Telcos find their place

Not long ago, the battle for telecom supremacy meant the incumbent local exchange carriers and interexchange carriers had to offer a broad array of network and IT services to win and protect customers. A combination of factors has forced them to re-evaluate this strategy and refocus their energies on their core competencies of transport services. This retrenchment eventually could lead to their return as a key element in the utility computing services market.

To continue reading, register here and become an Insider. You'll get free access to premium content from CIO, Computerworld, CSO, InfoWorld, and Network World. See more Insider content or sign in.

Not long ago, the battle for telecom supremacy meant the incumbent local exchange carriers and interexchange carriers had to offer a broad array of network and IT services to win and protect customers. A combination of factors has forced them to re-evaluate this strategy and refocus their energies on their core competencies of transport services. This retrenchment eventually could lead to their return as a key element in the utility computing services market.

The carriers used their newfound freedom in 1983 to pursue a variety of new businesses, including systems integration and outsourcing. They set up divisions aimed not only at addressing customers' network integration and operations needs, but their IT requirements as well. This put them in direct competition with Andersen Consulting (now Accenture), Computer Sciences Corp., Electronic Data Systems and IBM, among others. These efforts failed because the carriers barely understood data communications, nevermind data centers.

The telephone companies' systems integration and outsourcing failures in the 1980s and early 1990s didn't discourage them from pursuing another promising new business in the late 1990s: Web hosting. Again, many of the carriers not only established business units that offered the communications necessary to ensure proper connectivity to hosting facilities, but also built their own hosting facilities to compete with the leading players in this market. This time, they failed because the demand for hosting services was far less than forecast.

It appears some carriers finally have learned their lessons from these experiences and are returning to their primary business of providing bandwidth and connectivity services. Specifically, these companies are building out their IP/Multi-protocol Label Switching-based networks and packaging an assortment of managed services that will complement the utility computing services offered by their partners.

BellSouth and Qwest are offloading their hosting businesses to IBM and HP, respectively. SBC and Verizon also have pulled back from pursuing Web hosting services aimed at the complex needs of enterprise customers. The ILECs have recognized that they are more likely to succeed in utility computing and the broader e-business market by partnering with other companies that have greater skills and resources.

Not everyone has heeded these lessons. Sprint is still promoting and delivering an array of application and other managed services to enterprise customers. Unlike AT&T, which is partnering with companies such as Siebel, and MCI, which is promoting its converged network services, Sprint is playing the "prime contractor" role and turning to partners on a case-by-case basis. This approach is destined to fail because corporations don't believe carriers are qualified to solve their computing needs. Proof of this is Sprint's recent decision to offload the bulk of its Web hosting business to third-party providers.