Why did Betsy really leave?


Betsy Bernard, president of AT&T unexpectedly resigned yesterday, drawing a lot of tittering from telecom glad-flys. However, her resignation, and appointment of William J. Hannigan as the new AT&T president shows that Ma Bell is about to make aggressive and perhaps strong moves into the business network services. It is a sign that CEO David Dorman’s plan to transform AT&T from a long distance player to one offering value added network services, ala IBM Global Services.

I had highlighted this change almost a year ago in my story in the Old Red Herring in August 2002. The turnaround strategy made ample sense to me then, and eventually rest of the world caught up, but never mind. Here is what I said:

bq. Mr. Dorman plans to focus on offering phone and data services to large corporations. Then he will offer these same business customers high-margin professional services, which could include helping corporations design their internal networks. For this to work, Mr. Dorman must ensure the successful spin-off of AT&T’s burdensome cable operation, which he is in the process of doing. He must also control costs. If his strategy works, and it likely will, he will be left with a smaller but much more viable business.

But lets take Betsy Bernard’s role in the turn around. She is known to be a remarkable executive especially in the bad times, and past four years certainly qualify. “She kept a tight hold on the long distance consumer business and then (when) she was shifted to business services unit, she brought tight managerial control and discipline, which allowed to the company to take out some of the costs and clean-up house,” Pascal Aguirre, senior VP with telecom consultants Adventis told me in a chat yesterday.

But now it is time to shift gears. When you are going to rebuild a much beaten football team, which only knows defense, then you need a new coach, who can go for offense. Football fans should know this all too well. Cincinnati Bengals have been a fantastic story this year, and I would expect AT&T to be an even better story next year. Hannigan, who has a deep background in services, (he ran Sabre) is going to be Ma Bell’s Marvin Lewis.

In many ways replacing Bernard with Hannigan is the right move for the company to make. Increasingly ‘information technology’ or computing and communication networks are converging, which puts AT&T at loggerheads with the likes of IBM, EDS and Accenture.The downturn in telecom industry has left everyone scratching their heads as they desperately look for growth. Voice and data services, the plain vanilla versions have become commoditized.

I think the focus of telecom companies will shift to value added services. Friends in the past (IBM Global Services) will now become competitors. Telecom services are being commoditized. AT&T could be totally pushed out the business. I think increasingly AT&T needs to move up the value chain itself, and Hannigan is the man.

“If you look at the complexity of managing a disparate set of networking technologies, AT&T has the knowledge to manage at that scale. There aren’t many players who can pull it off except for AT&T. I think really for very large enterprises AT&T is the only option,” says Aguirre. Makes sense, because the Bells are still struggling to come-up with their own enterprise related strategies with limited success. MCI is going after mid-market, while no one really knows what is going on with Sprint.

And one last reminder: while Bells are rolling out their IP networks, AT&T has already made the transformation and is now going global. Watch out, Ma Bell is coming back.



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