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The Bloor Perspective: telecoms charges, dot-coms and their customers, and IBM-Novell rumours
In their latest snapshot of the week's key issues, Robin Bloor and his colleagues scrutinise the cost of telecoms services in Europe, dot-com customer service, and IBM's possible play for Novell...

By Bloor Research

Published: Monday 21 August 2000

Incumbent telephone carriers certainly haven't been the driving forces for dramatic cost reductions. Throughout Europe, they have looked to protect revenues from established services. Price confusion has been promoted by complex special offers that make simple comparisons difficult. For years, the most ambitious target imposed on BT was to keep the increase in phone costs a few percent below the general rate of inflation. That's not the stuff of revolution.

Then the wireless operators looked like the threat that could galvanise stodgy carriers into action. Some were subsidiaries of telephone carriers, but the most aggressive were new entrants. As technology for high-speed wireless data transmission was unveiled, it looked as if the wireless operators would have an impact on the data communications market.

That is now looking suspect. Government bandwidth auctions and infrastructure costs are one factor. Let's do some 'finance for dummies' calculations. The UK started the auction game, and it has continued in Germany, reaching even higher levels. It looks as though the going rate is to be around £500 per head of population. Assume infrastructure costs are the same again, we've a cost of £1,000 per head. Allow for a return on capital and spread the cost over ten years, and that's about £135 per annum per head, or £11 per month.

So far, we've not included any operating costs, billing costs or costs of service provision. Or the value added taxes that are applied across Europe. And our costs are per head of population. If the new technology is sold only as a premium product to a section of the population, clearly the price would be much higher. So it looks as though wireless operators will be cautious about making a big play for low cost communications.

There's little sign that simple competition will deliver rapid results. That throws us back on the regulators, and at present it seems that Europe is ahead of national regulators. With a determination to encourage competition in the 'last mile' and to support smaller, more competitive providers, the European regulators are presently our best chance of progress. So, this time, let's applaud the bureaucrats and wish them success!

*Dot-com customer service - a contradiction?*

With all of the money, effort and resource pouring into dot-com development it's hardly surprising that the industry is moving at such a pace. But one thing continues to blight its development - customer service. A new study from Gartner Group has revealed just how sorry the state of online customer service really is.

The firm seems to have chosen a fairly good spread of firms for study, ranging from the traditional retailer to the e-tailer, and covering businesses both large and small. However, the result shows some serious flaws in the way many of these sites are operating.

Of those sites studied, not one received anything even slightly resembling praise. None of them managed to gain a rating of excellent, or even for that matter good. Twenty-three per cent did attain various degrees of an 'average' rating whilst 73 per cent came in with 'fair' customer service. Four per cent were deemed poor.

The study discovered it is the traditional retailers that really let the side down with their customer service, whilst the e-tailers were slightly more adept at such things. But overall Gartner says these companies are paying little more than lip service to CRM (customer relationship management).

Only 6 per cent of the study group provided a feature that would allow customers to request a customer service call, which seems like a fairly basic requirement. And only 24 per cent have instant messaging. Perhaps worst of all though is the fact that a mere 28 per cent will acknowledge the receipt of a customer email enquiry - leaving you hanging on unaware of what is going on.

A worrying situation indeed, and one that web sites need to address post-haste before it gets too out of hand and shoppers - or potential shoppers - just give up on the e-tailers and return to bricks and mortar companies in droves. In the meantime though what, as a shopper, can you do?

Gartner suggests the surprisingly simple, and commonsensical, idea of picking up the phone and ringing the retailer if you really want some decent customer service, which is probably the only chance we have of getting anything even vaguely resembling decent customer service. But the problem there, of course, is that these companies are typically even less prepared to deal with phone enquiries - so it's a loser at every turn.

*IBM to buy Novell?*

The rumour mill - again - has IBM buying Novell. This time it could be right - there are reasons why the companies could be a good fit. Naturally there are also obstacles and uncertainties.

What are the similarities between IBM and Novell? Both are successful mainly in what now tends to be called middleware. That is the software that runs above the operating system but well below applications. Both believe strongly in heterogeneous platforms, so their software is designed to run over many major hardware and software systems. Both have been successful at making money from unglamorous but useful technology as well as pitching at the fashionable internet.

So the cultures are comparable. One immediate question is how would a buyout work for the key Novell executives. In the IBM purchase of Lotus, the deal was mounted on a hostile basis because of the intransigent personality of Lotus boss Jim Manzi.

Current Novell executives, led by Eric Schmidt, are a more pragmatic bunch who would be more ready to negotiate and, if necessary, to work within an IBM environment.

Then there is the issue of price. That is the big attraction at present, with Novell's capitalisation only a quarter of its value earlier in the year. At the current price, Novell looks a good buy for IBM. Forthcoming results could spring a surprise and push the share price up again, and IBM won't be willing to pay too much.

And how would IBM manage a Novell merger? The Lotus merger was handled well, kept at arms length, with almost all product overlaps resolved quickly and firmly. Absorbing Novell could be more challenging. How would GroupWise be positioned in relation to Lotus Notes? Would IBM finally abandon OS/2 as a server operating system in favour of NetWare?

So the problems that could derail a deal are there. Yet IBM has the presence in larger corporations that could drive Novell's newer products further and faster, and at the current price, Novell will be a tempting target. Watch the news!

* For more research see http://www.it-director.com