It’s not just software, telcos are caught in a big technology trap

Since I posted my last article, I have almost lost count of the conversations I’ve had about the nightmare of managing IT in telecom companies. It seems many of my connections have had plenty of their own “Aaaarrrgghh!” experiences. As my career has largely been built on the two industries, I have been at the sharp end of deploying technology from both sides of the relationship. So, I thought I would share some of the most common problem areas I have encountered, and what I have learned down the years.

1. Cost

Every telco CEO I know is constantly aghast at the amount they need to spend on IT. It is like a ravenous money-eating machine, and it is only getting hungrier as technology continues to permeate businesses more deeply. Managing IT spend is increasingly difficult because companies not only need to get new systems and tools in, they also need to clean up or remove legacy versions at the same time. An interesting benchmarking study from the management consultancy Kearney puts this into perspective. It shows that while the workforce at leading telco operators reduced by 14% between 2018 and 2023, the one area to see an increase in requirements for people during this period was IT.

A big part of these spiralling needs (and costs) is fixed rather than variable, which is a problem when you also need to stay at the forefront of new technology, whether it is 5G infrastructure, fiber broadband, or advanced networking capabilities. IT budgets are also lost in the trade-off between capex and opex, so operators would do better to pay close attention to their total cash out and keep tabs on the overall amount being spent. Cutting costs, meanwhile, will only be possible if priorities and programs are decided (only) at the top of the company. In an IT role I once ended up with 9% of revenue from a telco subsidiary (which is just absolutely ridiculous), where the technology team reported into marketing and programs were decided by creative marketeers ??.

2. Complexity

This is a word that just keeps coming up in the telco industry. IT requirements here are complicated, to put it mildly. Convoluted infrastructure, along with high data and traffic volumes, the need for security, and the additional demands of varied regulatory standards require multiple technologies to co-exist and integrate with one another. Just think about billing as one example. Add voice, data, multimedia, and broadband services to a multitude of subscription and pay-per-use models and you are left with a great pile of tech “spaghetti” that drives complexity and cost in the long run. What’s more, as time elapses and technology continues to evolve, the number of old customer propositions grows and every time you do something new, you also have to test if all the previous iterations still work.

This is where uptime becomes key in securing customer satisfaction – because producing something new that destabilizes legacy systems is devastating. And actually, it might sound counterintuitive, but sometimes NOT moving to the new thing is the right thing to do. Paging Fotis Karonis here, who I worked with at EE in the UK. Together we decided halfway through a project to cancel moving to a brand new stack. Instead, we took the best of two old systems and got them to work together. So ironically one of the best decisions I ever took with IT was not to transform…

3. Delivery

Most telcos still use traditional “waterfall” IT development and project management methodologies. This is time-consuming and prone to failure because there are so many handoffs and changes to requirements involved in developing new solutions, which is really quite incompatible with the inflexible step-by-step nature of waterfall. Just one early mistake can end up costing you dearly.

Instead, they would be better to adopt agile development practices. These allow for a more iterative approach and are responsive to change, even at the last minute, without much disruption.

To manage all of this effectively, it makes sense for operators to combine their IT and networks teams, if you have a leader who can do both (which is rare). Typically, network employees are fantastic at securing high availability, while modern IT software engineers excel at agile application development. By bringing them together, you multiply their individual strengths.

However your teams are organized, you also need to make sure that they are not allowed to get away with a 5 year transformation plan, while your sales team is held to a quarterly budget. Basically, if an IT change takes more than 12 months, it will be too hard, too complex, and too expensive.

4. Talent

In telecoms, technology talent is particularly hard to find and attract. This leaves leaders at a distinct disadvantage. How do you build the institutional capabilities needed to find new sources of competitive value, modernize the ageing elements of the technology stack, and keep up with new advances - without the right people?

One solution that many companies have turned to is outsourcing, but this comes with its own difficulties. While it can bring some short-term returns through labor arbitration, the likelihood is that you are going to lose most of that again through an increasing number of hours per project and deteriorating time to market.

My advice would be:

• Do not outsource any IT that drives your differentiation and is key for your success.
• Outsource only non-core IT solutions and keep digital and key application development in-house.
• Extended workbench models, in which an internal technology team collaborates with external developers or specialists to augment their skills or capacity, are better for generating labor cost arbitration without hours per project ballooning as a result. I have been a huge fan of Orange Moldova, who provide this service extremely well, for years ??.

5. Performance

Last but not least, IT departments in the telco industry often lack a clear scorecard that includes real customer and company benefits like time to market, true differentiation, additional revenue generated, and so on. This is one of the many reasons why IT continues to be treated as a cost center in telco companies, rather than as a value driver.

One of my career heroes, a guy called Randy Mott, was an absolute superstar at driving value up and cost out. He retired from corporate life in 2021 after a 40-year career in which he held CIO roles at General Motors (where he brought IT totally in-house), Walmart, Dell and Hewlett-Packard, which is where I originally encountered him.

Shifting IT from a cost center to a value driver is a massive undertaking. But I do think it’s possible if certain conditions are met:

1. Truly aligning IT with your overall business objectives and consistently measuring its impact.
2. Shaping the department around these needs and finding ways to make it easier to deliver on them.
3. Effective planning and governance, combined with open and honest communication.

But the most important thing of all is to really believe that IT can be an innovation engine for your business – and to treat it as one. As Randy Mott said a few years ago, “Real innovation happens when IT professionals are tightly aligned to the company strategy.”?

Amen to that.

Photo credit: Bethany Drouin, Pixabay