Faced with the challenge of injecting growth into what had been a staid company, BT has embarked on several ambitious plans. The most ambitious, BT’s 21^st Century Network, is well known throughout telecom for its stated aim of moving all of BT’s services onto an Internet Protocol backbone in time to shut down the “old” PSTN by 2011.

Lesser known than 21CN is a specific effort to inject technology into BT through a Technology and Innovation Group that the U.K. carrier has headquartered in the heart of Silicon Valley.

The goal of this operation is to identify and move quickly to implement innovation wherever it can be found, said Jean-Marc Frangos, senior vice president of technology and innovation for the office of the CTO of BT Group. The goal of this group is to be constantly looking at innovation taking place outside BT that could be “reasonably and quickly” deployed inside the company to either increase revenues or cut costs.

“This is a reasonably new model--to look outside the company,” he said. “We have our own internal R&D--about 350 people--devoted to doing research. But our group is looking at shorter term innovation than what we develop internally.”

To accomplish this, Frangos has what he terms a “small team” in Silicon Valley and an equivalent unit in South East Asia, looking at developments in China, Korea, Japan, India and Israel. They are looking at start-up companies, at the research of major vendors and at government-funded projects at universities and elsewhere.

“We have an existing customer base, an existing company that is quite large and set in its ways,” Frangos said in an interview. “The challenge is how we inject innovation into that operation, in order to enable growth. Over the last decade, we got into new territories to get growth. Things have stabilized--we are not being as aggressive geographically, our perimeter is quite clear. So how do you get growth by building on the existing portfolio and getting more from your existing customers?”

The current “hotspots” for innovation, according to Frangos, are value-added broadband services including VoIP applications.

“It’s all those VoIP apps which had a hard time getting to the spotlight because usability was poor,” he said. “You had to dial a short code from a long list of codes that nobody remembers. Now we have Web interfaces to manage calls and that opens the way to a lot of new VoIP apps.”

There are also new ways to manage incoming calls, using softswitches to customize the routing of calls, he said.

Wireless innovation has also become part of BT’s mantra, since the company divested its own wireless assets. It now operates as a mobile virtual network operator on Vodafone, but is building Wi-Fi networks in 12 U.K. cities and looking to deploy dual-mode handsets through BT Fusion. The company is using mesh technology from both Tropos and Cisco Systems to enable customers to use Wi-Fi inside the home or office and use cellular connections as they travel.

Frangos credits the Fixed-Mobile Carrier Association, a group of 27 telcos chaired by BT, with accelerating the development of those dual-mode GSM-WiFi phones. “There is a growing range of handsets – more than 20, currently,” he said.

Another hot topic is IT convergence, which enables a telecom service provider to sell business applications to enterprise customers. Outside the U.K., BT focuses on large multinational players but on its home turf, it is also taking these applications into small to mid-sized businesses. BT also is marketing that expertise to cable companies and smaller telcos outside the U.S.

“Our offer encompasses applications and IT infrastructure as well,” Frangos said. “The innovation in this space attacks the cost side as well. We are running large data centers and we can run the Web servers of ours and our customers, at a lower cost. By ‘virtualizing’ boundaries, we can expand applications to use idle resources, for greater efficiency.”

BT is launching what it calls “BT Podshow,” a distribution area for podcasts to enable its smaller customers to use this technology, he added. And for small-to-mid-sized businesses, it is developing a hosted application that automates the process of signing contracts using scanning and messaging.

The innovation group has also been able to help BT 21CN in its processes, Frangos said. Using a company called QuickCycle, BT was able to speed its testing processes that do daily inventory management.

“In order to do things like this, you have to have the appetite at the top for innovation,” he said. “Our CEO is innovation-minded. Our top management does innovation immersion trips to the Valley and to China every year – the top five guys in the company come around and I show them what we are up to.”