Telefónica is halfway through its digital transformation programme, according to its CIO, who revealed he thinks the enterprise market is where the industry’s focus needs to be.
Speaking at the TM Forum’s annual showcase in France this week, Phil Jordan gave an update on the Spain-based operator’s progress towards becoming what it calls a “100% Digital” telco.
The CIO used his slot in the keynote sessions to reveal that Telefónica now uses half the number of systems it did three years ago and that by the end of this year it will have one-third of its 322 million customers on a transformed stack.
A little later, sitting in a rare moment of Nice sunshine, Jordan gave European Communications a more detailed insight into its progress.
Argentina will be the first opco to become fully digital this year, with the rest of the operator’s Lat-Am subsidiaries to follow.
Jordan says the Lat-Am opcos are changing “slightly ahead of the curve” with Europe “slightly behind”.
He cites the integration of E-Plus in Germany and Telefónica’s attempts to offload its UK arm as holding back transformation in those two countries.
In Spain, transformation is a few years away as the operator battles to regain its foothold in its home market by focusing on getting converged offers out in front of customers.
Outlining the difficulties the business has faced, in a separate session at TMFLive!, Telefónica Spain CIO Cristina Alvarez Alvarez revealed her budget halved between 2011 and 2015.
Jordan says: “The minute you [transform] when you are chasing the market it’s an investment you don’t want to make.”
Last month, Telefónica revealed revenues from digital services – mostly video – hit the €1 billion mark during the first quarter.
With group revenues as a whole registering €10.8 billion over the same period, Jordan admits it’s a case of “the tail still wagging the dog”.
The CIO confirms that the vast majority of digital revenues come from Telefónica’s retail customers and says that digital transformation will accelerate this trend by allowing it to “industrialise” services at a more global level.
However, he thinks both Telefónica and its peers need to focus more on the enterprise market moving forward.
“Most telcos would acknowledge that they’re not going to be a digitally native consumer business,” says Jordan.
“We are going to be a very important part of that ecosystem… we’re a great provider of connectivity for consumer digital services.
“[But] in B2B it’s all to play for.
“I think it’s very natural buying behaviour for [enterprises] to come to a telco.”
Telefónica does not break out the financial performance of its enterprise division.
It is certainly behind global rivals such as BT Global Services, Orange Business Service, T-Systems and Vodafone Global Enterprise.
And it doesn’t look like catching up anytime soon.
“Digital transformation at our enterprise business will come at the end [after our consumer businesses],” admits Jordan.
He says it’s a question of priorities and that he is “OK” with that.
“We have to learn how to drive realtime, automated processes into our B2B product… that’s still emerging so the fact that [the digital transformation] comes a bit later isn’t an issue for us. It isn’t holding us back.”
More agile enterprise players are likely to fill the void, however.
Overall, Jordan says the biggest challenge Telefónica has faced as it transforms itself is the individual businesses “voting to change themselves”.
Although the digital transformation decision was made at group level, it's up to the CEO of the opcos to decide how and when it will be implemented.
Jordan admits there have been “deep seated, multilocal tensions”.
Another interesting dynamic has played out between Jordan and CTO Enrique Blanco.
There has been much talk across the industry over the past few about the two power bases converging.
While some have gone down that route, Telefónica has kept the two separate.
When it comes to digital transformation, Jordan says he and Blanco have had to do a bit of give and take.
Jordan handed over the network side of the operator’s OSS to his colleague to transform, while Blanco reciprocated by giving an old relationship with Ericsson on the BSS side that the network team had looked after.
But Jordan adds: “The line between the two is blurring faster than ever.
“I personally feel we should be putting the network and the IT together.
“We’ve done a lot of work around our data strategy in the future… I couldn’t show you the boundary [between the network and IT].
“What you can see is a different model emerging – infrastructure/physical assets and services/data.
“We’ve haven’t got there yet but I’m sure a time will come when we don’t have separate IT and network organisations.”
When that does happen, Telefónica will hope to have achieved its goal of becoming a digital telco.