Efficiency Drive by Major Telcos Has Claimed 74K Jobs Since 2015
One of the most obvious benefits that such automation should deliver is an increase in revenues per employee, with staff numbers falling while sales development continues as normal. Facebook and Google (Nasdaq: GOOG), two of the most heavily automated companies in the world, generated revenues per employee of $1.6 million and $1.4 million respectively in 2016 -- way in excess of any telco.
However, telcos are wary of drawing a connection between automation and job cuts amid concern that technological advances will leave millions of people without employment in the next few years. Automation's champions have argued that staff will be redeployed on service development and other less routine chores, instead of being made redundant. But this move would not lead to any improvement in revenues per employee unless it spurred sales growth, which seems unlikely in saturated markets for communications services.
Telco spokespeople have either downplayed the effect that automation has already had or denied it is responsible for headcount reductions, although Deutsche Telekom did acknowledge that technology is having some impact on the workforce.
"Sure, there is a skill shift as part of the transformation in the telco industry," said a spokesperson for the German operator when asked whether automation was responsible for a recent increase in revenues per employee. "That's influenced by RPA [robotic process automation] and other factors, but you cannot just say that RPA has led to employee headcount reductions."
In September, a Deutsche Telekom consulting subsidiary called Detecon said the operator had realized cost savings equal to about 800 full-time employees through investments in RPA since 2014. (See DT Trumpets Automation Savings Worth '800 Employees'.)
Designed to automate simple tasks, much like a macro does in Excel, RPA is described as one of three key aspects of intelligent automation by James Crawshaw, a senior analyst with the Heavy Reading market research business. (See Colt: Automation's 'Silent Killer' Is Poor Quality Data.)
The other two, he says, are machine learning and natural language processing, whereby computers are engineered to understand human language.
While both are in their relative infancy, AI is now developing at a much quicker pace than anyone had thought possible a few years ago. Outside the telecom sector, Google last month unveiled a new and improved version of AlphaGo, an AI system that in 2016 was taught to play Go, a complex board game with origins in ancient China, and then went on to defeat Lee Sedol, one of the world's best players. AlphaGo Zero, the latest iteration, appears unbeatable and learned the game without any human intervention. (See AI Threat Is Tech's Fart in the Room.)
Deutsche Telekom's spokesperson describes revenues per employee as a "key metric" for the company and one it would like to improve further. Its annual reports show that its headcount fell from about 225,000 in 2015 to around 216,500 at the end of September, a reduction of nearly 4%. Per-employee revenues increased from about $358,000 in 2015 to $390,000 last year, and have risen from just $295,000 in 2012, fueled partly by sales growth in the US market.
The German telco is trying to realize cost savings through its pan-net project, which aims to replace the discrete systems it has used in particular countries with a single, highly automated European network. In early 2015, Deutsche Telekom said its ambition was to reduce annual operating costs by €1.2 billion ($1.4 billion, at today's exchange rate) by 2020, a target that would seem to have implications for headcount. Questions about the impact the pan-net project would have on employee numbers went unanswered by Deutsche Telekom. (See DT's Pan-Net Still at Start of the Marathon.)
AT&T, which snapped up satellite company DirecTV in 2015, was much cagier than Deutsche Telekom when asked about targets for revenues per employee, saying it could not speculate on this figure.
"As we continue to do everything we can to better serve our customers and reduce costs, there are some areas where restructuring is necessary to operate more efficiently," it said in a statement emailed to Light Reading. "And like many companies, we continue to evolve along with technology."
AT&T rival Verizon, which has been similarly acquisitive in the past few years, has also made sharp reductions to employee numbers, cutting 17,600 jobs since 2015, or about 10% of its headcount that year. Between 2015 and 2016, its annual per-employee revenues rose by 5.7%, to more than $783,000.
But a Verizon spokesperson denied that headcount reductions had anything to do with automation. "I'm not surprised the employee number is going down, mostly because of the steadily shrinking landline business," said the company's spokesperson. "A majority of our employees are in that business and it is a declining business with the exception of the fiber-based services we provide. The metric is not attributed to automation and we can't give guidance on the trend."
Spain's Telefónica said that recent employee cuts formed part of a restructuring plan announced in 2015 and agreed with labor unions, without sharing further details of the changes that are underway. It has cut more than 11,600 jobs since the start of 2016, or about 8.4% of its workforce in 2015. Revenues per employee at the company increased from about $465,000 in 2015 to nearly $476,000 last year.
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