BT Merges Standalone Units Into New IT Services Entity

BT has announced that it is merging three separate businesses into a single IT services-oriented entity.

The UK carrier confirmed the re-organistion in an email sent to eWEEK Europe.

“BT Retail has announced a new £400m business created from the integration of three standalone businesses: Engage IT (an IT service provider), BT Business Direct and dabs.com that sell and manage IT services across different market segments,” wrote the BT spokesperson.

New Services Unit

For those unfamiliar with the units, Engage IT has 900 staff and is a BT-owned operation that offers its customers a portfolio of IT services. BT Business Direct, meanwhile, is a reseller that acts as a one-stop-shop for the computing, networking and ICT support needs for businesses.

And Dabs.com is essentially an online retailer of electronic goods and components, from laptops and computers, right through to graphic cards, hard disc drives and USB sticks. It was sold to BT in 2006.

“The new entity will deliver IT services to the entire spectrum of BT Business customers,” the BT spokesperson said. “It will allow BT Retail to work more effectively as one team across its customer base and across the different businesses.”

“As well as continuing to grow revenues, it will also bring benefits in many other ways, such as making the most of BT Retail’s purchasing power and providing better utilisation of assets and skills between the businesses. The new business unit and the integration activity will be led by John Thornhill,” said BT.

It has been reported that Martin Balaam has stepped down as head of BT Engage.

“The Engage IT board will report direct to John Thornhill with effect from 1st September. Martin Balaam will work with John over the next few weeks on the handover. Martin’s next steps will be announced in due course,” said the UK carrier.

Growth Drive

On the surface it seems that the decision to integrate these three operations into a single entity, is part of an efficiency drive by the UK carrier.

But this has been denied by new boss John Thornhill, who reportedly said in an interview by ChannelWeb that the principle decision to integrate the different brands was to drive growth, rather than to improve efficiencies.

“We have aspirations to build an IT services business that is close to £1bn over the next few years,” Thornhill was quoted as saying. “We took the view that to play at that scale we needed to bring together the component parts and maximise their capabilities under one unified organisation.”

Thornhill also apparently said that no job losses were expected from the mergers, and that the Engage IT, Business Direct and Dabs brands will remain in place for “six to nine months”.

However he did warn that the enlarged organisation will “in time need to look at rebranding”.

Services History

Of course, BT already has an IT services unit, known as BT Global Services.

This BT Global Services unit has acted as one of BT’s principle growth drivers (besides broadband) over the last decade, although recently it has been underperforming. In May BT revealed that its Global Services division had recorded an operating loss of £141 million on sales 5 percent lower at £8 billion.

However this is against a backdrop of a tough period for the IT services sector in general.

Analyst house Ovum recently warned that the IT services sector has experienced a massive decline in new orders.

It said that new contract signings had fallen to their lowest level in more than eight years. It also revealed that total contract value (TCV) of deals announced in Q2 2011 was just $19 billion (£11.8bn), down 40 percent on the same period last year.