BT Americas' INS Buy Provides Professional Services Boost

On February 1st BT agreed terms to acquire International Network Services Inc. a provider of IT consulting and software solutions based in Santa Clara, California. INS specializes in four major areas -- Enterprise Architecture and Governance, Business Productivity, Information Risk Management, and Infrastructure Transformation.

Recommended Competitive Responses

► AT&T and Verizon Business need to be aware of the potential threat from BT Americas' to its top tier accounts among multinational corporations, and do more to highlight their own consulting and professional services capabilities both in the U.S. and overseas.

► Orange Business Services is also building its U.S. presence – albeit slower and organically. However, to penetrate the U.S. public sector, Orange Business Services will either need to acquire a well-established U.S. systems integrator or create a strong alliance partnership with one.

► Major integrators such as HP and IBM should expect stronger RFP bidding competition from BT Global Services both in the U.S. and Europe.

► Outsourcers like Accenture, EDS and CSC can match (and surpass) BT Global Services global consultant strength, and should especially emphasize the lack of serious professional services capabilities of all the global carriers in Asia.

Recommended End User/Customer Responses

► U.S. customers should consider BT Americas' new IT consulting and professional services competence with the INS acquisition. The company has served some 75 percent of Fortune 500 enterprises and more than half of the Fortune 1000 companies.

► Potential enterprise customers should inquire about the timetable regarding migration and integration for this merger. While BT has integration experience with past mergers and plans to operate INS as a subsidiary in the short term, there are the risks of disruptions that these changes can evoke.

Akamai Grabs Netli in Applications Bid

On February 5th Akamai Technologies announced that it would acquire Netli in a move that will support Akamai’s application acceleration solutions for Web and other Internet-based applications.

Recommended Competitive Responses

► Akamai’s merger news drops a bombshell that presents a real challenge for competitors. Competitors will need to take steps immediately to determine how they can best survive as the Akamai-alternative.

► Mirror Image needs to hit hard with its pricing alternatives to Akamai. This means it needs more marketing dollars to gain market awareness. Further, it needs to investigate how it can deliver an applications acceleration solution that can compete against Akamai.

► Limelight will need to examine how it can leverage its network and build-outs to help clients with application acceleration in addition to content distribution. It may also want to make its own acquisitions, and add European and Asia Pacific build-outs if it can swing the capital. This could position it solidly as a key alternative to Akamai.

Recommended End User/Customer Responses

► End users will find that the market for Akamai alternatives continues to decrease given Akamai’s elimination of competitors through acquisitions. Clients will want to pursue RFPs from Mirror Image and Limelight to determine if these players represent a good alternative.

► Clients may find the one-stop shop for content and application acceleration appealing and once the dust clears from the merger, can inquire as to how this can best be delivered from Akamai. Most companies will find few service alternatives for application accelerations in the market.

FairPoint Cuts Deal with Verizon to Take Over Its Rural Northeastern U.S. Properties

On January 16th FairPoint Communications agreed to purchase Verizon Communications' wireline operations in Maine, New Hampshire, and Vermont in a transaction valued at $2.715 billion in cash and stock.

Recommended Competitive Responses

► CLECs operating in northern New England, particularly One Communications, should make sure they weigh in with state policymakers on the proposed transfer of assets to FairPoint Communications. These competitors can use the fact that an RBOC divesting itself of entire states is wholly without precedent, and that as a response, these deals must have a unique level of scrutiny and requirements.

► In particular, CLECs buying Verizon Communications services on a wholesale basis must impress on regulators that spinning out ILEC territories from an RBOC should not absolve these properties from any of their dominant carrier and/or RBOC obligations, which they can say would harm competition. These competitors can say that since Verizon stockholders will own a 60% majority stake of the combined company and Verizon will appoint six of its nine board members, FairPoint Communications will be an independent LEC in name only.

► Cable competitors in northern New England should focus on rolling out broadband services that they can sell to businesses and SOHO/teleworker clients throughout the smaller northern New England metro areas, investing in plant upgrades wherever needed. Cable competitors will continue to be at a disadvantage in selling business services until they release business dial tone voice services.

► AT&T and other business services competitors with brand name recognition should use any opportunities for confusion over the next year in northern New England to tout their own services. These competitors can claim that Verizon is “abandoning” its access customers in northern New England.

Recommended End User/Customer Responses

► For all business customers, changes in northern New England are as much as a full year away. It would be a good idea in the coming months, however, to keep an occasional eye on regional newspaper headlines to see what issues the proposed transfer of assets from Verizon Communications to FairPoint Communications dredges up at the state level.

► Enterprise-class customers served by Verizon Business in northern New England will not be directly affected by Verizon Communications' spin-off of its access business to FairPoint Communications. There might be changes to the costs and/or terms of service for underlying access links in the region.

► If the asset transfer to FairPoint Communications is completed as planned, enterprises with a strong presence in northern New England might check with FairPoint Communications directly to see whether the carrier can sell competing regional products and services at a competitive price point.

► Smaller businesses that are Verizon Communications customers will be transferred to FairPoint Communications if the transaction completes as planned. At this point, it is still too early to make a decisive call about how well the transfer will be executed. FairPoint's plans to build a regional back office infrastructure sound promising, but businesses should keep a close eye on their bills and service levels for both accuracy and service integrity.

► Businesses currently served by CLECs should at some point in the coming year discuss with their account representative how the transfer from Verizon Communications to FairPoint Communications might affect them and ask for evidence of any good news on the horizon, if possible.