The other day I visited Colt’s London HQ and saw how the telco is revamping its approach to developing more customer-centric and Agile solutions (Colt consciously avoids the “cloud” terminology). By now, most telcos managed to jump onto the cloud bandwagon by launching cloud-based services. The challenge, from an end user perspective, is that these solutions all seem very similar. Customers can get storage, server capacity, unified communications, etc., from most telcos. All telcos underline the value-added nature of end-to-end network QoS and security that they can ensure (check out our report, "Telcos As Cloud Rainmakers"). Indeed, telcos have some right to feel that they have achieved some progress regarding their cloud offerings — although it took Amazon to show them the opportunity.

But most telco cloud offerings suffer from the fact that telcos develop cloud solutions in the traditional sense through their traditional product factories. This approach tends to follow rather than slow product innovation cycles. Moreover, it produces products that, once developed, are pushed to the customer as a standard offering. All customisation costs extra.

The reality of cloud demand is that each customer is different. Most customers want some form of customisation. Most customers want some form of hybrid cloud, a private part for core apps, as well as access to the open Internet to, for instance, exchange views and information with end customers via Twitter or for crowd sourcing with suppliers. Similarly, most customers want a mix of fixed and virtual assets and a blend of self-service and managed service solutions as the chart indicates.

There is another approach for telcos to enter the cloud age. Colt has created a large open-floor production factory where many different groups of people work simultaneously on Agile solutions. Each group has a distinctive task that they are working on. By placing these groups in one large open space, it is extremely easy for employees to get up and walk over to another group to clarify potential questions and provide suggestions. Interestingly, these groups comprise staff from all country operations and from sales as well. Consulting and advice form an important part of the pre-sales and sale process. For this purpose, Colt hired many sales professionals with an IT services background.

All teams are staffed on a rotating basis, with staff members spending a few weeks in London every now and then before returning home to be replaced by colleagues from their country offices. This way, Colt ensures that the country operations are closely tied into the development process, feel a sense of ownership, and truly understand what is being developed as part of the portfolio. In turn, this makes it easier to go to market. Significantly, Colt also invites customers to experience this open-floor production factory in order to ensure that their views and needs are adequately reflected in the development process.

Importantly, Colt’s venture is also about Colt changing its operating culture by pursuing a much more dynamic approach to innovation. Colt put in place the structures to get sign-off for significant software and hardware investments as part of the R&D process in a few days or weeks rather than several months by moving the final budget decision-making much closer to the product factory. Several of Colt’s partners like Cisco, EMC, and VMware have noticed this different innovation pace and taken suggestions for product innovation as part of their own product road map.

Changes to products are made and implemented incrementally in many small steps rather than one large step after a development process has been completed. This way Colt aims to ensure minimum disruption of its customers during the transition from the current to the future mode of operation.

Agile Infrastructure Services is the first service that Colt has taken to market using this approach. Agile Infrastructure Services is an on-demand infrastructure service with SLAs that customers can consume in a committed or pay-as-you-go manner. The base offering covers both Windows and Linux VMs (disk storage, virtual router with firewall, load balancing, and Internet access.). The offering is at beta stage, with 15 customers in France, Germany, Spain, and the UK piloting the offering. Colt is now actively communicating Agile Infrastructure Services to its customer base. Prior to the first beta customer, Colt conducted a trial with one of its own internal development teams.

I left Colt’s offices with three big questions:

  • First, can Colt maintain and scale this approach in a profitable manner? Financial results over the coming quarters will hopefully provide some insights into whether this approach to Agile solutions is generating tangible benefits, not only in revenue terms but also in terms of additional positive cash flow. It is not clear what additional efforts Colt is undertaking to defend profit margins under the new form of product development. Moreover, Colt might find it challenging to scale its collaborative approach if it were to grow significantly.
  • Second, how can Colt communicate its different approach to “cloud” without ending up with the usual “we offer our customers a flexible way to consume ICT” pitch? Marketing could prove to be a very challenging part of this venture. At present, Colt spends a lot of energy on empowering sales staff during whiteboarding sessions to truly internalise the new Agile solutions. Sales needs to be able to explain the solutions in their own words without the assistance of marketing brochures, etc. This approach certainly makes sense for now. However, Colt needs to also communicate how it differentiates its approach to cloud from its competitors to the wider market. The sooner Colt begins to adjust its marketing strategy the better. Thankfully, Colt is beginning to adjust its marketing strategy. We expect some updates during the Analyst Day in late May.
  • Third, is Colt’s approach really the right model for all telcos to speed up innovation cycles and develop more Agile offerings? Larger telcos are unlikely to be able to pursue a similar approach. Their operational structures are often extremely unwieldy and dominated by conflicting internal interest groups. Moreover, country operations are often just in execution mode of HQ decisions. Colt’s approach to product innovation resembles that of a startup. And to be sure, Colt is hardly the first established business to attempt to bring back startup dynamics.

It is early days for this venture. It was launched only about 18 months ago. Interestingly, Colt does not consider this new approach for solution development as a project, but as a venture. There is no set end date. The changes that have been put in place are there to stay and to evolve as market demand evolves. At the end of the day, it will be end customers who will decide whether Colt’s approach is the right one to develop the Agile solutions that the market is beginning to demand.

Still, Colt’s approach demonstrates a very interesting departure from old-school telco ways of product development. This is good and commendable as telcos are in dire need of a radical cultural shift if they want to avoid complete utilitisation. Many other telcos could take a page out of Colt’s book