Can Telecom tango with the information titans?

By Rod Oram

Between the lines


The vision is bold indeed. Telecom and its customers would be transformed into truly internet-based companies, thanks to software products and services Telecom will develop with EDS and Microsoft in alliances announced yesterday.

The logic is sound for Telecom. It urgently needs high-margin services to counter the challenging financial model facing all telcos. On one hand capital investment remains heavy while revenues get ever-lighter thanks to commoditisation of phone services.

The logic is just as solid for customers. It sounds like an overworked cliche, but the internet really is radically changing the nature of business. E-commerce will enable New Zealand's typically very small companies to perform more effectively at home and, more importantly, to reach out to the world in ways they never could before.

And the Telecom vision burns even brighter. The new-found trio will take their New Zealand-developed e-commerce and e-business products to markets across the Asia Pacific region, perhaps even beyond.

To cement the relationship, Telecom will take at least a 10 per cent stake in the New Zealand subsidiary of EDS, the US-based systems power house founded by Ross Perot. And it will get a minimum of two of seven seats on the EDS NZ board.

Well, so much for the vision. What's the reality? Corporate alliances can be the quicksand of international business. Launched with high hopes, they often sink into acrimony and lethargy under the burden of conflicting cultures and agendas.

Telecom is protecting itself from some of the pitfalls. It will retain a fair measure of flexibility over whose technology it buys. However, it will inevitably be locked into an EDS/Microsoft view of the world which may not always be the optimal one.

It will sit at the EDS NZ boardtable in Wellington but that's not where big strategic decisions will be made. Telecom is a small telco dancing with the world's largest systems integrator, EDS, and the world's largest software provider, Microsoft.

Therefore, the odds seem long that this venture will spawn a true centre of excellence here for a particular class of products, one that would spin off a host of small, related software developers.

Telecom also faces two delivery challenges. The first is physical. It's a moot point whether local phone lines outside central business districts will be capable of handling the heavy data flows such services will require even with the new bolt-on ADSL line technology.

The second is cultural. Telecom, EDS and Microsoft are huge organisations seeking to intimately involve themselves in the lives of small businesses. They will have to learn fundamentally different customer relation and alliance skills.