Business Management

BT Services CEO Sees a New World of Opportunity

The evening before our early morning meeting at BT’s labyrinthine offices near St. Paul’s Cathedral in London, Luis Alvarez spent time speaking to family and colleagues. Children in Portugal and his native city of Madrid, his father who is also in Spain, and BT’s CEO in the US — all via videoconferencing. It is an emblematic picture: work and pleasure, no borders, exchanges of opinion and affection, all afforded by communications technology.

The CEO of the £7bn ($11.8bn) turnover BT Global Services that employs 20,500 staff, he says the transformation available via smart communications, combined with other seismic changes such as globalisation, has created a thrilling inflexion point. “I love my job because I feel the luxury of being involved in transformation,” he says.

Immaculately dressed, tanned, passionate, speaking highly accented English and a supporter of Real Madrid, Alvarez could hardly be more Spanish. But here he is in the UK, running a unit that accounts for two-fifths of revenues at BT Group. He says that being a Spaniard managing the operation is symbolic of how BT has changed from the ancient, slow-moving, change-averse telecoms incumbent of old to the new, more agile company that has recently bet big on football broadcasting with BT Sport and is one of the world’s largest communications firms.

Alvarez sees enormous opportunities afforded by the globalising economy and recommends Thomas Friedman’s book The World Is Flat as having anticipated what he calls “instant globalisation”.

“Something happens on the stock exchange in Tokyo and it has an effect on what a company is doing in Brazil,” he says. “Whether it’s social unrest, a discovery, an invention, everything happens consequently across the globe. This is changing everything we do, both personally and professionally. And it’s really happening for us. Most of the contracts we’re signing are truly global.”

But he recognises that the fast-growth economic powerhouses have obstacles to overcome.

“We used to think about emerging economies but now they have emerged: Mexico, Indonesia, Nigeria and Turkey, the MINTs. There is one characteristic to me of these countries though: they are still in a fragile state in their journeys [in terms of] their economy, politics, law, education and health… the major drivers in creating [opportunity and] a healthy middle class.”

That’s not stopping his group from pursuing the new opportunities all over the world though. Our modern world is “driven by connectivity”, Alvarez says, and that gives BT a chance to have a bigger international footprint.

“It’s the art of connecting and it’s not only about understanding technologies but how they are used. We don’t just sell networks but what people can do with networks.”

Globalisation and the need to understand even some of the more challenging and remote parts of the world has driven BT into remarkable projects like Connecting Africa where it worked with the charity SOS Children’s Villages, hooking up modern satellite communications to over 700,000 people in 12 countries for education, healthcare and mentoring. Another project is in rural Colombia where schools have satellite data links and have become connectivity hubs serving local communication needs. But it is the young people who lead by example.

“If you give tools to small kids and teenagers they are the real change agents in their communities,” he says. “They’re very quick at learning these tools and they show their parents and friends. In the beginning it’s just the curiosity of finding interesting things about the globe. [But later, a farmer might] have access to what the real price is of a kilo of tomatoes is in the final market so it becomes a more transparent market.”

He also talks about a related trend that he calls “the power of individuals”.

“You can suddenly kill a business by with a tweet. The Arab Spring was an amazing experience. Something unexpected drove a complete transformation. You can build a new website or app and spread the word without spending a euro or pound and it’s worth hundreds of millions.”

But notions of customer service are also changing, Alvarez contends.

“More people will need to understand how they manage consumers,” he says, adding that he buys his coffee from Coco di Mama, across the road, by St. Paul’s Cathedral, because the service is so brilliant. The coffee has to be good but the service adds the cream.

Also, companies will also have to accommodate a new generation of workers, the famous Generation Y.

“Employees want to share more and more. They want to have similar social networks to Facebook and the new generation doesn’t understand you wanting to protect your assets and keep them in a drawer. The war for talent is more and more a fact. I am Spanish and in Spain we have 50% unemployment. It’s a responsibility of every single executive and politician to create a model where young people can gain knowledge and work.”

Back to the global view, I ask Alvarez whether deregulation of the old national monopolies has worked, given the fact that so many of the incumbents remain leaders in their markets.

“The way the market was deregulated in the US was regional. In Europe they opened their networks. Unfortunately, the way this has been implemented I don’t think has always facilitated competition. In the UK, the regulator was quite determined to make it happen.”

The mission for BT and Global Services is, effectively, to lead the world and BT remains in an elite handful that have truly global operations, even if 44% of revenues are generated from the UK. Alvarez says BT and his unit are growing in many of the fast-growth parts of the world because clients like agribusiness giant Syngenta, Rolls-Royce and Mastercard pull it in as they spy expansion opportunities or because of strong relationships with incumbents like energy giant Ecopetrol in Colombia or energy/chemicals firm Sasol in South Africa. In Latin America alone, BT Global Services has 1,000 direct employees.

Alvarez says that BT has an “exceptional” customer base in the US including P&G, Pepsi, Mars and Exxon but he betrays a hint of frustration too.

“We keep saying that we think the US is missing an opportunity to have a more competitive market. It will come because it’s good for the industry and good for the market, but it’s taking longer than we would like. There’s not the urgency of Europe: they feel comfortable [but] new competitors could create jobs and more competition.”

The conventional view is that telecommunications is becoming a commodity so telcos need to look to add value in other ways but Alvarez demurs a little.

“We are, and will continue to be, a telco and we’re proud to be a telco. We understand the technology around networks and can make best use of them. It’s not a commodity. You have to understand the infrastructure in South Africa, Brazil... That is an art and the network is more and more intrinsically connected to other things.”

Cloud computing has made the network the epicentre of the digital world, he says, and opened up new ways to collaborate. For example, Renault Nissan is hooking up design centres and operations around the globe and is dependent on its network to keep all parts in harmony.

Alvarez, a 15-year BT veteran who will celebrate two years as Global Services CEO in October, is widely credited as having steadied the ship and doesn’t come across as big fan of risky endeavours. When I ask about the large loss and the £340m write-down BT was forced to make in 2009, he says this:

“We learned a number of lessons. Growth and profit are not two things you can disassociate. It’s an ‘and’ and not an ‘or’. You have to pursue the right opportunities.”

Since then, risk and contract management have been tightened, he says, and BT is a healthier organic business.

I suggest small, boutique-style collaboration consultants could be interesting acquisition candidates. Alvarez doesn’t sound keen though.

“I am not that much in favour of acquiring small companies or capabilities. I prefer we have innovation within the company and work with our customers. We have a very, very powerful R&D engine. It’s quite amazing what’s happening in the market and we still have a large organic opportunity.”

The opportunity doesn’t just lie in the rise of BRICS, CIVETS and MINT countries but in niches also. He points to cybersecurity, for example, where BT has 2,500 experts.

“In security, you’re an expert today and not tomorrow because of speed of change,” says, adding that BT learned a lot from the Olympics where it was official communications partner and responsible for infrastructure that came under attack 20 million times.

The future he says is bright even if these changing times mean there is less clarity than in the past.

“One word has become the new normal: uncertainty. Predictability levels are not as much as they used to be. You have to be able to adapt. As Darwin said, it’s not the strongest or fittest but the one that adapts that wins.”

One example of that adaptability is in mobile where BT recently stepped back into the sector with the BT One Phone service after having sold to O2 in 2005 to Telefonica.

“We’re coming back at the right time,” he says. “We believe the biggest usage is going to be data.”

In a world where data traffic continues to grow exponentially, the combination of knowing 4G cellular but also WiFi and fixed-line for extra capacity will be a strong mixture, he says.

Companies will increasingly move design and contact centres to different regions for cost arbitrage or to get closer to opportunities, he says, and BT needs to be similarly agile. In the UK, agile is not perhaps a term that is often used in association with BT but Alvarez says that perceptions are changing, thanks to projects such as the Olympics and the bold launch of the BT Sport TV channel that has gone head to head with Sky for English Premier League football coverage.

“That [staid] image was clearly in the market, especially in the UK, until one year ago but when we launched BT Sport we showed we could be agile, smart, fast, by creating a disruptive proposition. The reputation of the brand has improved a lot.”

At a time when many of the biggest US tech and internet companies are coming under the microscope for lack of diversity, Alvarez points to himself and others as the personification of BT’s diversity and noting the highly cosmopolitan list of leaders at BT and Global Services.

“I personally hope I combine a degree of Latin passion and the discipline I have mentally as an engineer with the power of a British company. I really admire the way British organisations have a very professional aspect with a good customer focus. It’s a tribute to BT that it’s possible to have talent here from all over the globe.”

He says his earlier experience as a CIO showed him the importance of partnering and adds that BT can help CIOs deal with the ramifications of globalisation, referring to the way Nestlé uses analytics and Fiat has shortened development cycles.

“If you’re a CIO you need a partner. We’re a ‘glocal’ company: global but with a local presence in many different countries. I spent 11 years as CIO. You are in the middle of suppliers, partners and business so you need to understand the strategy of the business, the technology and connect the dots of both worlds. The best CIOs are those able to use technology to transform their businesses. You see everything that’s happening in your company and in technology and can import things form other sectors.”

Before I leave, Alvrez shows me a corner of his office where, behind his desk sits a pile of bricks, hand-signed by BT staff that he says represents his metaphor for BT.

“We’re building a cathedral,” he says.           


Martin Veitch is Editorial Director at IDG Connect 


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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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