Kaz sell-off reignites telco debate

Kaz sell-off reignites telco debate

Telstra's decision to offload Kaz's business process out-sourcing division in order to focus on servicing its Next IP network has renewed debate around telco involvement in the IT market.

Kaz sold its Business Process Outsourcing (BPO) unit to Fuji Xerox earlier this month. It came two months after the telco axed 200 staff from Kaz to improve operational efficiencies and follows the sell-off of its superannuation business, Australian Administration Services, earlier this year.

Kaz spokesperson, Kevin Ryder, said its strategic review allowed the company to concentrate on three key areas: applications development, systems integration and selective infrastructure contracting. BPO had represented just 2 per cent of overall revenue.

"BPO wasn't seen as core to our strategy moving for ward," Ryder said.

But independent telco analyst, Paul Budde, remained unconvinced of Kaz's success in the future integration landscape. He pointed to Telstra's history of failed IT acquisitions including Advantra, IBM GSA and Keycorp.

"What has happened is a shame -- we had good IT companies who were leading the way and the acquisition was a blow to the industry," he said. "Telstra uses what it can from Kaz and puts remnants of the company back on its feet. I think its previous disasters, plus the fact that key management people have left, clearly shows Telstra has problems with running an IT business."

In contrast, other telco players like Macquarie Telecom and Optus were establishing strong positions on the IT battleground, Budde said. The Optus takeover of Alphawest had been easier because of its modern network and systems, smaller size and IT focus.

"Optus has had some success in the corporate market and considering its smaller size, it's punching above its weight," Budde said. "I think it has to do with the fact that it's been more successful in the IT sector. "If you look to overseas markets, BT's major growth

is now coming from the IT sector. If you can do it right, you can do things better." IDC telecoms analyst, David Cannon, said the parts of Kaz sold off did not represent its strengths or business opportunities.

"Where Kaz has been successful is in desktop management and applications," he said. "Telstra can't be everything to everyone and it's sticking to what makes sense."

But it still faced challenges defining which of its internal business units owned accounts, Cannon said. "Telstra's biggest issue is the butting of heads between different departments. There is an overlap in solutions supported by Telstra's other business units," he said. "This has caused internal friction."

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