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U.K. companies unprepared for telecom woes

Companies in the United Kingdom are failing to make contingency plans for their telecommunications services, despite the turbulent telecom market, according to analysts.

Many U.K. companies are failing to make contingency plans for their telecommunications services, despite the turbulent state of the telecom market, according to analysts.

There is widespread concern about the state of the telecommunications sector, following the troubles of WorldCom, KPNQwest and PSINet, according to research published last week by The Yankee Group. However, many companies surveyed had not developed a contingency plan in the event that their supplier should collapse.

Quite a few companies are taking a "wait and see" approach--which puts them at significant risk, The Yankee Group reported.

"Some level of contingency is vital," analyst Amy Rodger said. "The market has proven that even suppliers that may have appeared stable are in trouble, and further consolidation is likely."

Although signing up with another telecommunications supplier--the dual-supplier approach--or backing up via a secondary supplier can be expensive, Rodger says this is the best way to try and protect a business from the possible future collapse of their current supplier.

In the United States, WorldCom competitor AT&T launched a major ad campaign to lure customers from WorldCom, and other companies say they are actively looking for other suppliers.

Because changing suppliers can be expensive, enterprises must consider factors that determine the stability of alternative suppliers, such as an organization's finances and its management structure, The Yankee Group's report said. This should minimize the danger of moving to a telecommunications provider that later collapses.

One reason cited for not making contingency plans is the belief that customers are not immediately affected when a telecommunications provider hits big trouble.

One company told The Yankee Group that it was planning to continue using WorldCom as a supplier because the telecommunications company continued to supply an acceptable level of service after it filed for Chapter 11 bankruptcy protection in what was America's biggest corporate failure.

Another U.K. company said it would continue to employ PSINet because there wasn't deterioration in the level of service PSINet supplied after it filed for Chapter 11.

Despite this, The Yankee Group insists that contingency plans must be made.

"Using multiple suppliers gives you flexibility and reduces any business impact that may be caused if your supplier ceases to exist," Rodger said.

ZDNet UK's Graeme Wearden reported from London.