Pipeline Publishing, Volume 3, Issue 6- Wedge Greene and Barbara Lancaster of LTC International

Pipeline Publishing, Volume 3, Issue 6

	This Month's Issue:
	Avoiding Snares

Unintended Consequences

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were only given to the largest of the service providers. This further reduces the margin of advantage once held by the service providers over their customers.

4. Managing Enterprise Networks

For enterprise customers comfortable applying advanced technology, deep packet inspection measurement devices, enforceable SLA’s, and autonomic network control devices allow traffic shaping by the customer to best utilize their network – often a composite network leased from many suppliers and patched together by the enterprise customer. Traffic management by customers means they can lease from providers offering wholesale or no frills networks, further driving down telecom profit margins.

5. New markets for OSS/BSS applications

The expert engineers that end up with enterprise customers typically want to leverage all of their old skills, such as customizing and operating OSS/BSS products. Business customers are now therefore buyers of the OSS and BSS products that before were just used by telecom providers. This means that vendors have a significant new group of customers whose needs must be addressed, which causes the vendor to shift priorities to meet these needs creating, for example, a high priority on network performance monitoring in support of those detailed SLAs. In crossing from Service Providers to Enterprise markets, OSS/BSS application price reductions are likely, but the potential customer base for these agile vendors has grown significantly. So those vendors who can adjust to the enterprise market survive and perhaps flourish. A decade ago HP Openview once navigated this transition and benefited greatly from it. However, OSS/BSS application vendors catering to new enterprise customers reduces the impact telecom service providers can expect to have in driving future product development by the successful vendors.

6. Gaining the inside track

Procurement and test lab experts are also sought after by vendors and enterprise customers seeking the “insider” knowledge of service providers. These insiders can use their knowledge and personal relationships to reduce procurement time or even win a sale that they might usually have difficulty winning. The result could mean a less competitive solution than if the procurement procedures were followed to the letter.

7. Knowledge transfer to competitive service providers

Smaller service providers have also hired from our downsized talent pool. In the ‘90’s CLECs were generally less skilled than the incumbents and at a disadvantage for selling high value products. Today, surviving CLECs know just as much as the big providers. This makes the surviving smaller carriers and regional specialist carriers generally rather successful and therefore attractive takeover targets. One of the benefits the larger carrier seeks out of the merger is the agility and flexibility inherent in smaller companies. Ironically, this puts “returning” employees at an advantage in assignments, raises, and retention over those employees who never left.

8. Disillusioned employees

Many observers have shown that downsizing has lead to a “breaking of the trust” and reduction in the enthusiasm of employees. Being left with “more to do”, coupled with reductions in raises and bonuses, those that are left represent a brooding labor force. They know the company has no loyalty to them, so why should they have loyalty to the company? This makes retaining the best talent tougher. At first, the “more to do” aspect has lead to increases in productivity of telecom companies. But this can only be maintained for so long before exhaustion and the impact of reduced dedication and loyalty begin a counter swing. Fear of losing one’s job is not a good long-term motivator. Eventually, productivity will likely decrease to productivity levels lower than that maintained during the telecom boom.

9. “In sourcing” for Asia Pacific

Another very significant trend is the shifting of skilled and experienced talent to the Asia Pacific region. Before, many strong engineers from the east moved to the USA and Europe to fill the vacancies in the rapidly growing telecom ecosystem. After the downsizing of the USA and Europe, many returned home with state-of-the-art skills and experience.

Relying on the returning engineers to tag the right people to recruit, companies in China, South Korea, and Singapore recruited some of the very top engineering and management talent (loyalty being no longer a winning personal strategy). We know of fellows, distinguished engineers, VP’s and at least one European telecom CTO, who now work for Asian telecom vendors. Competitive advantage is moving toward the east. They are now designing some of the best telecom equipment at significant price discounts to North American and European vendors.

10. Security risks

A drastic dimension of idled worker which we hope does not manifest itself, is the destructive behavior of the distraught and psychologically disturbed. We know that downsizing strongly affects individual self esteem and family dynamics. From this fairly large pool of disillusioned experts, statistically, there must exist a few who will not cope successfully with the change in their work reality. This population, while likely quite small, is also exposed daily via the media to the disproportionate impact that terrorist activists have – some may see this as a means of regaining personal stature or for enacting revenge, no matter how negative the publicity. That these are also highly skilled and experienced network engineering or network management workers presents a grave security risk since this group knows how to disrupt networks.

11. Impact on strategic planning and direction

One of the groups frequently impacted in each merger or downsizing is the “Strategic Engineering” group. This is the small group of the very top talent in a service provider or telecom vendor charged with shaping the future. Traditionally telecom has had stronger planning organizations over other industries. When a merger occurs, generally one or the other strategic groups is released, or a reduction occurs in both. In a bankruptcy or corporate sell off, knowing the strategic future of course has little residual worth; these teams are downsized or idled. For these self-driven premium employees, being bored also leads to departures.

Specifically, this year the IMHO that was the top strategic OSS planner at AT&T was downsized with the SBC merger. The top OSS strategist at BT was hired away to an Asia Pacific company. But for many unemployed planners it is hard for all to find new strategic jobs in a smaller telecom ecosystem, so a great proportion of this best talent jumps entirely away from the industry.
Disturbingly, the loss of strong strategic teams has lead in a few instances to a type of product monotheism at some service providers. This leads to having only one strategic vision – we see this in American fiber-to-the-home and IPTV plays. Where strategic teams no longer exist, are in disarray, or no longer have any influence, service provider companies exhibit a tendency to abdicate planning for a simple “follow the leader” strategy - adopting strategic plans wholesale from perceived market leaders. Hence the great attention paid to BT’s 21st century network and the Quad plays of Telcom Italia and France Telecom.
It is ironic that the very groups which should be championing diverse strategic directions, and incidentally, predicting and stopping these “unintended consequences” are the arm of the corporation most negatively affected by MAD. As the complex telecom ecosystem swings back to a new equilibrium, likely strategic groups will again emerge to guide the industry. In the mean time, the Analyst and Media companies will set our direction by “picking trends.”

The Bottom Line
As our analysis shows, there are winners and losers every step of the way: the people who are laid off and those who find rewarding new opportunities; the employers and vendors who lose expertise, insights and passion; and those who gain from hiring that talent. There are likely to be welcome surprises created by talented people who move out of telecommunications into entirely new industries.

What is also clear is that “unintended consequences” need not always be so. With some careful consideration and a serious effort to learn from recent down sizing experience, the telecommunications industry and its employees could reap the benefits of more logical and uniformly positive “right sizing” initiatives. More importantly, we think that this analysis shows that the biggest potential “losers” are the biggest of the service providers, and that action now to reinforce programs to identify and retain, or recapture, their best and brightest is essential to having the experienced experts in place to design and execute strategies that can keep big service providers in the game.

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