Lacking the assets
Inexpensive long-distance illustrates one of the key factors that has led Qwest to crash the enterprise market ahead of Level 3, Williams and the rest: its successful 1998 acquisition of LCI International, a rather traditional domestic long-distance carrier. LCI's top two executives eventually left the firm, but Qwest was remarkably successful in retaining the next layer of product and marketing executives.
This was key because LCI was the only U.S. carrier other than the Big 3 to offer a business-class voice virtual private network service akin to AT&T's Software Defined Network -- even WorldCom didn't have such a product before it merged with MCI. Now called Qwest VNS, that voice network product plays a role in almost all customer voice/data network contract deals. Plus, LCCI provided the basic frame relay net -- which at the time was migrating from a Newbridge to Ascend frame/ATM platform -- that also has figured in most of Qwest's recent enterprise deals.
In fact, for all his bravado, Qwest CEO Joe Nacchio is one of the least prideful telecom executives when it comes to admitting that his company needs to look elsewhere for assets and expertise. Example: Last week Qwest signed a joint venture deal with IT consulting kingpin KPMG to form Qwest Cyber.Solutions, essentially an application service provider outsourcing firm -- 51% owned by Qwest and 49% by KPMG.
"While we have the physical assets, the missing element is where do you get the professional skills to get people to support the applications in the CyberCenters?" Nacchio says. The venture will include 450 KPMG software engineers who specialize in enterprise resource planning and customer-relationship software packages. Qwest's sales channel may make the initial contact, but "they'll fall back on the specialists in order to close the relationship," says John Charters, a Qwest vice president who will be the joint venture's CEO.
Looking for help
KPMG is hardly the only place Qwest is looking for help, having signed about a dozen recent deals for help in operating software, applications and broadband local loops. Qwest has even turned to non-network organizations for marketing help in affinity deals. While some of its next-generation telecom rivals have turned up their noses at small and midsize enterprises as too expensive to serve, Qwest has raced to sign up business users who belong to membership groups, such as the American Hospital Association and the Remax real estate company.