Telco tussle

Dimension Data continues to work closely with Telstra on a number of projects, such as IP telephony, but is aware of the brewing conflict, says Dimension Data Australia’s national solutions and services director David D’Aprano.

"We’re under no illusion that telcos want to get into this space and, realistically, they have to, their revenue is under pressure. The price for their core services is only going to go one way, which is down," D’Aprano says.

"I think it forces us to do it, move up the food chain from an integration perspective, and this is a challenge that integrators have had from day one. When they got into PC networking, it was specialised, it was hard, there were not a lot of people that did it. As the technology commoditised, more and more people did it and I think we’re simply seeing the same thing happen now with the carriers."

As Telstra further embraces the IT services market, Foster’s claim that you can only go with one partner would seem to leave companies like Dimension Data out in the cold.

"I think it would be a concern if Telstra decided they didn’t want to partner with anybody and they were going to do it all on their own," D’Aprano says. "But that’s totally contrary to what even their new CEO is saying about needing partners and wanting partners."

So as these big telco fish swim into a small pond, how do the other fish survive? By playing to their strengths in niche markets, says IDC Australia’s Fevre. "You need to analyse where Telstra is very good, if you need scale probably don’t go there. Stick to what you do well and don’t try to compete with them because you’ll spread yourself too thinly."

Further friction with existing business partners would seem inevitable as Telstra and Optus expand into the IT services market through acquisition.

While Optus’ acquisition of Alphawest is yet to be finalised, the telco has already written to its partners in the IT services industry to reassure them they have nothing to fear from the deal. The services Optus’ partners provide will "not be interrupted", says Optus Business acting director Danny Leddin.

"Any agreements they have in place with Optus will continue in accordance with the terms. We plan to keep Alphawest as a standalone business. It will be an Optus subsidiary reporting to the managing director of Optus Business," Leddin says. "Alphawest complements Optus’ growth aspirations and our plans to become an integrated information and communications technology provider."

Not all Optus’ IT services partners are comforted by Leddin’s reassurances. Network integrator NetStar regularly partners with Optus. Owned by an Asian investment company, NetStar manages devices in 42 countries but most of its work is in Australia.

Despite Leddin’s comments, NetStar views the Alphawest acquisition as a threat, says NetStar strategic relationships national manager John Hills. "It’s a mixed message and you tend not to believe them. Well, you tend to believe them like [you’re] working in a lion’s cage with a whip and a chair," Hills says.

"We’re at the stage where we’re assessing what we’re doing. We’ll still work with the areas of Optus that we work with well, and we’ll still give them the great service we try to offer, but we’re obviously looking at other telcos."

In the past, NetStar’s certifi cations, such as Cisco Gold partner and Nortel Networks nPower partner, have allowed it to offer value to partners like Optus but now telcos are acquiring such certifi cations themselves.

"Even so, they’ll never have enough people to offer the service capability that we can offer our customers. They’re just too big," Hills says.

"The pre-sales and post-sales for these guys is a really hard thing to do. I’m generalising, but their representatives traditionally can’t get their heads around all their own products, let alone converged solutions on a customer’s premises. So they need pre-sales comms consulting and engineering support to go and sell any of these solutions. That’s why Telstra has picked up KAZ and Optus is picking up Alphawest."

While Optus says it remains committed to partners such as NetStar, Optus’ Leddin says a growing number of customers want an all-in-one package.

"Corporate and government organisations are increasingly looking to have single suppliers for both their telco and IT needs, particularly with the migration to IP. Optus customers are already looking for us to provide ICT services," Leddin says.

Telstra’s Foster agrees. "Customers are saying they want someone not only to give them carriage services or data services or voice services, because where does one begin and the other end? They just want to make one phone call and have somebody come in and give them a service level across the whole lot."

Analyst Budde agrees businesses want single suppliers for both their telecommunications and IT needs, but asks whether they will trust this all in the hands of one telco.

"Very few customers will go to a telco for their IT services. So the telcos will have to change their business model, their image in the market and so on. This will be very diffi cult for them to do so, in the end, they will be the infrastructure provider."

NSC -- formerly North Shore Connections -- partners with vendors such as Lucent and Avaya to service the mid-size to large end of town, both corporate and government. Its customers prefer to have individual relationships with their telco and IT providers, says NSC managing director Craig Neil.

"I think it is because customers like to have that negotiation power. When they engage us they tend to lock us down for three to five years, but when they lock in a carrier they normally only lock them in for 12 months because every 12 months they go out to the market and get a discount."

"At the end of the day the client will choose whether they really see their technology partner as the integrator or the carrier," D’Aprano says. "I think the challenge for the telco is to convince the customer that they have the expertise to be a true technology partner."