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Telstra's Network & IT Transformation – Becoming a Software-Centric Organization

For the Australian incumbent, reskilling an entire workforce is the route to a successful network and IT transformation.

James Crawshaw

October 31, 2019

4 Min Read
Telstra's Network & IT Transformation – Becoming a Software-Centric Organization

T22 is the name of a rocket, a strain of fungus and the bus from Aberystwyth to Cwmystwyth via Devil's Bridge. It's also the name of the strategy plan of Australian CSP Telstra which includes various goals it wants to achieve by 2022. Like many operators Telstra is aiming to simply its product offerings, eliminate customer pain points and create all-digital experiences. It also wants to simplify its structure and work methods to increase speed to market and reduce cost.

As the company explained in its recent results presentation for the fiscal year ending June 2019, it has already reduced the number of consumer plans from 1,800 to just 20 and is cutting the number of enterprise offerings in half. It reduced the number of contact center calls by 22% in fiscal 2019 more than doubled the share of digital sales to 17%.

A large part of the simplification effort is headcount reduction, including a quarter of management roles. But it also involves the introduction of an "Agile at scale" strategy, new software engineering and data analytics capabilities. During the final quarter of FY2019, 70% of Telstra's Agile teams were at level 3 maturity (which on a scale of zero to four is pretty good) and the target is to reach 80% this year.

Heavy Reading spoke with Nikos Katinakis, Telstra Group Executive for Networks & IT, to learn more. "The company has gone crazy," notes Katinakis, "and I mean it in the best possible way. Normally when CSPs talk about digital transformation they start with a relatively small, discrete part of their business, typically B2B or enterprise services. You digitize B2B, the management thinks that it's done, you never touch it again and everything is beautiful -- that's not the case for us."

So, what's so special about Telstra? In Australia something unusual happened a few years ago when the government decided to take ownership of the fixed telephony and broadband access network. Although Telstra has been compensated for the asset transfer, it will leave them in the long term paying around AU$1 billion per year (around 4% of revenue) to the state-owned National Broadband Network (NBN). "So, the pressure is quite high for us to truly innovate and change the way we do everything. We've had challenges with legacy network equipment, and we're addressing it with around 40% of our new builds now on SDN/NFV. We have also had challenges in our aging IT systems, so we have decommissioned legacy IT apps, and have launched a completely new digital technology stack in FY2019 which underpinned our consumer and enterprise products," notes Katinakis.

Telstra's not just carrying out a network transformation or digital transformation: Katinakis sees it as a complete company transformation. "Digital transformation means nothing. It's just taking money from one vendor and giving it to another by replacing your billing system or CRM. Instead Telstra is seeking a deeper level of transformation by reskilling our workforce." The company is adding new competencies in its organization in the areas of software development, data, security and automation. "We are eliminating 9,500 roles but also adding about 1,500 new ones. In India alone we also work with around 5,000 software developers, a lot of them from partners" notes Katinakis.

By way of example, Katinakis compares software development under the new Agile methodology with a traditional waterfall methodology. "A team of four people made a chat bot for field technicians. It cost us around AU$300,000 to build. I have another team of over 50 people that created a chat bot for customer care -- it cost a few million dollars. That team followed the traditional process with multiple validations and designed for highly unlikely corner cases. The other team took more of a fast fail approach -- three students, one team leader, boom, finished in six months." Katinakis is trying to take the best from both approaches to change the organization runs.

Telstra has also combined its networks and IT organizations into a single group. But that doesn't just mean putting one person in charge with everyone continuing to work in their old silos. "People have a bit of network in their role and a bit of IT," notes Katinakis, "they have to take care of the customer journey end-to-end. Now I've got wireless guys worrying about the IT provisioning system. We build fantastic networks but if the IT systems are poor the user experience is bad."

While Katinakis is a big fan of Agile methodology and DevOps, he is a bit more circumspect about the potential for open source in the networking domain. "Open source for most people means cheaper and faster; it's neither. Projects like ONAP are too slow. As a result, vendors go around the side and create proprietary solutions. Collaboration is a big opportunity, but we've got to improve how these initiatives work."

— James Crawshaw, Senior Analyst, Heavy Reading

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About the Author(s)

James Crawshaw

Principal Analyst, Service Provider Operations and IT, Omdia

James Crawshaw is a contributing analyst to Heavy Reading's Insider reports series. He has more than 15 years of experience as an analyst covering technology and telecom companies for investment banks and industry research firms. He previously worked as a fund manager and a management consultant in industry.

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