1 TELECOM ITALIA LAUNCHES THE ITALIAN CLOUD WITH A FOCUS ON THE IT MARKET Milan, Teatro Puccini Monday, 20 September 2010 The general outlook Good morning everyone, thank you for taking part in our press conference to present a new line of corporate services called the Italian Cloud. In the view of Telecom Italia, this offer has special significance. With this offer Telecom Italia wants to increasingly become the all-round partner of the Italian enterprises. The specific characteristics of the solution and Telecom Italia s strategic positioning in the ICT sector will be described by Dr. Battiferri. However, before examining the details of the Italian Cloud, we should understand how this new offer fits in and its meaning in the overall economic and competitive framework of the Italian system.
2 According to recent estimates published by the European Commission, GDP growth rates are likely to be 0.5% in the third quarter of 2010 and 0.2% in the fourth quarter. The estimates published by the OECD in the previous week forecast a slight decline (0.1%) for the third quarter and an essentially similar fourth quarter. Apart from the difference of views on the short term economic situation, it seems clear that we are facing a structural crisis which cannot be overcome simply by sporadic and external measures. A phase of favourable exchange rates, the overall recovery of global economic activity or plans to stimulate demand would simple alleviate the symptoms and temporarily reduce the acute aspects of the crisis, but without eliminating the causes of the decline towards which the mature economies of Europe seem to be headed. The problems being experienced by Europe and by Italy in particular are based on issues inherent in the production system. In order to overcome these problems, radical measures are required for an impact on the competitiveness and productivity of the national system. With respect to the challenges by global competition, the comparative advantages historically enjoyed by our production system, such as design, quality, tradition, creativity and manual skills, are no longer enough. If we do not want to resign ourselves to a lowering of living standards, we can t afford to wait for our problems to be solved on their own. This is what resigning ourselves to the prospect of taking 8-10 years before returning to the pre-crisis industrial production would mean. We need more competitiveness, a more merit-based approach, more flexibility and more productivity. Without these factors the Italian production system is destined to undergo a slow, gradual and inevitable decline. It is no longer the time to fall back on incremental measures, patchwork reforms and the management of emergencies with palliatives and superficial measures. What is needed is a radically new paradigm. What the Italian enterprises must do 2
3 This new paradigm must involve the country as a whole: the institutions, the civil service, the public and enterprises. The latter in particular have a highly important and complex task: to recover competitiveness. In order for the Italian enterprises to become competitive again, on the domestic and international level, we must bridge the gap separating us from other European countries (such as Germany) in terms of the efficiency of production processes, the promptness of intervention and the response to the rapid market changes. On the one hand, the Italian production system can count on many small sources of excellence. However, in an increasingly globalised world economy such as ours, even niche sectors or sectors that reach sufficient economies of scale by expanding their geographical market must succumb. This means that our enterprises, and especially the small ones, must necessarily make a quality leap to add to the quality of the product the other equally important factors for the success of an enterprise. The Telecom offer comes in this context. Telecom Italia, with its technological partners, is to enable Italian enterprises to focus increasingly on what they know how to do best: the design and creation of products. With our cloud computing applications, we want to deal with the rest ; in other words, to offer solutions helping small and medium size enterprises to be competitive on the international market. Cloud computing to overcome the problem of company size Let s try to understand the reason for these drawbacks in Italian enterprises, the effects they have produced and above all, how ICT services with cloud computing can help them overcome these weak points. In the past decade, we have seen a substantial failure by the Italian production system to keep pace with international competition in terms of productivity growth. In the first half of the 2000s, productivity in countries such as the UK, France and Germany grew by approximately 5%, while Italy remained stationary. 3
4 The failure to achieve a productivity increase is due to the substantial failure to implement computerisation and ICT technologies, reasonably blamed on factors related to the small size of the overwhelming majority of Italy s industries. In particular, the small size of Italian enterprises has meant excluding the opportunities provided by ICT for basically three types of reasons: 1) A lack of economies of scale ensuring the profitability of the minimum investment required for adopting ICT solutions; 2) The absence of standardised solutions and the need to use custom software, with the consequent high costs of the ICT solutions proposed; 3) The need to have technical personal in the company qualified to manage the computer solutions implemented. With respect to the critical factors related to custom solutions requiring in-house management by the companies, cloud computing provides considerable advantages: 1) In the first place, cloud computing, with the distribution of hardware and software resources over different entities, enables small enterprises to enjoy the same economies of scale as the larger ones. Furthermore, since these are shared resources, the minimum investment requested for access to the basic ICT solutions is much lower than in the past. 2) In the second place, the off-the-shelf solutions almost totally eliminate the costs related to the development of custom solutions, with greater reliability of the solution adopted, thus making it easier to introduce in the company. 3) Finally, a rented resource eliminates the in-house management and maintenance costs (the need to hire technical personnel), reduces the total cost of ownership, spreads the expense over time and reduces the risks associated with the investment (with conversion of capex into opex factors). Cloud computing for Telecom Italia Our cloud computing services are also perfectly integrated with our way of conceiving evolution in the sector. For a telecommunications operator, a provider of broadband services, providing cloud computing services is a major strategic step. A step in the direction to supporting the transition from just being providers of connectivity to being providers of services. 4
5 In cloud computing services, the enterprise purchases the final service (storage, applications, remote management of devices from a remote location, etc.) while connectivity becomes the tool and the means to enable access to the service. Customers (companies and the public) do not attribute an intrinsic value to network performance (being able to surf at 50 or 100 megabits). On the other hand, network performance acquires value when it is transformed into the element enabling access and use of certain services. This is why Telecom Italia does not just want to sell pure connectivity to companies. Telecom Italia wants to sell services. Telecom Italia wants to provide its customers with what they want, and with what they are willing to pay for. Conclusions It is Telecom Italia s view that the launching of the cloud computer platform is another achievement in the convergence of systems, a factor that is increasingly important for the development of enterprises and therefore the economy. For Telecom Italia, this is an important opportunity to exploit its infrastructure assets, so that it will become the major domestic player in this sector, which will acquire much of the value resources of the current supply chain of information technologies. I would like to stress, however, that cloud computing is not just a great opportunity for Telecom Italia. Cloud computing actually offers extraordinary opportunities for the world of enterprises, and especially for the Italian enterprises, with their severe drawbacks in the ICT sector. The advantages offered by being able to have your own applications and infrastructure on the web and use them according to your operational needs (reduction of investments as well as fast and easy implementation) also make the adopting of ICT solutions compatible with the financial characteristics and resources of small and medium size enterprises. This is why cloud computing offers the Italian production system the opportunity to compensate for years of backwardness and stagnation in the adoption of ICT technologies, and to start up the indispensible process of renovating the industrial framework. 5
6 Everyone the institutions, the political world, enterprises and the public must realise that without cloud computing, or more generally without adequate ICT resources, the Italian enterprises seem to be inevitably destined to lose out in the face of the challenges of the global market. Without adequate ICT resources, there is the risk that all the efforts made by the Italian industrial system from the post-war years up to now will have been in vain. In other words, we risk losing the competitive advantages, such as skills and knowhow, acquired over time. The Italian cloud offer is our way of preventing this from happening. By means of this offer, Telecom Italia intends to be an enabling factor in the technological development and growth of the Italian enterprises. By means of this offer, Telecom Italia intends to accompany the Italian enterprises through the challenges of the coming years, enabling them to access and exploit as far as possible the potentials of our products. By means this offer, Telecom Italia is taking another step towards the future. 6