The regular rant heard from mobile operators is how much "over the top" service providers are stealing their revenue.
The likes of Skype and WhatsApp operate on their handsets, but allow users to circumvent the core voice, text and data services the networks provide and use Wi-Fi to go over the top to communicate with friends, family or colleagues.
Now some operators have taken the approach of “if you can’t beat them, join them”, building up their own services arm to challenge the established apps on the market.
Telefonica has gone one step further by creating a whole new business named Telefonica Digital. Computer Weekly spoke to its CIO, Brendan O’Rourke, to see how he thinks his company can compete.
Brendan O’Rourke took up the post in May this year, eight months after Telefonica Digital was formed, but he had been part of Telefonica for two and a half years, heading up the online integration division for O2 – the firm’s UK presence. However, before that, he worked at several small London start-ups for five years and was the CIO at BT Openworld for a further five.
“Having come out of BT and spent that time with large consultations through to working in small start-ups, I have realised the importance from both sides of getting things done with agile systems,” says O’Rourke.
So, what is the goal of the business at which he has now a C-level executive?
“The main aim is to create, capitalise and compete in the digital world, there is a massive opportunity with communications at the centre of it,” says O’Rourke.
“The digital world can mean lots of things to lots of people, but we see it as services across a connected network. Everything from M2M through to over the top messaging applications.
“We find it easier to define it though by what it isn’t. It isn’t Telefonica’s core of voice, text and data; it is what operates on top of that network.”
Digital options widen communications competition
The CIO says Telefonica Digital recognises the growing number of options available for communication now, be it specific solutions, such as Skype, or features within other apps, such as Facebook Chat. He denies these rivals have stolen revenue yet, but the prospect of it happening in the future was very real.
“We recognise that customers choose how they want to communicate and with more ways to do so,” says O’Rourke.
“The over the top provisions are challenging us. If they are not eating away at our revenues now, they are eating away at our usage and it will lead to them eating away at our revenues in the future.”
O’Rourke admits the creation of Telefonica Digital was a response to that pressure but adds: “Our core competency is communication and we are bringing together the things we do around this, or over the top of this, into one place.”
One example of this is TU Me – an application launched by Telefonica in May. It enables users to make voice calls, send texts or share pictures using their mobile data allowance.
Although this has been squarely aimed at consumers, trying to encourage them away from Skype and back onto its revenue stream, O’Rourke says the app does have a business future.
“We are currently trialling this with enterprises to see how they use it and what functionalities are missing to make it an enterprise-ready product,” O’Rourke says.
“But I see that as part of this growing trend and buzzword that is consumerisation, the kind of experiences consumers are getting at home they want in the workplace too and we will be able to offer that.”
Growth through R&D and acquisitions
As well as a statement about Telefonica’s strength in the mobile market, the foundation of the firm has also bolstered the British market, with the Spanish company choosing to put the headquarters here in London.
“We chose London partly for the exposure to the financial analysts to seek advice, as it is such a key financial market, but also to have access to all the talent London has in the digital space,” says O’Rourke.
“Both these things are good to have near headquarters.”
The development centre in the UK is in Slough and there is a much larger site in Spain, but O’Rourke claims there was a new drive to bring more of the projects to these shores.
However, it is not just internal research that adds to the company’s services.
“We invested into our mergers and acquisitions group who look at opportunities of where to invest and when to acquire,” says O’Rourke. “The mergers and acquisitions piece can have peaks and troughs but we have our team in Palo Alto to look at particular opportunities.
“We also see it as important to partner. Which approach we choose depends very much on the product and market segment. I can’t say what the split is currently between the three but this can change over time because of these two elements.”
Developing cloud capacity
There may be a drive for various types of innovation for Telefonica Digital to offer its customers, but what about the technology running the company from the inside?
One bonus of a newly formed company, even if it comes from a large parent firm, is the lack of legacy.
“In terms of our own systems, it is a bit green field,” says O’Rourke.
“With Workday, for example, we chose a best in breed global cloud platform for HR and our task was then to integrate it into the operating systems of everyone globally.
"This is something I found quite invigorating and that integration is really the challenge we are faced with.”
He says the way the company works – focusing on how to distribute the services it creates rather than manufacturing and storing a product – requires a different approach to infrastructure.
“In Telefonica Digital, there is not a lot of legacy,” says the CIO.
“What we focus on is the distribution of our services and these go through a number of channels. Our focus has to be on the integration and how we distribute them globally to all of Telefonica’s separate operations and customers.
“I work with CIOs of all the operating businesses within Telefonica, which is clearly so important to get the job done, and I have a role on the global CIO team.
"They are all wanting to get these products into their markets and as we have built the integration in the UK for over two years, this is a great place for us to be based and pass on the knowledge.”
O’Rourke references the firm’s contract with Workday, but overall he is quite the cheerleader for cloud computing solutions throughout the business.
“I am positive about using cloud but only where it is appropriate,” he says.
“We use Salesforce over here in the UK and we also use Amazon at the moment. It makes a lot of sense in many circumstances as we don’t have to invest into Capex.”
However, as the company grows, O’Rourke wants to build Telefonica Digital’s own cloud.
“We will move to our own cloud-based system as we roll-out… and get to scale,” he enthused. “Then we can bring it in house and have gotten both advantages.”
“I much prefer cloud thanks to the flexibility, the lack of lock in and the standardisation, so the temptation to make your systems more complex through customisation is taken away.”
O’Rourke’s parting thought is to emphasise his firm’s play in the business space.
“Although the messaging at the moment is about consumer products such as TU Me, we are very strong in the B2B space,” he concludes.
“We have our cloud virtual datacentre offerings, M2M, even health, so it is a mixture.”
“We will continue to grow this business and will have more to offer for enterprises as the company grows. “