I ran accross this article in the Independent about how Cable & Wireless are cutting 600 more staff. This will bring their global headcount to about 13,900 if the headcount numbers in the article are to be believed. About half of the cuts will come in the UK while the remainder will come in Germany and France. At the same time C&W will be moving out of their headquarters in London and moving to the burbs. This seems to be a common approach to corporate offices around the world as long-standing companies abandon some or all of their expensive, historic locations in favor of cheaper and more modern digs on the outskirts. Think AT&T and more recently the New York Times.
The really interesting quote from the article comes from Richard Lapthorne, the Chairman of Cable & Wireless. This is actually incredibly frightening for the continuing state of the telecommunications industry:
“Salvation for a telecoms company won’t come through top-line growth. Far more of our profit growth will come from cost savings.”
High holy hell!! How much more savings can be cut from telecommunications operations? I actually disagree strongly with Mr. Lapthornes comment. Theres so little fat left in major telecommunications operations. Where is the innovation that is going to spur demand and get the top-line revenue flowing again? Have we tapped out quality content for individual users or the benefits of interconnectedness for business operations? Id like to think weve only just begun and that technologies like fiber to the home are going to open up new waves of unanticipated demand for video games, television programming and other on-line content that consumers will pull down content to fill up those pipes. On the business side of things Im certain there are still any number of benefits to be unlocked by networked IT. Just one example that leaps to mind is streamlined supply chain logistics enabled by RFID.
But cutting costs as the only source of profits? Yeesh! Im concerned that many telecommunications companies have cut so far theyve eliminated their ability to innovate. Its becoming more and more apparent that the real innovation that might save the telecommunications industry wont be able to come from within.
