The prophet calls correctly
PROFILE Sir Peter Bonfield; Richard Halstead on the man who's giving BT more IT
Sunday 16 June 1996
Some thought, pessimistically, that he was referring to another round of job cuts, to add to the swingeing job losses that have halved BT's workforce in the past five years. But Bonfield had another, more cerebral agenda: he was talking about turning the giant telecoms operator into a global technology company for the next century.
Until recently, the Bonfield roller-coaster contained a lot of dips and little else. A proposed merger with Cable & Wireless collapsed in April after months of fruitless talks. And despite strong efforts by Bonfield to make peace with Don Cruickshank, the telecoms industry regulator, BT has been hit by new price controls that will cut its profit margins and may lead to more redundancies.
But the former ICL chief executive has at last sent the roller-coaster skyward. Last week, Bonfield announced that BT and its American partner, MCI, would invest pounds 200m before the end of this year to boost the capacity of the Internet by a third. The market cheered the news, and BT's shares ended the week 6.5p higher at 369p.
The BT/MCI investment will take the form of new switching stations on three continents that will speed the flow of electronic traffic between the Internet's estimated 58 million users, and will provide additional capacity for the anticipated glut of "intranets" - networks that mimic the operations of the Internet within companies.
Bonfield's announcement was well timed. Having broken out from its initial "hobbyist" market, the Internet is verging on collapse, with many more transactions than it was designed to take now flowing across the network. At certain times of the day the volume of traffic will already cause parts of the system to seize. The new BT/MCI system will not add to the Internet's processing capacity, but it will improve the speed at which data is transmitted.
Bonfield calls the plan "the First Class section of global Internet services". The new capacity will be broken into separate pools, one open to individual users, the other maintained at lower usage levels for customers (usually corporations) who will pay more for clutter-free electronic communication.
"You can either ignore the Internet or capitalise on it," says Rupert Gavin, BT's director of multimedia services. "We want to be right at the centre of it."
The news that BT was taking the Internet seriously went down well with the City. "It's the first time a telecoms company has viewed the Internet as an opportunity, and not as a threat," says Martin Mabbutt, telecoms analyst at HSBC James Capel. "BT's aim now should now be to lock as many large customers as possible into long-term deals since the Internet is going to be the main driver of volume growth into the next century." It is in this strategic deal-making arena, say colleagues, that BT's new chief executive will really come into his own.
In many ways, Bonfield is quite unlike any other British chief executive. Brought up in Letchworth, Hertfordshire, he has spent his entire working life in the electronics business, initially as an engineer for Texas Instruments in Dallas, where he worked on developing the early computer microcircuits. In 1981 he moved to the computer company ICL, which was then wallowing in crisis. He joined as marketing director but took charge in the mid- Eighties. ICL had once been the flag carrier for the British computer industry, but by then it was a subsidiary of STC.
His 15 years at ICL were spent wrestling with the company's unwieldy structure to create a viable IT business. This involved a painful restructuring process. In an ironic twist, Bonfield closed the factory in which his father had spent his career. It also involved jetting around the world to hold the hands of jittery customers who were ready to junk their ICL systems and sign up with competitors when the company was haemorrhaging red ink.
Bonfield is fastidious about his looks - right down to his meticulously trimmed beard. He is also a keep-fit fanatic, rising at 6am every day to go running with his wife, a fitness instructor, or to work out on the rowing machine at home. At 52, he still puts in 13 hours of work a day, six or seven days a week, and has only recently started taking holidays. Bonfield's explanation for his gruelling work habits: "I'm not as bright as some, and I need to work harder."
As someone who started his working life in the US, and ended up working for a Japanese company, Bonfield says he feels at home in both those cultures. These attributes and experiences, plus a disarmingly direct speaking style, make him a formidable deal maker and a key asset for BT as it tries to make its dreams of technological convergence come true.
But the jury is still out. At ICL, he had to spend most of his time trying to keep the fragile facade of a major IT company intact while in reality the company was too small to compete directly with the behemoths of the computer manufacturing industry such as IBM, Hitachi or DEC. In doing so, he came up with a visionary solution for ICL's woes: turn the company into an IT services company along the lines of Electronic Data Systems or Andersen Consulting.
This was in 1990. If Bonfield had carried through his plan, ICL might be ranked among the highly profitable IT consultancies of today.
Instead, the company went through a period of strategic confusion - including an aborted foray into PC manufacturing - before it finally settled on the IT services model this year.
According to some of his former colleagues at ICL, Bonfield's constant travelling and strategising meant that he couldn't carry through the plans he had laid, and in the later stages of his ICL tenure he became increasingly distant from the day-to-day running of the company.
The City's verdict on Bonfield's tenure at ICL was that he made the best of a bad job. "He turned it into one of Europe's best computer companies," says one analyst, "but he still couldn't get it to make money."
Now the pressure is on Bonfield to deliver the goods for BT, a company that, unlike ICL, has the size and global reach to match his ambitions.
"He's proven he can predict the future, but so far he's not shown he can do anything about it," says another observer. "He's going to have to prove himself all over again."
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