Telefónica's Looking Trendy

2:25 PM -- Telefónica revamped itself earlier this week, shuffling its executives, tightening up its international structure and creating a new business unit called Telefónica Digital. (See Telefonica Restructures, Creates New Units.)

Some have questioned the creation of the Digital unit. The Wall Street Journal called it controversial. But it's not controversial at all. It's a natural move for a company that that has gone beyond being just a traditional telecom operator. And it's part of a process Light Reading is calling Bridging the Chasm.

For some time now Telefónica has been branching out into new multimedia and online service areas through internal developments, such as the formation of its BlueVia applications development community, and acquisitions, such as the purchase of VoIP specialist Jajah. (See Telefonica Shows Developers the Money , Telefónica Buys VoIP Player Jajah and TEF Launches Jajah VoIP Services.)

Its move with BlueVia, along with broader service delivery platform and cloud services developments, has already earned the Spanish giant a place in The Top 20 Bridge Builders, which identifies those operators that are bringing their traditional telecom and Service Provider Information Technology (SPIT) resources (technology and people) together to take their businesses to the next level. (See Bridging the Chasm: A Manifesto.)

Now, by creating its Digital division, Telefónica is bringing together 2,500 people from within the broader group that have expertise in: traditional and new generation telecom technologies and services (from its Telefónica R+D department); social networking (from Tuenti, also known as "the Spanish Facebook"); Terra (its long-standing online services division); next-generation voice-based applications (Jajah); and applications development (BlueVia).

Under one virtual roof, with a unified strategy and set of goals, this division is in a great position to accelerate Telefónica's new service development capabilities and build on its strengths as a company with hundreds of millions of customers, its own network infrastructure and a lot of intellectual capacity. Those assets mean it can approach the communications service and information delivery markets in a slightly different way from the online giants such as Google (Nasdaq: GOOG), Amazon.com Inc. (Nasdaq: AMZN), Netflix Inc. (Nasdaq: NFLX), et al.

In fact, in the same way that it's now working closely with Microsoft Corp. (Nasdaq: MSFT), it should end up working with these companies, not battling against them. (See Microsoft Gives Telefónica an Apps Edge .)

This is the kind of development large telcos such as Telefónica should be undertaking -- in fact, one might ask why it has waited so long -- and its peers (even if they haven't amassed the same breadth of talent) should follow suit.

By creating its Digital division, Telefónica should, in time, be seen as a trendsetter. If it isn't, then that would signal a strategic deficiency on behalf of the world's other major operators.

— Ray Le Maistre, International Managing Editor, Light Reading

Gabriel Brown 12/5/2012 | 4:54:25 PM
re: Telefónica's Looking Trendy

Agree, it looks logical... in some ways. It's good to see operators invest like this.

Do you think Telefonica will stick with it over the long term?

It seems like the sort of thing that will cost a lot of money before it starts to pay its way. CFO might get cold feet and close it down. Isn't that how many of these telco initiatives end-up?


digits 12/5/2012 | 4:54:24 PM
re: Telefónica's Looking Trendy

It's also the kind of thing that is going to be REALLY tough to determine any return on investment (ROI) for.

There is no doubt that Matthew Key has his work cut out, because he has to make sure he doesn't interrupt any ongoing developments and get the disparate parts of the new unit (disparate in terms of people and location) work together to create new approaches and put them into practise.

But if it wasn't doing this sort of thing it would, I think, be a big mistake. These companies have to innovate, and how better to do that than creating an intellectual melting pot from the people you already employ?

Of course it might fail, but the worse thing would be not to try to make it work.

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