Verwaayen's new army is on the march

Out went the engineers; now BT is bringing in the IT experts who will transform it into a software services company. Tony Glover reports

The average BT employee today is more likely to be a software developer glued to a computer terminal or a lab scientist in a white coat in Shanghai than an engineer in a boiler suit disappearing into a manhole filled with wires at the end of the street.

After years of reducing its headcount, BT is now set to grow via acquisitions and the development of international IT-based services. Although the UK-based telecoms giant is shedding traditional engineering and middle-management jobs at the rate of roughly 5,000 a year, it is creating at least as many new jobs in areas such as research and IT.

The company's chief executive, Ben Verwaayen, told The Independent on Sunday: "Next year we could be employing more people than we are today. BT today is not the BT that was."

Although it currently employs around 107,000, Verwaayen says that as BT grows by acquisitions and expanding into new markets, its headcount will inevitably rise: "A growing company generally needs to hire more staff."

Although BT employs more people than the British Army, it has well under half the number it had in 1982, before its privatisation. Voluntary redundancies and generous severance packages have been used to slim down its staff numbers. But it is now discovering that the world of IT can require at least as much manpower as traditional engineering.

"We are on a journey from the screwdriver to the keyboard," says Verwaayen, speaking after the unveiling of the company's interim figures last Thursday. These showed that although revenues as a whole had grown by only 3 per cent to just over £5bn, "new wave" revenues from IT-powered services were up 10 per cent to more than £1.9bn. Pre-tax profits were over £1bn.

Verwaayen is referring to a shift of staffing resources away from the traditional operations performed under the company's old structure to its new IT-oriented internet and entertainment services.

At the end of March 2004, for example, BT Wholesale, the division broadly responsible for the network's former heavy engineering, employed roughly 28,000 people. By July of this year, it had only 3,500. BT Retail, BT's biggest division in terms of sheer staff numbers and responsible for day-to-day maintenance of the old network, employed 41,500 staff. By July of this year, its headcount had more than halved to about 20,000 people.

But despite the massive reduction in staff at BT's former twin pillars, BT Wholesale and BT Retail, the company's overall headcount actually rose from 100,000 to around 105,000 during the same period. According to BT, the reason for this is that new staff have been hired as fast as others took up voluntary redundancies and, where possible, existing engineering staff have been retrained with new software skills.

The IT-intensive BT Design division has risen from zero staff to 7,000 people and the BT Operate division from zero to 13,000. BT Global Services, which provides IT and communications back-up for international organisations, increased its staff from 21,000 to 24,500.

The changing nature of communications means that even those new divisions that have taken over some established roles rely far more on IT and customer-handling skills that on male-oriented engineering expertise. For example, the customer services engineers at BT Openreach, a new division that has grown from zero to 33,500 employees, need a different set of skills from BT's traditional engineering staff. Their job is to go into customers' homes to set up broadband and WiFi connections. They must explain to people how to use the new communications technology offering video entertainment, high-speed broadband and mobile services as well as fixed-line phone connections. To do this, they must also have the IT skills required to configure a range of electronic devices.

Earlier in the year, when announcing the company's recent restructuring, Verwaayen said: "This is the second phase of BT's transformation. The first phase saw BT shift its focus from narrowband to broadband. This next stage is equally important. It will see BT advance from a 20th-century hardware-based company to a 21st-century software-based services company. In a software-driven world, services will be available in real time and around the globe, harnessing the potential of BT's 21st Century Network."

Known as 21CN, this project is being developed to create the UK's new high-speed communications backbone. But rather than digging up roads and planting fibre optic cables, as has happened in Germany and other countries, BT is using sophisticated software to turn the UK's existing copper wire connections into a high-speed network.

BT's big revenue drivers are no longer UK telephone services but international IT projects. And software skills are what are driving BT Global Services. In its last quarter, this division had a total order intake of £1.6bn. During the quarter, it signed deals with the courier services company DHL Express Italy, steel producer Arcelor Mittal, drugs maker Novartis and computer services company Logica CMG.

The kind of deal that is being done with these businesses more closely resembles an IT outsourcing agreement than a traditional utilities deal. Winning a contract often involves taking on large numbers of the client's staff.

BT is also acquiring new staff via corporate take-overs. Its recent acquisition of Basilica Computing, for example, brought with it over 200 people, many of whom possess the kind of IT skills BT now needs. This was followed by the acquisition of Lynx, a leading UK supplier of IT services, employing around 500.

BT's growing global footprint is also changing the nature and nationality of large part of its workforce. In addition to call centres in India, where IT skills come cheaper than in the UK, it is growing in the US, where BT Americas handles communications needs for clients such as Pepsi Cola, and in emerging markets including China.

In Shanghai, BT recently recruited an entire research and development team to work on products aimed at the Chinese market and to use local software skills to come up with products and services for other markets.