“The Telecom World Is Not Flat…Yet”

After reading Tom Friedman’s 2007 bestseller The World Is Flat, it is easy to get carried away with the optimism and possibility of a world without barriers, where even labor turns into bits that can be allocated in the most efficient way on a global scale. Such phenomena are best exemplified by the emergence over the last decade of offshore giants in India, which have grown rapidly in size while bringing enormous value to Western corporations. Much of this revolution was made possible by advances in the ICT (information and communications technology) industries, but ironically these very same industries operate in a reality that is quite different from Friedman’s vision. ICT players have to navigate an arcane world of trade rules, regulations, taxes and product homologation that begins to look as complex as trying to solve global warming.

As technology convergence happens in the business world, there are two opposing trends that make matters even more complex for ICT players. The first trend is that the Fortune 500 CIO desires a flat world where he or she can get a one-stop shop for all services, with consistent customer experience, across the company’s global footprint. As the technology portfolio gets more complex and sophisticated with telepresence and unified communications, CIOs are searching for the right partner that can put it all together, products and services, across its global footprint, as they find themselves pressured to do more with less.

The second trend, somewhat in conflict with the first one, is that no single provider can do it all alone due to the incredibly complex ecosystem. To be successful, ICT service providers need to partner to provide a turnkey solution. This is not necessarily that difficult if a company is dealing with one country or a free-trade zone (such as NAFTA or the Eurozone); however, when more partners  are required and the BRIC and other emerging economies are involved, it becomes exponentially more challenging to deliver on a global scale. This is when the reality of a “bumpy world” sinks in.

Telecoms may claim that they have done this all along, which is true in terms of the “Communications” aspect of ICT. For example, telcos have a long-standing business practice of dealing with local PTTs to get their last-mile needs fulfilled. But in those cases, telcos were dealing with reputable peers, using the same dialect, and using practices that they were comfortable with (though the practices arguably could have been improved; see previous Telephony Online article on the “Buried Treasure in Your Network”). However the ICT space is a different beast. When a Fortune 500 CIO requires a telco to offer a two-hour SLA and maintain their router 24/7 in places like Votuporanga, in the middle of Brazil, the situation becomes more complicated! Relying on an unknown Brazilian distributor, with an offshore corporate structure and an aggressive tax strategy is a recipe for trouble, as Cisco unfortunately found out (see Financial Times article on Cisco’s problems in Brazil in 2007).

In this far-from-perfect world, ICT players need to have a crystal clear idea of what they are trying to do. Being able to sell anything, anywhere on a global scale is certainly a competitive differentiator and a value proposition that would get any CIO’s attention. However, it is also a very difficult promise to fulfill. CIOs are a well-connected group, with perhaps two or three degrees of separation between each of them, and it does not take long before one person’s bad experience becomes “viral” negative marketing.