'Brutal' Automation & the Looming Workforce Cull

As telcos try to emulate their Internet rivals, the industry looks set to set lose many of its current employees.

Iain Morris, International Editor

October 18, 2017

7 Min Read
'Brutal' Automation & the Looming Workforce Cull

Deutsche Telekom's Axel Clauberg bristles at the description of the Telecom Infra Project (TIP) as "Facebook's TIP." The social network is just one of 500 TIP members, he points out. A soon-to-be-formed TIP working group on artificial intelligence (AI) will have the German telco and Spain's Telefónica as co-chairs, not Facebook. (See Facebook's TIP to Launch AI Working Group.)

But there is no denying that TIP's mission of lighting a fire under the moribund network equipment market was the brainchild of Facebook. And it is Internet giants like Facebook that Deutsche Telekom AG (NYSE: DT) and other telcos are now unashamedly desperate to emulate. "We are using stone-age tools while the Internet companies have laser swords," said Clauberg, Deutsche Telekom's vice president of transport, aggregation and IP, during the SDN NFV World Congress in The Hague this month. "I'd prefer those to an axe." (See TIP Players Voice Open Source Misgivings.)

Figure 1: Much Better Than an Axe Use the force, Clauberg. Use the force, Clauberg.

This digital reinvention, using Internet companies as a template, is deeply unsettling for workers in the telecom sector. Last year, Facebook generated about $27.6 billion in sales with only 17,000 employees. That works out at more than $1.6 million in revenues per employee. Deutsche Telekom's sales in 2016 were more than three times as much, but it needed a workforce of 221,000 employees to earn them. Productive next to some of its peers, the German operator fared poorly in comparison with Facebook, bagging only €331,000 ($389,000) per worker. Making that figure look more respectable portends a grisly cull of staff.

Any comparison between Facebook and Deutsche Telekom is not strictly fair, of course. One is a young and relatively asset-light online specialist that generates its sales entirely from advertising. The other is a former state-owned monopoly whose ageing copper networks snake like the tributaries of the Danube throughout central and eastern Europe.

Yet the stark contrast between them as communications players highlights the scale of the shape-shifting task that now lies ahead of Deutsche Telekom. Only through a process of "brutal automation" will the operator be able to pull it off, said Arash Ashouriha, Deutsche Telekom's deputy chief technology officer, in The Hague. His remarks hint at the carnage to come and the urgency of making it happen. (See DT: Brutal Automation Is Only Way to Succeed.)

The urgency is unsurprising. For several years, operators have been investing in software and virtualization technologies as they try to become more like the Internet companies that sometimes harm and at other times help their businesses. While the telco challenges mount, those investments have so far not delivered much value, industry executives including Ashouriha now admit.

Gloominess about the financial outlook for operators remains prevalent. "We still face exponential traffic growth and at the same time ARPU [average revenue per user] for traditional triple-play services is flat or even declining," said Clauberg. "We need to open new revenue streams but we also need to get better at radical approaches to capital efficiency."

Against this backdrop, automation has swiftly become the industry's latest buzzword. By taking advantage of the latest developments in software and virtualization, operators are now trying to build networks that can serve customers and address faults without intervention by engineers and technicians. Deutsche Telekom's bold vision is of "zero-touch network service management with no human involvement," said Ashouriha. To promulgate that message, it has been instrumental in setting up a new zero-touch industry group that will aim to spur industry-wide automation efforts, should it get the final go-ahead. (See Tribalism Is Rife in Telecom, Too, Martiny Cocktail? DT Exec Eyes ONAP & Zero-Touch Merger and Automation Gets Its Own ETSI Group.)

In their broadest sense, AI and machine learning could have an even bigger automation impact than virtualization. TIP's new AI working group, which will see the light of day next month, will look specifically at ways of improving network management through machine learning, according to Clauberg. But AI is also reaching into other parts of the telco business. Sweden's Telia Company has started using a software application from a startup called eBuilder that predicts when devices are about to malfunction and guides customers through self-care steps. Vodafone UK is using chatbots instead of people for some customer care activities. Both operators admit their moves have ramifications for staff numbers. (See Swedish Startup Is Helping Telia Automate Device Care for Customers and Chatbot Takes Charge: Vodafone's Customer Services Overhaul.)

Next page: Panic stations

Panic stations
Not everyone is in a panic about automation and its impact on the telecom workforce. The rose-tinted view is that it will create nearly as many jobs as it destroys, bringing a welcome end to routine chores and freeing up time for more intellectually stimulating pursuits. For many of those in this camp, automation is nothing new. Its roots lie in the Industrial Revolution of the nineteenth century, when the rise of the factory met with a backlash from the machine-hating craftsmen whose jobs it threatened.

But one might as well argue that automation began with the first primate to wield a bone as a weapon or tool, as in Stanley Kubrick's 1968 science fiction classic 2001: A Space Odyssey. Since prehistoric times, man has used tools and machines to carry out work and make tasks easier. Industrialization was but a continuation of this trend. Automation is patently not, because -- as Ashouriha so brazenly declares -- it eliminates the human factor entirely. Previously a sign of technological progress, a typical automobile is also a job for a human driver. A self-driving car, by contrast, makes humans redundant, other than as passengers. For several years, automation will create jobs for AI developers. But it will ultimately claim those jobs too, even if that prospect currently seems like science fiction. (See The Automation Taboo: Let's Talk About Jobs.)

Figure 2: Monkey Business First evidence of automation? First evidence of automation?

Telcos, some of which still count public sector authorities as shareholders, are not about to admit publicly that automation could wreck livelihoods on a super-massive scale. But industry sources have already told Light Reading founder Steve Saunders that US telco giant AT&T Inc. (NYSE: T) plans to use automation to cut about 70,000 jobs, representing one third of its workforce. Other telecom service providers plan to cut about 50% of jobs through automation, writes Saunders. (See The Revolution Will Be Automated .)

Deutsche Telekom remains an interesting case study, because it specifically calls out automation when discussing workforce developments in its 2016 annual report. "We will see… an increase in the automation of tasks that are currently performed by people," says the German telco. Its workforce shrank by 5% between 2012 and 2016, and by 3% last year alone. "Measures to enhance efficiency" were cited as a major reason for that reduction.

But far bigger workforce reductions could lie ahead. Through its pan-net project, Deutsche Telekom wants to replace all of the systems it maintains across central and eastern Europe with a single, cloud-based network. This will collapse about 650 service platforms into just 50, it has argued, and generate annual cost savings of about €1.2 billion ($1.4 billion) by 2020. It is hard to imagine it will not have repercussions for staff in future. (See DT's Pan-Net Still at Start of the Marathon.)

Less dramatically, Deutsche Telekom has recently divulged details of ways in which automation has already cut out the human factor. Thanks to investments in so-called "robotic process automation," or RPA (one of the latest automation fads), it has already realized cost savings equal to about 800 full-time employees since 2014. With RPA, software robots are used to automate simple IT processes that have previously needed human intervention, like creating charts in Excel and using those to produce a management report in PowerPoint. It remains unclear whether RPA has actually led to 800 job losses, or simply to equivalent savings. (See DT Trumpets Automation Savings Worth '800 Employees'.)

Regardless, employees have cause to be worried. Automation is generating upheaval in industries besides telecom, but in most it is seen as a troubling market force as well as something to shout about. Telecom events that laud the technological brilliance and profit potential while glossing over the jobs issue are missing the bigger picture.

— Iain Morris, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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