Getting service providers back on track

It seems as though half my columns this year have been about the failings of service providers. I’ve gotten a few heated notes from telecom employees asking, “Why do you keep beating us up?” and many more comments from IT executives saying, “Right on! Way to go!”

Much of my frustration stems from the fact that these companies are positioned to take advantage of many trends under way in the IT industry – and yet they’re floundering.

What do I mean? Here are a few strengths of the service providers, particularly the traditional telephone companies:

Scale. As former IBM CEO Lou Gerstner says in his book, Who Says Elephants Can’t Dance?: “Big matters. Size can be leveraged. Breadth and depth allow for greater investment, greater risk taking, and longer patience for future payoff.” This is the guy who transformed IBM from an also-ran with outdated, overpriced technology into the world’s leading provider of e-business solutions and integration services. He knows a thing or two about leveraging assets.

Talent. I’ve said it before, but it bears repeating: Telcos have some of the finest technical, project management, and operational expertise in the world. And their employees tend to be exceptionally loyal and committed.

Customer access. Despite deep inroads by determined competitors, it’s fair to say that between them, AT&T, Sprint, WorldCom, Verizon, SBC, BellSouth and Qwest can count approximately 90% of U.S. businesses as customers. A firm that does absolutely no business with any of the traditional telcos is rare. Your average start-up CEO would ransom family members to get this kind of customer access.

Intellectual property. Telcos have maintained some of the best research facilities. The intellectual property locked up in service providers alone could launch a new wave of IT innovation and keep venture capitalists in Jaguars for decades.

So what’s missing? Part of the answer is highlighted in another must-read book, Clayton Christensen’s The Innovator’s Dilemma. Christensen (who coined the term “disruptive technologies”) demonstrates that great companies can fail by getting too good at delivering exactly what their customers want in a product – and missing the opportunity to roll out other products their customers might want even more.

What should the traditional telcos do? For starters, recognize that they’re truly in crisis: They’re selling the world’s best buggy whips in the automotive age. Then they should recognize the assets they have, and figure out a way to build on them. And they should remember that they can do it.

If Big Blue succeeded, so can Ma Bell.