network services outsourcing firm has been approached by at least one executive recruiter for the myriad of openings that existed in the evolving Solutions organization," Yankee reported.

Analysts have also been unusually enthusiastic about Solution's mission statement and its goal of using electronic commerce to do business. "The 'futurize' vision statement and the focus on electronic commerce are quite compelling for an AT&T services company," Young said. "Futurize" is a word Solutions has service-marked, a similar process to trademarking, but for an idea rather than a product. According to AT&T, futurize means "managing the present from the future."

Still, AT&T faces stiff competition from companies that have been in the integration and outsourcing business much longer. EDS, Hewlett-Packard, IBM and others are taking big chunks out of Solutions' targeted market.

Meanwhile in the telecom ranks, MCI has been building up its integration arm, bolstered most significantly a year ago on the same day AT&T broke up when MCI bought Canadian integrator SHL Systemhouse, which it recently re-named MCI Systemhouse.

But Millar has four more years to reach his goal, and he's off to a running start.

Significant network management outsourcing contracts awarded during 1996

VendorCustomerIndustryValue ($M)Length (Yr.)

AT&T SolutionsMastercard InternationalFinanceNA5

AT&T SolutionsMerrill LynchFinance5006

EDSAutomakers Ltd. (S. Africa)Discrete Mfg.22.710

Hewlett-PackardGroupo Proeza (Mexico)Discrete Mfg.NA5

Hewlett-PackardChina Commodity ExchangeFinanceNA1

Hewlett-PackardSmithKline BeechamProcess Mfg.13

Source: INPUT 1996 Outsourcing Database

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