Transform to survive the data and 5G onslaught

Transform to survive the data and 5G onslaught

Huawei MWC.jpg

Move services to the cloud, be faster and be simpler: that was the message Alan Burkitt-Gray heard from industry leaders at a Munich conference on operational transformation

Kaan Terzioğlu, the CEO of Turkcell, had what he calls “a moment of truth” about the reality of digital transformation on only his fifth day in his new top job, back in 2015. “I got the first WhatsApp call of my life,” he says. It was, therefore, a phone call that brought no revenue whatever to Turkcell: WhatsApp calls run on the data bundled into a mobile subscription.

That made Terzioğlu, a former vice president of Cisco for central and eastern Europe, to drive Turkcell’s transformation strategy – not to find ways to block WhatsApp, but to ensure the telco can provide digital services to compete with it.

Terzioğlu was speaking in September at a digital transformation forum in Munich, alongside senior executives from companies such as BT, China Unicom, Deutsche Telekom, KPN, Hong Kong Telecom and Orange (see interview, ).

Huawei organised the Munich event and its chairman, Hua Liang, told the telecoms executives that it was taking its own medicine and was running an aggressive digital transformation programme of its own. “Everything should be on a common digital platform,” said Hua. “Now it is time to go digital. When you are digital you achieve revenue growth.” The key question was about cloud computing: “How does this technology impact our business?”

Hua ran through a list of benefits. Huawei has “eliminated 250 million customer waiting hours”, he said, and has achieved a “40-60% opex saving”, including replacing “15 siloed ordering systems”.

Digital services “could be seen as optional” in the 4G mobile era, he said; but not in the 5G era. The promise, he added, is that “in 2025 digital services will be 20% of the revenue of the telecoms industry”.

Laxmi Akkaraju, the chief strategy officer at the GSMA, warned the industry of the need to transform. “Revenues are plateauing” for mobile operators, she said, but 5G will create new data demands – she estimated 250 exabytes a month by 2021. The industry will need new tools, such as artificial intelligence (AI) to help handle the new load. “AI and 5G will transform the current landscape,” Akkaraju warned, but “operators will need to optimise their infrastructure”.

There is growth in the entertainment industry, “but almost all growth is in new media”, she added. “Subscribers are switching  from linear TV to digital services.” The industry needs, she said, “a cultural transformation”.

How has Turkcell transformed since Terzioğlu was startled to receive that WhatsApp voice call in 2015? It’s changing from “being an infrastructure player to being a real digital operator”, he said. “We are changing from playing with the hardware to providing real digital services. We are changing from complaining about demand growth to using that demand growth.”

Today the average customer of Turkcell still has 32 minutes of voice calls a day, but listens to 24 minutes of music and watches 57 minutes of TV on the company’s platform, and reads material on the internet for 31 minutes.

“Two out of three customers have a multiplay relationship with us and 70% of our revenues are created by these customers,” said Terzioğlu. Turkcell has its own login for customers so they’re not tempted to connect with Facebook, and the company has developed a national search engine, Yaani. “Today 20% of our customers are on our own e-commerce platform.”

Meanwhile Turkcell is now “a single operating company, not based on single asset classes like mobile or fixed”, he said. “Don’t be afraid of data growth – that’s where the revenue is.”

In the Netherlands KPN has introduced the biggest social network in the world, the Chinese service WeChat, to its network. More than just an Asian WhatsApp, it’s also used for payments and buying tickets. The Netherlands welcomes 100,000 Chinese visitors a year and in May 2017 Tencent, the owner of WeChat, wanted to allow its customers to use the app on their travels.

“We brought the service live in weeks,” said KPN’s Bouke Hoving in Munich. “Users can buy tickets for museums and railways; they can book hotels and pay restaurant bills.” KPN was able to introduce WeChat payment and booking so fast because “we started digital transformation in 2013”, said Hoving, who is executive vice president for network and IT.

Before 2013 KPN “wasn’t going in the right direction”, he said. “We were in a critical moment in the history of KPN.” The company started transformation “by digitising our business. We consolidated backend systems and unified the digital layer. We started at the front end and worked with cloud technology and open-source software.” What is Hoving’s motto after what he called “a journey of almost four years”? It is: “Simplify. Complexity remains the enemy.”

Four years ago Telefónica’s O2 Germany bought a rival mobile operator, E-Plus, from KPN. Combining the networks added an extra level of complexity: “You will find problems, call flows and use cases you never dreamed about,” Michael Häberle, Telefónica’s director of network operations and quality in Germany, told the Munich conference. A sympathetic audience heard about one high-value customer who drove from the Netherlands to Munich every Monday, making conference calls the whole way. “In six hours he got four call drops. That’s not what the customer expects,” said Häberle, adding with a smile: “He might have said the network did well with only four.”

Now Telefónica has put in systems to analyse “the call flow and why calls could not be performed”, he said. “We can see data from the customer before they have to call the hotline.” Telefónica created a service operations centre “covering sales, marketing and everything”, that works closely with the network operations centre. “Now we can see all the data. We can see events before they happen.”

Telefónica has a worldwide programme of transformation, called Unica, that will effectively put all of its operations in the cloud. Separately from the Munich conference, I talked to Arturo Aguilera, head of international services for carriers at Telefónica International Wholesale Services. “Transformation means we can sell faster and with new functionality,” he told me. “And it means quicker income and with better margins.” With Unica, Telefónica is able to offer added-value services to its wholesale customers.

The group has been working on this for four or five years, he said. “The first years we were working on the hardware solution with Intel. We have a permanent lab to test the new kind of infrastructure.”

Telefónica is running Unica in Germany, Argentina, Colombia and Peru, he said, and it will be expanded to seven more countries. There are seven hubs used to deploy the new services to wholesale customers around the world, in places such as Mexico City, Miami and Hong Kong.

Back in Munich the gathering heard from Jean-Claude Geha, who is senior vice president of international technology and services delivery at Deutsche Telekom, and also chairs its Pan-Net unit that is designed to transform its national operations outside Germany. “Speed is key, especially when we’re competing not only with the traditional provider but also with webscale providers that started with a clean sheet.”

The Pan-Net project is international, headquartered in Bratislava with technology skills distributed across central and eastern Europe. “We’re testing applications and services and we’re also testing processes. We’ve implemented artificial intelligence without having to increase headcount,” said Geha.

Services to be transformed “started with easiest, such as messaging and voice over Wifi”, and on the business-to-business side it started with secure cloud services before moving on to cloud-based customer premises equipment.

“We now have 160 million unique users. The numbers are growing and we are now planning more sophisticated services. There’s a great opportunity cloudify television. We’re working with Huawei to cloudify the TV backend,” he said. It will be offered across the company’s footprint, he added.

He addressed some of the challenges for management. “Technology people tend not to want to let go when it comes to cloudification,” said Geha – a polite way of saying that people don’t want the products they work on to be transferred to a cloud-based alternative. The answer? “If you start with new products and services then cloudification is easier.” He took a gentle swipe at the top management. “It’s not trivial to assume that the executives, the people who provide the funding, understand the implications of cloudification.”

The results of moving to the cloud are that you spend more opex but less capex. “You need fewer and fewer network engineers and more software developers.” But Deutsche Telekom finds itself completing with the webscale companies for software people, he noted.

The possible savings are huge, he said, putting them at “30%, 35%, 40%”. Geha added: “If something saves 5-10%, you’re doing the wrong thing.” That’s not enough, he implied.

After his presentation I asked him which vendors the Pan-Net project is working with. “We’re looking at vendors that are cloud-ready to see how they work in the international environment [on areas such as] the signalling platform, wholesale voice and roaming. It’s a matter of having vendors with true cloudification capability.”

How do you choose what to cloudify? “What we’ve learned is that we cloudify where it makes sense in terms of customer experience, time to market and efficiency. It’s important to understand the technology well, to put you in a better position to figure out what makes sense now and what in three to five years.”

It has to be “doable and integratable, and not one-offs”, said Geha. Don’t customise, either. “We want a lean and agile position. If you customise you’re stuck. We must work together and have a case that’s not just technology-driven, not used just because the technology sounds good.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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