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10/8/2004
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AT&T's Gambit: Relying On Automation To Make Up For 12,000 Fewer Employees

AT&T's top IT exec says automation of its IT systems will let it shed more than 12,000 jobs this year without hurting its network or service.

AT&T, the nation's largest long-distance company, contends the IT systems it's built in recent years mean it can shed more than 12,000 jobs this year, while writing down more than $11 billion in assets, without hurting its network or the services it offers businesses. "We've been investing very heavily in terms of automation, so I believe our costs will go down and our quality, performance, and reliability will go up," says Hossein Eslambolchi, AT&T's tech czar, who serves as the company's CIO and CTO.

Eslambolchi says he understand that customers may "get a little worried" when they hear about massive layoffs at AT&T. But they "should have minimal impact on our network and customer-service platforms and processes. My expectation is that the customer will see better performance," says Eslambolchi, who also heads up AT&T Labs and the company's Global Networking Technology Services operation, which provides business services.

A variety of automated systems now let AT&T's business customers place orders, set up circuits and services, troubleshoot problems, and make changes to network services without dealing with an AT&T employee. "Seventy-five percent of all our switched-circuit orders flow now through a global integrated management system without human intervention," Eslambolchi says. "That has reduced order cycle time by 75% and the head count supporting those switched orders has been reduced by 86% in the past two years."

In other areas, computers automatically process 20,000 orders a month for permanent virtual circuits and handle 10% to 15% of all frame-relay orders. "Automation has helped us reduce the workforce in that area by 40% and reduce cycle time by 50%," he said.

Also, AT&T's Business Direct business portal uses XML to provide customers with access to AT&T systems. It handles 25 million transactions annually and "eliminates 25 million calls, E-mails, faxes, and manual entry of data into AT&T systems," Eslambolchi says. "It also saves AT&T an average of $15 per transaction." AT&T supports 600,000 users on that platform.

AT&T, once the nation's largest employer, had previously said it would cut around 5,000 jobs this year. It now plans to shrink its workforce by around 20%, or about 12,500 jobs, bringing its total to fewer 50,000. Around three-quarters of those losing their jobs have already been laid off or notified. "In response to recent regulatory developments and a highly competitive market, we have made some tough decisions to reduce our workforce and cut costs," AT&T chairman and CEO Dave Dorman said in a statement issued late Thursday .

The downsizing of what once was the country's largest telecommunications company comes as AT&T retreats from the consumer market, confronts competitive challenges brought about by new technologies, and deals with losses in the regulatory arena. Those include changes that affect the rates it pays to use access lines from local phone companies to provide services to customers, especially residential customers. The company blamed "sustained pricing pressure" and the shift to new network technologies in the business market, such as IP networking, for the workforce reductions and asset write off.

The company also is writing off $11.4 billion in assets to reflect the lower value placed on AT&T's network, which will be carrying less residential voice traffic. The company also said expenses related to the job cuts will amount to $1.1 billion.

AT&T expects its net debt to be under $7 billion by year's end, almost half of what it was two years ago. With lower debt and costs, the company said it remains profitable and generates enough cash flow to keep investing in its network and to keep paying a dividend to shareholders.

AT&T has around 30 million customers, but said earlier this year that it would stop selling conventional long-distance and local services to consumers. It's marketing an Internet voice service to the residential market. However, the company's main focus is the business market, which generates 75% of its annual revenue. AT&T reported $34.5 billion in revenue in 2003.

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