Telefónica global chief information officer (CIO) Phil Jordan is leading one of the most complex and challenging IT transformations in the private sector.
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Telefónica is the fifth-largest mobile network provider in the world, with operations in Europe, Asia, North America and Latin America – and known in the UK for its O2 brand.
In February 2014, its chief executive announced that one of the four key areas of focus for the company was increased efficiency through cost cutting and simplified structures – a goal that is aligned with the strategy carried out by the CIO.
“As we become more digital and global, the business agenda has really shifted to be an IT agenda, whether that’s driving our business online and creating multi-channel digital experiences, or consolidating across the group to create virtual shared infrastructures. This is all really to do with IT in a digital context,” Jordan says.
“Beyond IT and digital, it’s all about customer data, which is accessed through great systems – so I think technology has always been important to telcos but right now the IT element is mission critical. The winners in our sector will be the ones who have the best digital multichannel experience and best insight to create the best customer propositions.”
In Europe, Jordan’s team is approaching the end of year one of a three-year transformation. The highlights include virtualisation of more than 25,000 servers, moving IT operations to a central datacentre. In Latin America, the process has similar timescales and will include a consolidation to strategic datacentres in Brazil and the US. However, modernisation is less of an issue in the region as the infrastructure is less obsolete than in Europe: “That sometimes surprises people,” says Jordan.
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Moving to shared services
As a business present in 20 countries, a lot of Telefónica’s global infrastructure and services can be shared and Jordan’s three-pillar IT strategy reflects this.
The first part of the overall plan is about consolidating datacentres. Here, the most important services have already been migrated to the company’s new generation of tier 3 and tier 4 datacentres, and a major ongoing refresh across Europe will consolidate and virtualise mid-range infrastructure in the company’s private cloud.
“We are a telco that's been around a while and grown very quickly and therefore doesn't necessarily have as much sharing and virtualisation as we'd like. We had quite an obsolete and ageing technical setup across Unix and Wintel (Windows/Intel), and are taking the opportunity to modernise that and virtualise it as much as possible,” says Jordan.
The modernisation agenda also involved rebuilding a lot of the company’s core infrastructure and the “usual suspects” – Oracle, HP, VMware – are all involved: “We are working with best-of-breed hardware and software manufacturers in the mid range, much as we always have.
“We are moving a business that was below standard in terms of virtualisation to above-industry average over the next two years. And we are taking this consolidation opportunity to move all of our production and operations organisations into a shared services company,” the CIO adds.
The shared services company Jordan refers to is Telefónica Global Technology (TGT), which is the company’s own IT operations arm. The systems underpinning Telefónica’s offices across 11 countries have been moved to TGT.
As part of the consolidation exercise, six datacentres closed last year and an extra 11 locations are being decommissioned in 2014.
Driving the shared services agenda has been “very challenging”, because it introduced a lot of structural change and organisational disruption.
“You are disrupting the accountability of most parts of the business as you move operations from one part of the organisation to another. So there is a lot of resistance to change,” Jordan says.
“We had to focus very heavily on showing the benefits of standardisation and sharing in the group. It worked in the sense that 2013 was the best ever operational year in IT – and that's the same period in which we moved 11 countries into our shared services company,” he says.
I think technology has always been important to telcos but right now the IT element is mission critical
“We put a lot of emphasis on proof points and ensuring continuity, proving that this is a new way of operating and that it can be better – but we haven't rushed the change either, since our number one priority are the services we provide every day. The transformation agenda is key but if you mess up customer service experience in doing it, then you don't survive.”
To win over the business, Jordan sought to find a balance of continuity of service and showing the value of change. However, that has not always been a smooth ride.
“Occasionally, we had to use a very top-down mandate to say this is what we are doing. I believe wholeheartedly that what we're doing is on the critical path to Telefónica being a successful digital global company – and you have got to keep reminding people that what you are doing is central to the commercial strategy of the business,” he says.
“It's not easy by any means, because you disrupt an awful lot of people's accountability – and dare I say it, power – and it's a tough journey, but once you've started you have to keep on moving.”
The second pillar of Jordan’s strategy focuses on simplifying Telefónica’s business applications. Significant progress has been made on that front, with about 1,300 systems being decommissioned during 2013.
Much of this applications work was possible thanks to the removal of many physical datacentre locations from the first pillar of the IT strategy. Technically, says Jordan, this brings Telefónica into a “whole new era of full stack, business-led IT transformations”.
The telco’s entire business solutions stack is being modernised and replaced in many of the countries where Telefónica operates and six countries are currently undergoing that process.
For the new stack, Telefónica has struck a deal with Israeli telecoms systems specialist Amdocs, which has implemented “with very little customisation” an off-the-shelf business support platform for the company’s pre-pay businesses that has been in place in Argentina for over a year.
The successful implementation of the Amdocs platform prompted the company to sign a new deal where Argentina's setup and processes will be heavily reused in Chile and Peru. A separate deal for a similar project has also been signed with Huawei for the company’s Mexico operation.
According to Jordan, the driver behind signing Huawei instead of Amdocs for Mexico was to avoid overstretching and committing to Amdocs too far, given that the company will be running three full-stack implementations in Latin America concurrently.
“Of course, from a leverage perspective this isn't a single vendor strategy - we have gone for a standard tools-based strategy and therefore there is room for a second vendor – so we felt that three countries was a lot for Amdocs,” he says.
“Obviously, Huawei was keen to work with us and therefore provided an effective price point, so a combination of reasons led us to bringing in a second supplier into the execution at this stage.”
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A third implementation should be announced in due course around a platform for Central America and also in Uruguay, with a different supplier.
As part of initiatives started by Jordan to “sell” the benefits of standardisation and modernisation, an event was organised where the top 2,000 people in the company were given a Nokia Lumia 920 smartphone and a Lenovo Helix tablet PC running Windows 8 and Office 365.
“I am a big fan of giving people an additional workplace for their own digital platform and a believer in consumerisation historically, but I think we will see less of a need for consumer devices as the enterprise will be able to provide good consumer platforms too. Our top executives have an environment that’s open and they can use client services and use ‘digital work’ to its fullest impact,” Jordan says.
“That proved to be hugely successful. We made a good execution and everybody was blown away - we used it as a symbolic movement into a truly digital workplace. Since then, we've been slowly moving to Office 365 wherever we have had the opportunity to do so. I am big fan of cloud-based applications because I think it gives us tremendous flexibility and we'll now continue down that journey of moving as and when the right opportunity arises in each of our markets.”
The same approach, of applying new technology where appropriate, is something that Jordan is adamant about for big data too.
“We have got one eye on emerging technologies and therefore we are implementing Hadoop and other tools in many of our big markets. The thing that's probably talked about most is what do we want to use big data for, what are we trying to solve, what is the biggest value we are trying to create – then let’s apply technology to that and sometimes that will be big data technology,” he says.
“Because of big data’s point in the hype cycle, people tend to talk about it without really defining what you want from it and also making the distinction between value you're trying to create and what technologies underpin it.”
The third strand of Jordan’s strategy is all about innovation. He says this is a much more future-oriented view, named internally as “Power of Digital Telco”. This will follow the consolidation and the standardisation of Telefónica’s infrastructure, applications and processes.
“I’m looking beyond the first two workstreams of the IT strategy now and saying 'OK, what does IT become in our business?' Obviously innovation is when you are standardising and commoditising your core needs to be focused on how to innovate for your customers. So if ‘I’ is information and if the ‘T’ is more standardised, we’ve got to refocus our entire organisation on data and customer insight and driving a better activity as a result of that," says Jordan.
Maintaining momentum with all the leaders and all the people is more difficult because it is incredibly intense and tiring
“So this third part of the strategy is very much signalling to the business and to the IT community really that beyond this change we are driving at the moment, there’s a future that is very exciting - but different, with different skills, culture and positioning in organisations like ours.”
According to Jordan, it will take about three years to get to the point where the third strand will be fully on-stream.
“We need to get the applications' modernisation and consolidation as quickly as possible but in reality we are talking about a journey that we started a year ago. This is a long journey and I know many leaders of businesses like ours would hope that it wouldn't take as long but in reality it does,” he says.
“We are a business that has more than 320 million customers globally and we put them first – so we have to go at a pace that is relevant to our business of course, but also recognising that we have real responsibility with customers, so that will drive the pace.”
Keeping up the momentum
Not rushing into projects while also driving such a large transformation forward is one of Jordan’s biggest leadership challenges.
“Maintaining momentum with all the leaders and all the people is more difficult because it is incredibly intense and tiring. But we work very hard at trying to build pipelines and people who can pick the baton up when people move on,” he says.
“That is also why I am so interested in people’s ability to lead change when I look for IT leaders, because it’s such an important skillset – you’ve got to be comfortable with so many things that are tough, create a vision and be able to find that communication balance between the businessman and IT.”
Telefónica has a CIO for every one of its markets with a fixed reporting line to the chief executive in that country, and a dotted line to Jordan. The same goes for the company’s shared services chief executive, who also reports into the global CIO.
“I think it's super important that the CIO has a profile and the influence inside every business unit, to ensure IT is shaping conversations and driving the business forward so the fixed line is with the chief executive and a functional reporting line with me – and I enjoy having the direct interaction with our markets,” says Jordan.
The CIO still has a few years ahead until many of the boxes in his initial plan are ticked, but how will Telefónica’s IT look like in a year’s time?
IT is all about engaging customers and making change rather than just IT that’s about systems records and back offices
“I think we will be spending more than we are spending today, but on the right things. We have been able to spend a lot more on transformation without increasing the overall cost of IT because we have been finding ways to balance, run, grow and transform,” Jordan says.
“We will also have fewer systems - 800 less for sure - and will be simpler. We will have almost completely moved into a shared service model in production and in operation. We will definitely have a real case study of effectively transforming the whole business unit with standard tools and because of that we will be continuing to run four, five or six country transformations at any one time.”
Finally, Jordan hopes his division will be even more prominent than it currently is in the business – so people’s perceptions of IT’s contribution to the overall business strategy will be a lot clearer.
“When I look forward, I can see a lot of hard work, a lot of intensity. But for me, IT is all about engaging customers and making change, rather than just IT that’s about systems records and back offices.”