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Big Year Looming for AT&T Biz Services?

Carol Wilson
8/31/2015

AT&T's emergence as a leading force in the global transformation of telecom is facing a crucial period: Will its efforts, which company officials have been publicly stressing the last two years, pay off in increased revenues in the multi-national enterprise sector?

One industry analyst thinks there are signs the answer is yes.

Courtney Munroe, group vice president of Worldwide Telecommunications Research at IDC , put AT&T Inc. (NYSE: T) at the top of his IDC MarketScape: Worldwide Telecom Service Provider. In his report, Munroe notes that this is an important year for AT&T, because of its structural transformation and the way the company is targeting the top multi-national corporations with "a robust portfolio of managed services and cloud and security services," while looking to make the overall customer experience better with more flexibility and agility in meeting market needs.

"If you look at recent earnings, AT&T is growing [at double-digit rates] over the last couple of quarters in those critical emerging growth markets," Munroe says, while other carriers aren't doing quite as well. "Whether it's Ethernet, managed services or the Internet of Things, I think they are doing a great job growing that part of the business, even as everyone faces tremendous challenges with legacy."

Aggressive movement
That's not to say others aren't making significant progress as global carriers move to the New IP. NTT Communications Corp. (NYSE: NTT), in particular, as well as BT Group plc (NYSE: BT; London: BTA), Orange (NYSE: FTE) and Verizon Communications Inc. (NYSE: VZ), are competing in the multi-national enterprise market aggressively. But in his 2015 assessment, Munroe chose to put more emphasis on future-looking strategies, and that gave AT&T an edge.

Everyone by now is familiar with the bold statements -- and promises -- made by John Donovan, AT&T's senior executive vice president of technology and network operations, who has said AT&T will virtualize 75% of its operations by 2020. He most recently said AT&T's first major push to deliver services virtually, its On-Demand Network, is reducing provisioning times by up to 95%. (See AT&T: SDN Is Slashing Provisioning Cycle Times by up to 95%, Donovan Touts AT&T's Software Push and AT&T Describes Next Steps for Network Virtualization.)

Munroe says, and Steve McGaw, the chief marketing officer for AT&T's Business Solutions agrees, that the talk is being backed up by action and investment.

"We are getting good third party validations of things we have been working hard at the last couple of years," McGaw says. "We are starting to see the fruits of a lot of investment and a changing strategy as AT&T has been transforming itself."

McGaw cites a couple of things that Munroe confirms: First, that AT&T's management was willing to move well outside its comfort zone in making changes to how the company does business. Instead of making incremental changes, AT&T went all in. Instead of just shuffling people around or trying to clarify processes or jobs, AT&T underwent major systemic change, McGaw says, that will prevent regression to former ways of operation.


See the latest happenings as telecom business services migrate to the cloud in our cloud services section here on Light Reading.

For example, in setting up the Network on Demand service, a team was set up outside the core product teams that works in traditional ways on the roadmaps for Ethernet, VPNs, managed Internet services and more, he notes. Using Agile work methods, this team -- which includes product marketing, IT, core technology, digital experience folks and others, all working side by side -- created a new model for giving customers flexible control of their own services. NetBond was set up the same way. (See SDN Powers AT&T's Rapid On-Demand Expansion.) and AT&T Lands Another Cloud Collaborator.)

"You have to manage a little bit to other teams to make sure they don't feel threatened by all this," McGaw admits. "But in the end, what I found is that the people working on the big iron, the stuff that we have tens or hundreds or thousands of units already deployed, actually see this as the next step in the evolutionary path anyway and they see it as enabling them to grow their product portfolio. That has actually worked very well."

Putting your money where your mouth is
The second major thing he cites is the willingness of management to back up its talk with investment dollars.

"It is easier to get funding for projects that fit into that API-driven, Agile model. A product that is going to fit into the SDN architecture becomes a self-fulfilling prophecy," McGaw says. "Because we have declared that that is the way we are going to do things, then there is friction to funding that doesn't fit within that framework. And so everyone wants to get [their] project funded, everyone wants to move the ball forward with the customer and meet the customer's needs and expectations."

That collapsing of the network and IT organizations within these product development teams marks another way in which AT&T has moved ahead of the field, Munroe says.

"Collapsing network and IT, using a dev/ops environment -- everyone says they are doing that, but AT&T has actually done it," he comments. "If you look at what they are doing with SDN and NFV and their Web 2.0 strategies, I think they are way ahead, with the possible exception of NTT. I think they are way ahead of everyone else in what they have done so far, and the fact they can roll out this on-demand Ethernet stuff is proof of the pudding."

The next proof point will be seeing the market acceptance of what AT&T has done and if it pays off in higher revenues and, ultimately, profits.

— Carol Wilson, Editor-at-Large, Light Reading

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DHagar
DHagar
9/1/2015 | 9:42:14 PM
Re: Big Year for AT&T Biz Services?
Carole, I believe they will succeed for all the reasons you cite from Munroe's report.  They are truly demonstrating "leadership" in their investments, execution, and their apparent skills at the "nuance" of true transformation.  I believe they are in an excellent position to capture the market now and demonstrate real growth. 

I am cheering for them - this is an excellent model for success!
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