October 17, 2012
Dan Bieler, Frederic Giron, Brownlee Thomas, Ph.D., Stefan Ried, Christopher Mines, Pascal Matzke, Jennifer Belissent, Ph.D.
T-Systems hosted its 2012 analyst and sourcing advisor event recently. To be sure, T-Systems remains one of the most advanced true ICT providers in the European market. But T-Systems ought to demonstrate more clearly how it can support and enhance business process for its customers and improve the customer experience for its customers’ customers. Of course T-Systems is not alone. The ICT industry needs to emphasize proven capabilities in delivering enterprise-grade ICT solutions ranging from co-management of infrastructure resources to full outsourcing.
T-Systems, like many of its competitors, is busy making sure that it does not bleed too much in what T-Systems calls the red ocean, i.e., the highly competitive market segment of legacy services. That's a good start. At the event, T-Systems communicated very clearly the progress at its internal production factory. This aspect is critical for streamlining and standardizing the portfolio, boosting margins, and developing products and services that the revamped sales team then can actually sell. One tangible outcome of this effort shows through in the high customer satisfaction level and deal wins like BAT, OMG, and Georg Fischer. Importantly, T-Systems also has put in place a rigorous certification framework for ensuring quality of service with suppliers.
However, T-Systems still needs to convince in areas of the blue ocean, i.e., the emerging innovative market segment. Like many of its competitors, T-Systems is not finding this easy. Why? Because T-Systems continues to prop up its legacy business: selling technology solutions.
T-Systems' Systems Integration (SI) portfolio is a case in point. T-Systems has a great amount of intellectual property accumulated over many years in the integration business, including numerous showcase projects. However, it falls short of articulating the resulting business value and business innovation capabilities it has delivered to enterprise clients of different shapes, sizes, and industries. T-Systems lines up Mobile, Big Data, SaaS, and De-Mail as "Innovators" in the SI portfolio, evidence that for the company, innovation continues to be mainly about technology and less about client business value.
We agree that SI should be a core focus area for T-Systems a) because proven deep experience is today a crucial differentiator and b) due to the continuing critical role during the next several years that systems integration will play for business technology evolution related to cloud computing. Additionally, T-Systems should more strongly communicate the value it adds through systems integration for Deutsche Telekom.
Some vendors are doing a better job communicating their strategy in blue ocean opportunities by starting from their customers' business requirements. An example is the "Infosys 3.0" strategy, which builds on seven — mostly nontechnological — trends that will shape their clients' businesses in the next five to seven years. Another example is Atos’ "Business enabling IT Services," which focuses more on enterprise clients' business value and external partners and its "Foundation IT Services," which comprises the traditional IT services.
The highlight from an enterprise solutions offering perspective relates to T-Systems’ cloud services, which are cutting edge. T-Systems’ commitment to contribute OpenStack is ahead of other European major players. And T-Systems’ activities around Caldera's Hadoop are preparing future data-as-a-service offerings across T-Systems and Deutsche Telekom. Moreover, the cloud computing approach is well integrated with Deutsche Telekom based on a modular production platform, which allows the pooling of production capacity. In this way, T-Systems provides a capabilities boost to Deutsche Telekom to complement its strong market share in Germany in small and medium-size businesses with a new SMB marketplace ecosystem (see my colleague Stefan Ried's blog post).
T-Systems has made significant progress in the communication and collaboration space. In comparison to AT&T, BT, Orange and Verizon, T-Systems still lacks the global scale of network infrastructure (see my blog post on the subject). However, T-Systems instead is positioning itself as a network-agnostic integrator and provider of interoperability among a variety of video endpoints, etc., in the enterprise environment, as demonstrated in its VideoMeet offering. This positioning is forward looking.
T-Systems’ longer-term strategy remains consistent with a focus on technology-based innovation drivers in key verticals like healthcare, automotive, and energy. It could provide more details on how precisely it intends to exploit specific as well as broader vertical sector opportunities over the longer term, however. One focus area for it will be the big data space, but we need to understand more precisely how T-Systems plans to turn ambition into delivering differentiated IT services to the marketplace.
The absence of a clear, enterprise-customer-focused strategy during the analyst summit remains an important obstacle to long-term success. T-Systems continues to present an inward-focused "we develop and the customer will buy" perspective. Like most peer competitors among both telcos and SIs, T-Systems is still overly focused on presenting its "capabilities" — what it "could do" for enterprise customers.
T-Systems ought to be much more disruptive in how they approach the blue ocean growth opportunities. This task is not easy to achieve and will require T-Systems to do things differently, like creating (more) internal start-ups that incubate these disruptions while they evolve and mature. In this way, if effectively executed, T-Systems will be better equipped to exploit the blue ocean and defend its position as a top tier ICT provider to distributed companies.
So can T-Systems achieve this? In our view, the company needs to press on with a cultural transformation in addition to the organizational adjustments. There need to be more signs of that. T-Systems has the opportunity to move its perception significantly if it develops a more stringent customer-obsessed strategy.