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How Deutsche Telekom plans to challenge AWS and Google in the cloud

German telco Deutsche Telekom wants to evolve into the public cloud and plans to beat sector giants such as Amazon and Google at their own game

Deutsche Telekom has made no bones about its ambitions to become a market leader in Europe’s cloud services market. The German company recently proclaimed its goal of doubling current annual revenue of €1bn from business customers by the end of 2018, as it extends its focus from the private cloud to the public cloud.

“At Deutsche Telekom, we want to grow by more than 20% each year in the field of cloud platforms, and to become the leading provider for businesses in Europe,” said Ferri Abolhassan, head of the IT division at Deutsche Telekom’s enterprise-focused unit, T-Systems.

Last year, revenue from cloud services, in particular in the highly secure private cloud, increased by double-figure percentage points at T-Systems alone, the company added.

To achieve its goals, the Bonn-based company intends to intensify its collaborations with technology partners “who are, in turn, market leaders”, including Microsoft, Airbnb and Huawei. Abolhassan firmly emphasised that such partnerships are essential to support Deutsche Telekom’s over-arching cloud business strategy.

Indeed, China-based Huawei, which is in turn is placing an increased focus on IT services, is already collaborating with Deutsche Telekom in both the private and public cloud, with the intention of helping the German operator to develop services in both these areas in future.

“After we agreed on our co-operation regarding IT infrastructure and private cloud services during CeBit [2015], we are now taking the next step and combining our know-how and cutting-edge technology in the public cloud area to ensure that companies of all sizes are provided with the cloud of their choice,” said Haibo Zhang, president of Huawei Deutsche Telekom key account department.

Speaking at Huawei’s Innovation Day in Munich in June, Abolhassan went further still. Not only does he want to see Deutsche Telekom become a leading provider of cloud services in Europe, he also wants to see Europe produce a competitor to the cloud-based companies that have so far emerged from the US.

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“There must also be in Europe a force that is an answer to all the initiatives coming from the US,” he said. Together with Huawei and its other partners, Deutsche Telekom plans to pit itself more strongly against Google and Amazon Web Services (AWS) in future.

Competitive advantages in the cloud market

The German company certainly has its work cut out if it intends to be part of the European answer to such cloud heavyweights.

AWS, for example, “is a $5bn business and still growing fast – in fact it’s accelerating”, said Amazon founder Jeff Bezos during the company’s first-quarter results presentation. “Born a decade ago, AWS is a good example of how we approach ideas and risk-taking at Amazon.”

To meet such challenges head-on, Deutsche Telekom is stepping up cloud activities across the group and establishing a strategy for services in the public cloud, including infrastructure, platforms and applications.

What’s more, Abolhassan noted that the company has a major advantage up its sleeve: security. Since cloud services for Europe are provided from datacentres in Germany, this means they are subject to strict German data protection guidelines.

“In cloud computing, datacentre location brings the valuable advantage of security. Our customers and partners place their full trust in Deutsche Telekom in this regard,” said Abolhassan.

Indeed, the Experton group, which produces the annual Cloud Vendor Benchmark for the German and Swiss markets, noted that the cloud offerings from Deutsche Telekom and T-Systems gained a positive rating overall in 2015 for their high data security and data protection standards, noted as “an advantage in the cloud market, which is set to reach a volume of more than €12bn in Germany in 2016”.

According to Experton, “there is still a preference for offerings with high data protection compliance”, and this is supposedly “so attractive that more and more US IT service providers are choosing to slip under this cloak of security”.

Building a cloud strategy

In essence, cloud services form a core part of the German company’s new strategy, which embraces other new areas such as the digitisation of industry, machine-to-machine applications, security and big data. 

This all forms part of a fundamental overhaul of the T-Systems group, which is emerging from a major transformation programme. This process saw the company sell off less profitable activities such as hardware reselling, as well as businesses such as T-Systems Italia and the systems integration unit in France.

Abolhassan said the company plans to take a step-by-step approach to the development of its future cloud strategy. “I want to make cloud more tangible,” he said, noting that most people now have digital content in one form or another but often don’t know where it actually is. What they need is someone who will take care of their content, he added. 

Devices, networks and content all need to be connected together. The challenge is also to achieve connectivity without disruption.

Virtual platforms

An example of a virtualised end-to-end service developed by Deutsche Telekom is Mall2Go. Introduced at CeBit in 2014, Mall2Go is a shopping app that enables employees of large companies to do their daily shopping by mobile phone and receive deliveries to their office on the same day.

The virtual platform is designed to enable regional supermarkets and smaller businesses to reach larger groups of customers than they can via their physical locations, while same-day delivery is an added value for customers. 

Now available as a service, employees can order what they need via the Mall2Go app. With the app, they can browse a store’s products and add items to their shopping cart using barcode or QR-code scan. Via a sharing function, they can also allow friends and family to check the shopping list and add items.

Meeting future challenges

The company already appears to be making an impression with its cloud strategy. In Experton’s Cloud Vendor Benchmark for 2015, Deutsche Telekom and T-Systems achieved top scores among Germany’s leading cloud providers in more than 10 disciplines.

The Experton analysts also drew attention to the change in strategy at Deutsche Telekom’s corporate customer arm in their benchmark study: “Thanks to its own internal transformation, T-Systems has also made the permanent leap to the ranks of the top IT players and is strategically aligning its portfolio with the challenges of the future.”

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