The real con in WorldCon

WorldCom replaced engineering with financial engineering, and paid the price.

James Woudhuysen

Topics Politics

This is a bit of random text from Kyle to test the new global option to add a message at the top of every article. This bit is linked somewhere.

‘We are a digital communications company made up of thousands of people from all over the world. The kind of people who live for technology.’

That’s what the ‘About WorldCom’ section of the WorldCom website still says (1). WorldCom people live for IT, not for corrupt accounting practices.

The sad part about this is that it’s true, in a way. WorldCom people don’t quite live for IT; right now, they want new jobs. But at this very moment, thousands of WorldComers are wrestling with the company’s enormous global telecommunications network. They will be trying to maintain service for multinational corporations, as well as for the FBI and the US intelligence services – both big customers of WorldCom.

You can bet that keeping up operations is not the first thing on the mind of Bernie Ebbers, WorldCom’s disgraced ex-CEO. But if Ebbers, his greed and his yacht have so far dominated discussion on WorldCom, that doesn’t mean that they were the real problems with the company. An orgy of regulation in accounting matters is no guarantee against future WorldComs.

The real con that WorldCom reveals is that, far from living for technology, the corporate world now lives for finance. It now prefers innovation in financial engineering to innovation in old-fashioned engineering. The way in which WorldCom itself evolved shows this.

Like many IT firms, WorldCom began life in the 1960s with a heavy orientation to financial services. It pioneered the sending of communications in packets (the units in which data is transmitted on the internet), and so went on to help retailers conduct point-of-sale and credit-card transactions.

In those days, American IT firms had a real commitment to innovation. When MCI, which WorldCom took over in 1996, attacked ATT in 1969 by establishing a private telecommunications service between Chicago and St Louis, it did so with a whole new technology – microwave transmission. As late as 1983, MCI was launching America’s first nationwide email service, as well as building 150,000 miles of fibre optic cable.

But WorldCom forgot about such traditions. Transactions became a substitute for technological daring, as management dropped everything to gobble up more companies.

In the 1990s, WorldCom laid a lot of undersea cable to complete its global network. It made some fatter telecommunications pipes, which worked faster. By the time it bought MCI, its partner was into ‘Friends and Family’ marketing scams in residential services. The intrepid days of putting microwave transmitters on top of hills and mountains were long gone; no substantial breakthroughs were made.

Today, WorldCom says its priorities are in web hosting, virtual private networks and web-based call centres – not a very inspiring portfolio. Just as General Motors has come to be described as a pension fund with a car assembly arm on the side, WorldCom is a failed deal-making machine with a telecommunications network as a footnote.

WorldCom was creative with the accounts, but not so creative when it came to shuffling electrons. And with more regulation around the corner, other IT firms are now likely to focus on putting their books in order, rather than boldly going where no man has been before.

James Woudhuysen is professor of forecasting and innovation at De Montfort University, Leicester. He is coauthor of Why is Construction so Backward?, Wiley-Academy, 2004 (buy this book from Amazon (UK) or Amazon (USA))

Read on:

In the wake of WorldCom, by Phil Mullan

Confidence goes bust, by James Malone

spiked-issue: The economy

spiked-issue: Don’t blow IT

(1) See the About WorldCom section of the WorldCom website

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Topics Politics


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