July 15, 2013
Henning Dransfeld, Ph.D., Clement Teo, and Brownlee Thomas, Ph.D.
We recently attended T-Systems' Analyst And Sourcing Advisor Summit in London. T-Systems has made some progress since its last analyst summit, not least of which is the development of a clearer overall market message and further developments of its portfolio. Its overall market message centers on what Forrester calls “the age of the customer.” The vendor emphasizes enhanced network/solution performance, innovation, and execution. Our key takeaways were:
- The deepening the relationship between T-Systems and parent Deutsche Telekom is sensible. During the keynote, and in the breakout sessions, there were several references to how T-Systems’ assets complement Deutsche Telekom’s. T-Systems is moving ever closer to its parent Deutsche Telekom, in particularly in the B2B2C space. T-Systems can provide solutions to its business customers that are brought to market through Deutsche Telekom's consumer customer base. Such an approach is limited to Deutsche Telekom's footprint. However, this strategy could also be extended to other carriers as white-label solutions, where no competitive conditions exist (e.g., in Spain or the Nordics). This approach clearly makes sense for both Deutsche Telekom and T-Systems and is reflected in T-Systems "zero-distance" marketing message.
- Details regarding B2B2C business offerings need to be refined. We remain unclear about investment intentions, as well as organizational and commercial arrangements between T-Systems and Deutsche Telekom. This situation could cause some uncertainties amongst customers. For instance: T-Systems might agree with a Germany-based insurance company on a consumer-oriented ad hoc insurance solution that is marketed via Deutsche Telekom’s domestic mobile arm. The French division of the insurance company, meanwhile, might wonder whether this solution is available in France, where Deutsche Telekom does not have a mobile footprint. Similarly, the insurance company in Germany might want to also sell to Vodafone customers.
- A move to a single all-IP service creation platform supports B2B2C business models. Service examples based on this platform include mobile payment services for merchants, as well as hourly booking of cars with inside infotainment for car rental companies. The migration of the T-Systems network to “all IP” reflects consequent technology transformation in line with the broader solution platform vision.
- T-Systems’ "German Cloud" approach is a potential asset. T-Systems is betting big on cloud computing. It has developed one of the strongest cloud portfolios in the sector. Whilst cloud computing could experience some temporary setback in light of the current government surveillance revelations, interest in moving applications to the cloud is likely to increase. T-Systems could benefit from the current debate, given the relatively stringent privacy regulations in Europe and Germany in particular, as customers might embrace the prospect that a "German cloud" offers greater security and data protection.
- T-Systems is undervaluing its USP as an integrated network and IT solutions provider. From a customer's perspective, these are not easy times to differentiate between the various IT services providers. All are pitching some message comprising "cloud," "mobility," "big data," and "real time." Few vendors, however, bring the strong assets that T-Systems has: network management experience blended with IT solutions and systems integration skills. In particular, T-Systems’ approach towards IP network transformation is industry leading. We feel that T-Systems is still not making a clear pitch in emphasising this unique blend of assets and how it can provide direct benefits for clients on the basis of this "platform." Such a pitch is also a crucial differentiator from more innovative emerging competitors like Google.
- T-Systems will continue to have a limited presence in the leading global growth markets. In Asia, the vendor focuses on China, India, Japan, and Singapore. Other countries, such as Malaysia, are seen as more opportunistic than strategic business opportunities. T-Systems believes that the Chinese automotive industry presents great potential for its “Connected Car” initiative. But it is unclear how T-Systems intends to partner and/or compete in that space.
T-Systems’ resources are limited, especially when compared with its strongest competitors. Going forward, T-Systems will need to reinforce its focus in terms of portfolio simplification and standardisation as well as the geographic footprint that it intends to cover — for its B2B and B2B2C activities. In its bid to lead the age of the customer, T-Systems needs to flesh out a set of clear differentiators and the demarcation between itself and its parent company.