Arthur Sculley, formerly managing director of banking powerhouse J.P. Morgan and now chairman of the renascent Bermuda Stock Exchange (BSX), told a reporter: "Bermuda should position and market itself as the Information Island. Like its predecessor, "Bermuda Inc.", the phrase has caught on, says Roger Crombie.
In essence, Mr Sculley and others argue that the world is in the early stages of an information revolution caused by digitisation. Developments in computer and telecommunications technology mean, in his words: "If you have the fibre optic cables and satellite transmissions, you are part of this global economy, which allows you to take advantage of your unique global strengths."
As the BSX grows under Mr Sculley's guidance, it is developing an electronic trading system. "Fully electronic, with such functions as regulation, clearing, dividend tracking and corporate actions included," he explains. But he issues a warning along with the good news: "I think Bermuda does a lot of things right, but there are some things it might do more of. The cost of telecommunications will hold us back from taking our rightful position in the new information age we have entered into. It is essential to get the costs down if we are going to be a player."
The Bermuda government has much the same idea, and has begun the process of de-monopolising what has until now been the private bailiwick of Cable & Wireless plc and the Bermuda Telephone Company, Ltd (BTC). It has not been easy (see box on page 58), but the government's determination to throw telecommunications open to competition has resulted, if nothing else, in a scurrying for position among dozens of companies determined to carve a slice of the pie.
Why are the information technology and communications needs of 60,000 islanders jammed into 22 square miles, some 700 miles from the nearest landfall, generating so much passion? The answer lies in globalisation, Bermuda's disproportionately large insurance industry and the plethora of technologies either available or waiting in the wings. It feels a lot like a gold rush.
About 320 companies registered in Bermuda maintain a physical presence, the majority of them insurance and reinsurance companies. More than 100 have local area networks (LANs) or wide-area networks (WANs). For years, they satisfied their IT needs from afar, flying into Bermuda the equipment and manpower necessary to fix whatever went wrong.
Three local companies - Bermuda Computer Services (BCS), Applied Computer Technologies Ltd (ACT) and Bermuda Microsystems (now BMS Ltd) - charted an initially lonely course providing hardware and software solutions for companies game - or perceptive - enough to seek a local solution to a local problem.
In the past year or two, the pioneers have been joined by a brigade of newer companies who among them, bring to Bermuda a complete range of services on-island, from secure extranet e-commerce to smart-wiring buildings to deliver the data as fast as is humanly possible.
Bermuda's IT capabilities are not so far behind New York's, probably the equal of London's and ahead, well ahead, of any number of cities outside those capitals. IT is hot. IT is the key to turning the former "Isles of Rest" into Arthur Sculley's vaunted Information Island.
BCS is installing a virtual private network for the BSX and its trading members, who will be connected through IBM's Global Network, the world's largest commercial data network, which supports both private secure networks and public internet connectivity. A fully automated trading system will follow.
ACT has used its time wisely; it now offers a complete consulting service, with specialisations in enhanced internet security, virtual private networks, computer/telephone integration and integrated document imaging.
"A lot has changed in the past few years," says BMS managing director Philip Cooper. "The notion still exists in some quarters that the skills are not here. That is wrong. The Bermuda market has matured considerably in the past few years. What was once true is no longer true."
To back up his claim, Mr Cooper points to his new education centre which has been utilising Microsoft-certified instructors to educate system administrators up to certification standards. The centre is also to be marketed on the US eastern seaboard to allow trainees to enjoy a vacation while they learn. Along with its agencies for Dell and Sun Microsystems, BMS has also developed a comprehensive consulting practice offering Unix (Solaris) and NT support, data security (firewall), solutions and networking services such as client/server and internet technologies.
What also has changed is the size of the global IT market. By the year 2000, roughly 286 million computers worldwide will have internet access. Internet and intranet products are expected to grow from about $18 billion last year to $92 billion by 2000, by which time internet commerce is expected to have increased from last year's $7 billion to $255 billion.
With huge shortages internationally of workers in the IT sector, Bermuda has a useful edge in hiring quality staff. "Given the choice, would you rather work in Bermuda or Pittsburgh?" asks New York insurance analyst Charles Ward. "The work going on in Bermuda, particularly in the insurance area, is setting standards a lot of people in the insurance industry wish they could attain."
Paragon Bermuda Ltd, a consultancy, is growing so fast it has opened a subsidiary in Toronto. Paragon is a Lotus Notes provider which has helped design Bermuda Connect, a Bermuda-only not-for-profit network. Internet based but not connected, it provides a secure environment in which Bermuda's service providers, governmental and quasi-governmental authorities, brokers, reinsurers and captives can conduct e-commerce and speed up the incorporation process by secure e-mail.
Paragon also has a training facility, which will provide clients with education focused on the applications that have been created for them. Director Graham Pearson says Paragon will be holding specialised workshops "to ensure that those employed in the technology sector in Bermuda keep pace with IT developments in the North American market."
If the test of an independent market is its depth, Bermuda now boasts strength in numbers across the spectrum; half a dozen major hardware suppliers, including all the recognised brand names; as many certified service centres; two long-distance telephone companies, several local and cellular companies; a legion of consulting companies, including the worldwide resources of the Big Five accounting firms and two internet servers: Logic and North Rock Communications. The latter is an ACT venture. The newly aggressive BTC purchased the former earlier this year.
"The telecommunications and IT industries today cross international boundaries, and companies must be positioned to compete globally," says Logic president Peter Durhager. "This amalgamation combines the resources of BTC and the infrastructure, technical staff and global relationships built by Logic, propelling us to the next level of development and competition."
E-commerce is spreading. Onlines Systems Ltd has enabled several Bermuda companies to conduct business transactions electronically and offers reinsurers risk sharing opportunities by means of unified applications. MicroState Corporation has developed a Bermuda insurance industry initiative to run applications over the net on a server called "Hamilton". Working with the largest companies and some of the authorities, MicroState has constructed intranets and extranets on websites.
The white vans with the familiar CCS Group Limited logo are seen on the streets of Hamilton so often that many think the company only provides telephone systems and voice, data and video cabling. But CCS is strong in networking; among its products are LAN/WAN integration, internet and intranet connectivity solutions, NT & Unix support and application development.
Solutioninc Bermuda Limited provides intelligent building communications systems (IBS), hard-wiring high speed cable access on IT lines to building owners, who can thereby offer tenants higher grade office space and the bonus of faster, safer data access. Nick Ball, Solutioninc's vice president of IBS, says: "We see IBS as the fourth utility. Just like water and electricity, a secure, high speed internet connection is essential for business."
The other half of Solutioninc's business lies in the area of how to process the information, with a focus on network solutions and interfaces. The company's Halifax based parent company was rated as one of Canada's top 25 up-and-coming IT companies by Financial Post magazine. "Now that the security and bandwidth issues are being fully addressed, Bermuda is in an enviable position. It is exciting to be involved in the creation of a 'wired island'," says Solutioninc Bermuda's vice president of IT, John Narraway.
Bermuda Central Station has ProLog digital communications recording systems, "protecting people, property and profits." The MM&I Technology Group offers protection from hackers and viruses, recovery planning and year 2000 systems advice. The consensus is that Bermuda, in the main, is reasonably year 2000 compliant, but the news will come as cold comfort to those who are not.
Bermuda has always boasted that telecommunications is one of the key attractions which enabled the development of its burgeoning international business sector. That statement has never been truer than it is today.
Competition in the air
So far, the real beneficiaries of the introduction of long distance telephone competition in Bermuda are few. Roger Crombie explains. Cable & Wireless has held a monopoly on long-distance out of Bermuda for generations. It installed and owns the trans-Atlantic fibre optic cables. The Bermuda Telephone Company (BTC) has likewise owned local service.
In the name of competition, the Bermuda government has dissolved the previously permanent partnership between Bermuda, its telephone company and its long distance server with results mostly as expected, plus one or two dramatic twists. The government is enforcing deregulation on the telecommunications industry using a single tool: regulation. C&W has been forced to hold its prices, until newcomer TeleBermuda - offering rates 15% lower than C&W's - gains a strong enough foothold to compete. How strong a foothold the government has in mind, it has not stated.
TeleBermuda is the latest satellite hub in Michael Kedar's growing world net. Mr Kedar made a fortune in Canadian telecommunications, and looks likely to make another in Bermuda with the government effectively regulating his company into existence. C&W claims TeleBermuda has taken 25% of its revenues. The government has refused to hear C&W's arguments - or read the full-page ads the once reticent giant company has taken out, crying "Foul!" Indeed, the government responded with an ad series of its own, using Bermuda taxpayers' money to explain why it was forcing the same taxpayers to pay more than necessary for its telephone service in the name of a longer term benefit.
Something of a war of words broke out between the two venerable institutions and the year old novice, which got uglier as it went along. C&W argued that the Bermuda government stepped out of a contract and should pay compensation. It issued a writ against telecommunications minister, Bob Richards. The government vowed to fight and accused C&W of acting in bad faith when it announced that the loss of a quarter of its business would probably mean the loss of a quarter of its staff.
C&W has been the most Bermudianised citizen among the larger international companies on the island: every staff member except a rotating chief executive officer is Bermudian. That means staff losses would hit the local community the hardest.
In April, C&W had to step in to restore service to TeleBermuda customers for a few hours when the latter had a problem with switching equipment. Battle may have been joined, but all sides realise that a Bermuda without telecommunications would quickly prove to be no Bermuda at all. Bermudians are the largest users in the world, bar none, of long distance telecommunications.
In the local market the BTC erected the poles, wired them and bought the switches, and has now buried a lot of its cables underground. A crop of rivals has been licensed to take on BTC, and two are already in business.
Bermuda Digital Communications is erecting a network of satellite dishes to provide cellular service island-wide. Quantum Communications is taking on BTC in the local market and has customers for its local data communications services, installed alongside Quantum stockholder Bermuda Electric Light Company underground cables in a ring around Hamilton. Bermuda will soon even have two telephone books. BTC's reliable hardy annual is to be joined by the Bermuda Communications Directory in print, on CD-ROM and on the internet.
For its part, BTC has purchased the island's original internet server, launched a new mobility service and sponsored the second annual Bermuda International Film Festival in an impressive show of all-around strength. Deregulation is shaking the Bermuda telecommunications market, which is responding in classic fashion to the challenge. Providing Cable & Wireless does not pull the plug and leave everyone in the dark - it wouldn't, surely? - Bermuda's telecommunications industry should emerge in fighting fettle.
Roger Crombie is a business writer based in Hamilton, Bermuda and a regular contributor to Global Reinsurance. He is a chartered accountant.