T-Systems Makes U.S. Splash

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T -Systems made a bold statement last month when it held the grand opening of its new headquarters in downtown Manhattan. In addition to a guest list that included several high-profile local politicians and tours of the lavish new office space, the move itself was highly symbolic--T-Systems' new home formerly housed AT&T.

Read between the lines, and it's clear that T-Systems, the latest telecom IT-services company on the block, which ranked No. 7 on the VAR500, is intent on succeeding in the United States where others have failed. Indeed, Konrad Reiss, chairman and CEO of parent T-Systems International, says profitable growth in North America will be a top priority. But who exactly is T-Systems, and how can it avoid the persistent problems that have plagued telecoms in recent years?

T-Systems International was created as a wholly owned subsidiary in 2000 by Deutsche Telekom, Europe's largest telephone company. Next, Deutsche Telekom acquired Debis Systemhaus, DaimlerChrysler's IT-services firm, and rolled it into its own IT-services business in an effort to create a formidable global enterprise integrator to compete with heavies such as IBM Global Services.

However, Deutsche Telekom has been struggling of late, though the German telecom giant did post a surprise net profit in its first quarter; one of the bright spots was none other than T-Systems, which posted a 2.8 percent revenue increase and a healthy sales pipeline. And despite a depressed economy, the global integrator is looking to expand.

Charged with the task of building a Great American Systems Integrator is Andrew Borgstrom, CEO of T-Systems, who wants T-Systems to be the "hungrier, more aggressive" IT-services company and capitalize on the integrators and vendors that aren't delivering.

"The IT-services space in North America is one of the most fragmented markets out there. There's plenty of opportunity in networking and IT services," Borgstrom says. "So far, our track record here is exceptional."

That may be because T-Systems has taken a slightly different approach to customers than other global integrators. For one, Borgstrom has the North American operation tightly focused on global enterprises, including more than 1,000 of Deutsche Telekom's largest customers, and four primary verticals: telecom, financial services, manufacturing and health care.

In addition, Borgstrom has been talking up a new trend that most telecom companies have yet to embrace: utility computing. The systems integrator is branching out from its network roots by blending utility-computing solutions with managed services. Borgstrom says his company has an advantage because, unlike vendor competitors, T-Systems isn't concerning itself with selling data-center equipment to customers along with high-priced services.

"Customers are very defensive; they want to drive out cost without replacing the technology they've already bought," he says. "We like to take the existing infrastructure and build utility-computing solutions rather than have the customer go out and buy new systems."

T-Systems certainly has obstacles ahead of it. Despite being a multibillion-dollar systems integrator, the telecom currently lacks a formidable presence and strong brand in North America. There's also previous history to consider: Telecoms have struggled mightily recently and haven't yet fulfilled their potential in the IT-services market.

"If T-Systems can't marry IT and network services, there's no hope for any other telcos," wrote Julian Hewett, chief analyst at European IT-research firm Ovum, in a recent report. "It's still too early to tell whether the marriage will be successful...[but] there certainly seems to be a determination to make it work."

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