UK: Managing information technology - The convergence of computing and telecommunications.

UK: Managing information technology - The convergence of computing and telecommunications. - Static flies when telecoms and computer companies try to merge. But analysts believe that the industry is ripe for a better line in communication. Jane Bird repo

by
Last Updated: 31 Aug 2010

Static flies when telecoms and computer companies try to merge. But analysts believe that the industry is ripe for a better line in communication. Jane Bird reports.

Ever since telephone lines were first used to transfer data between computers some 10 years ago, the imminent convergence of the two industries has been forecast.

The theory is that the increasing links between large and small computers via telephone lines should be matched by partnerships, mergers and takeovers between their providers. During the 1980s the argument inspired a number of such moves, but the expected integration has still to happen. The mergers continue, however, and in the view of many analysts have a better prospect of success in the 1990s, provided that they are well managed.

Developments in technology and the worldwide liberalisation of telecoms markets have created a wealth of opportunities for "telecomputing companies", says Geoff Vincent, electronics development manager at PA Consulting Group. These will combine computers with such technologies as optical fibre, satellite and radio communications to create a host of products and services.

Vincent explains: "The time is right for convergence. In the past, information technology has been concerned with automating paper-based systems that date back to the 19th century. Now all the elements exist for suppliers to help redesign their customers' businesses from scratch around electronic communications."

To meet this challenge, and keep abreast of the technology, suppliers need huge research and development resources. They also require rapid access to large markets if they are to recoup their investment and fund continued development. Being part of a global operation makes this possible.

Joint ventures between a small, innovative company and a large industry leader are popular. In the past few months several smaller computer companies, including Wang, Apple and Lotus, have formed joint ventures with their erstwhile rival IBM. They claim access to Big Blue's corporate customer base and R and D, while the lumbering giant benefits from their specialist skills.

Many takeovers are the result of a small company hunting for a suitable parent. John Leighfield, executive chairman of Istel, which was taken over by AT and T, says: "We spent half of 1988 diagnosing our problems and came to the view that we had to be part of a larger organisation. Our customers increasingly wanted global networking services and they expected us to provide local support in the countries where they wanted to operate."

But it is no good just putting together companies and carrying on in the same old way, hoping that the convergence will magically happen. "Telecoms and IT are totally different businesses, with different cultures," Vincent says. "There is little in common in their buying and selling patterns, product cycles and even the way people think." Both sides have to change, he says.

The telecomputing revolution is already underway - it is growing more than three times faster than the computer industry as a whole, and is forecast to increase from the current 2% of gross national product to 7% by the end of the decade. The world's electronic transactions, currently 50 billion a year, are expected to quadruple to 200 billion by 1995.

In future, users will have to make sure that they plan computer and telecoms strategies together from the start. Otherwise they run the risk of duplication, incompatibility, or the discovery that they have built a computer centre miles from their telephone exchange.

The cost of telecoms needs to be taken into account at the beginning, as it can completely unbalance a project which looked quite acceptable when it only included the computer side. Customers also face increasingly complex relations with suppliers, who all tend to point the finger at someone else when interconnected systems go wrong.

But convergence will bring more choice in products and services, lower prices and improved business efficiency. As national boundaries break down, customers can look forward to one-stop shopping for their global communications needs, and can expect a similar level of service all over the world. There will be many benefits, but there will be casualties on the way. Vincent says: "You could call the market dynamic, or you could choose a less positive word and describe it as unstable."

(Jane Bird is a freelance computer writer.)

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today