The Bloor Perspective: Cyber warfare, call centre futures and M&A today

Though busy with preparation for other forms of warfare, President Bush appears to have found time to ask officials and members of his administration to draw up 'rules of engagement' to govern cyber warfare. This would encompass protocols and rules governing the way in which military hackers use computers to attack the full range of an enemy's technology. Enemy technology functions may cover a host of things from military and civilian communications networks to computer systems controlling transport and utility functions, or financial and taxation gathering functions. Apparently the presidential directive seeks to formalise rules for the use of cyber warfare similar to those that exist for nuclear engagement. The US is one of a handful of nation states to have developed a cyber warfare unit as a prelude to the time when nations may be defeated by attacks over computer networks. It seems American cyber operations are currently governed by some basic rules, which seek to avoid "disproportionate or indiscriminate attacks, which disregard civilian casualties". Thus, an attack on a railway signalling system increasing the prospect of accidents and collisions is not acceptable, while bombing the signalling for military advantage is considered acceptable under current engagement rules. The notion of cyber warfare rules similar to Geneva Convention rules is somewhat mind boggling. Who is going to endorse and ratify them? Are those who stray beyond the rules likely to be put on trial for war crimes? Perhaps more unsettling is the prospect of retaliatory cyber counter attacks. The US has a higher level of automation governing civilian functions both in the public and private sectors. As such it is more vulnerable than most other nation states to cyber warfare. The future looks disconcerting, to say the least.

*Dark satanic mills no more?* Mitial Research recently produced a report which contains some interesting, and at the same time pessimistic, forecasts about the future of the call centre industry in the UK. It is suggested a variety of factors will contribute to a substantial decline in UK call centres over the next two years. Critical amongst them are over capacity, economic slowdown and the maturing of the internet as a means of customer communication, as well as more competitively priced call centres in Asia. Call centres have primarily been sited in UK regions where there was high unemployment, arising from the decline in traditional manufacturing and production businesses. Many were assisted in their establishment by regional funding grants. What they did was provide needed but normally poorly paid jobs in the less prosperous areas of the UK. About 300,000 people are employed in call centres in the UK. They provide flexible part-time work for students and mothers. It is predicted the number employed will fall to somewhere in the region of 220,000 by the end of 2004. Call centre work is rapidly segmenting into low value work and high value services. It is the lower value work that is being migrated to the internet or being moved to India. There, graduate calibre recruits can be attracted at salaries which are substantially below those of less educated UK-based call centre workers. Some of the banks, such as HSBC, have substantial service centres. It is likely that the number of larger call centres, providing basic call centre services, will diminish. Although the largest number of sites are located in London and the South, the largest fall in call centres in percentage terms is forecast to come from the North-East, Wales and the Midlands. The higher value service work provided through call centres remains in the UK, and at smaller call centres. Organisations would like to relocate this type of work to lower cost environments but there is a concern that this may result in lost business, because the customers "may feel uncomfortable".

*M&A activity - how times have changed*

Back in the not too distant past, mergers and acquisitions were used to gain market share, and move into new territories and different sectors of a market. It almost got to the stage that if you hadn't bought anyone or were bought yourself you just weren't anyone. Now with the slow economy and remaining few fragile business models hung over from the dot-com boom all but disappeared, it's a different story. It all starts off innocently enough, normally with a discrete phone call or contact from a third party. Next comes the face-to-face meeting with your potential acquirer. Discussions take place off site and if nothing comes of the meeting no one back at base is any the wiser. If things are to go further then one look at the visitor's book often gives the whole story away far too quickly. In the dot-com days money was no object. Just as VCs backed anything that looked like it might be a good idea, so companies acquired other companies paying little attention to financial performance, or considering just how the companies would compliment one another. As the bubble burst these over-priced under-used assets became very prominent on the acquirer's balance sheet and we have seen countless write downs of over priced assets with each new set of financial results. Things are different these days. Any acquirer should look long and hard at the business of a company in its shopping basket. It needs to understand exactly what it is buying and then work out how it will make optimum use of these new assets. Acquisitions work best on commonality - of business models, culture and approach. That means matching all the way down the line. It's all too easy for execs to get lost in the romance of the acquisition trail. Sometimes it all sounds too good to be true. Sometimes it is. Things must be considered from the acquired company's perspective too. They're probably in some form of difficulty and someone else coming along with a sympathetic ear at just the right time means they immediately don the traditional rose coloured glasses. Once the honeymoon is over the acquirer starts to demand that promises made are delivered. That's not to say that mergers and acquisitions don't work - they do, it's just important for all parties to keep their eyes open, as waking up and smelling the coffee may prove to be a painful experience.

Bloor Research is a leading independent analyst organisation in Europe. You can find out more at www.bloor-research.com or by emailing mail@bloor-research.com.