DT Demands Automation, Cloud Tech From Pan-Net Suppliers
Where do things stand?
This does not mean that pan-net has gone nowhere since last May, when Deutsche Telekom last updated Light Reading on its progress. At the time, the operator had opened a data center in Budapest as well as the service operations center -- staffed around the clock -- in Bucharest. It now manages another data center in Warsaw and is currently building one in Athens to support customer needs across almost the entirety of its European footprint. (See DT's Pan-Net Still at Start of the Marathon.)
More services are also available over pan-net systems. Having "started small," with simple applications such as messaging, Deutsche Telekom is now providing email and voice (over WiFi and LTE) services from its centralized data centers. It has recently developed a financial services tool in response to new European regulations under the Markets in Financial Instruments Directive (or MiFID). Cloud CPE (customer premises equipment) technology was recently added to the pan-net portfolio, too. "We are about to start on the cloudification of our TV and data services," said Geha. "We have multiple TV platforms in multiple countries and the aim is to bring this together."
Still at the planning stage, however, is the rollout of a cloudified EPC (evolved packet core) that should help Deutsche Telekom to manage traffic growth more efficiently. "We might have to decouple the control from the user plane to work with regulations on data privacy," said Geha. The notification comes a long time after Axel Clauberg, Deutsche Telekom's vice president of aggregation, transport, IP and fixed access, had first highlighted a potential need for this split packet core back in May 2016. (See DT: Telcos Must Escape Vendor Prison.)
In a sign of its interest in co-designing products with partners, Deutsche Telekom has also invited suppliers to work with it on the development of new, cloud-based voice applications. And despite admonishing its vendors on interoperability, it claims to have been running orchestration systems in the laboratory that have a multivendor capability. To what extent these have been engineered internally is unclear, but Geha says he is eager to start using them in a commercial environment.
If pan-net has slipped, Deutsche Telekom has been sticking to its guidance on related cost savings. Under a strategy announced about three years ago, the operator said it would look to reduce so-called "indirect costs" outside the US by €2.4 billion ($3 billion, at today's exchange rate) annually, compared with 2014. It aims to realize €1.8 billion ($2.2 billion) of those savings this year.
A commonly used accounting measure, indirect costs are expenses that cannot be allocated to a specific project or function, and include items such as group personnel and administrative costs. Deutsche Telekom's projections of a slight increase in "direct costs" implies a reduction in overall non-US operating costs of between €943 million ($1.16 billion) and €1.38 billion ($1.7 billion) this year.
As Light Reading has previously noted, tracking Deutsche Telekom's progress toward this target is not easy. Other than in its capital markets day presentations, it does not break out total operating costs in financial statements. Yet by deducting EBITDA from revenues, one can arrive at a ballpark figure for operating costs. Last year, that figure was €26.3 billion ($32.4 billion) on an adjusted basis -- about €680 million ($839 million) less than in 2014. Operating costs are falling, if not quite at the rate Deutsche Telekom had originally expected. (See DT 'Cost Lag' Could Overshadow Transformation Agenda.)
Nevertheless, as additional service platforms are shut down, and as more customers are transferred to the pan-net, further savings should materialize. In his presentation, Geha revealed that about 45 million customers are now on the pan-net. But Deutsche Telekom has many more, having served about 92 million mobile customers and 27.6 million fixed-line subscribers (with undoubted overlap between mobile and fixed) across Germany and Europe in late 2017. The ongoing automation of pan-net systems should also allow it to continue pruning its workforce. Hungry to automate, Deutsche Telekom has cut overall staff numbers by 10,500 since 2014, to roughly 217,350 at the end of last year. (See DT: Brutal Automation Is Only Way to Succeed and 'Brutal' Automation & the Looming Workforce Cull.)
Cost savings were never the primary objective, however. Figuratively speaking, what Deutsche Telekom really wants is to rip off its tightly buttoned suit and slip into the hipster outfit of the fast-moving software specialist. Like other telcos, it fears losing even more ground to the Internet giants if it cannot pull off this "DevOps" transformation. But that will require a cultural change across Deutsche Telekom's entire organization. For a decades-old, state-backed telco, this may be the hardest job of all.
— Iain Morris, News Editor, Light Reading