How To Be A Cloud Leader In The Telecoms World Through Cloud Success

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1 Cloud Strategy Snapshot: T-Systems Standing out in the telecoms world through cloud success Publication Date: 01 May 2015 Product code: TE Adrian Ho

2 Ovum view Summary T-Systems has long been recognized as one of the original cloud service providers, having launched its utility computing service approximately a decade ago. It was a strong advocate and proponent of a consumption-based IT model long before the industry came to terms with the transformational powers of cloud. Over the years, T-Systems has established itself as one of the leading global telecoms cloud providers, with several large deployments to its name (including BP and Shell). Its strong SAP heritage and IT capabilities have allowed it to gain strong traction with manufacturers that have large SAP installed bases. This highly targeted model has proved to be sustainable, making it one of the few telecoms service providers to have been successful in cloud. This is an accomplishment, given that many telcos have retreated in their ambitions in the wake of unrelenting price competition from the global leaders. T-Systems has invested heavily in expanding its cloud datacenter footprint and now has more than 20 sites globally. It also recently opened a mega cloud datacenter in Magdeburg Biere in Germany; one of the biggest in Europe, it is equipped to provide the highest security standards. T-Systems plans to host SuccessFactors in Magdeburg, and Cisco/Intercloud as well. Over the years, the operator has continued to expand its partnerships, which now include SAP, Unify, Microsoft, Cisco, and Salesforce. These partners have broadened its appeal and expanded its cloud campaign beyond manufacturing to other verticals. Ovum believes that T-Systems is the cloud leader in the European telecoms service provider community. Ovum view T-Systems deep application knowledge of SAP and Microsoft sets it apart from its telecoms rivals. Few telcos globally have a coherent, well-thought-out cloud strategy. T-Systems early decision to focus on SAP strengths allowed it to create a niche for itself among manufacturers. T-Systems is well recognized for its SAP capabilities and its deep knowledge sets the provider apart from its competitors. Enterprises looking for a cloud provider equipped with SAP excellence and knowledge would find T-Systems a natural choice. In addition, its ability to offer application class of service on its IPVPN network and deliver application performance assurance on its Dynamic Service for SAP sets it further apart from other telcos. Over the years, T-Systems has also made headway in other verticals, including government (it is G-Cloud certified in the UK) and healthcare. It has invested in cloud platform for seamless cloud delivery. T-Systems has invested heavily in the Dynamic Cloud Platform (DCP), a convergent cloud platform, that stretches across its datacenters globally and will enable the aggregation of virtual resources across datacenters, providing seamless agility between datacenter locations and all cloud solutions. Global MNCs are able to leverage this platform to shift capacity and workloads across the world. With the DCP, T-Systems will be able to flexibly shift capacities between different cloud types based on service logic. The platform also facilitates faster deployment of new cloud-based applications. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 2

3 It is innovating with newer cloud services. T-Systems continues to roll out new cloud services in response to market demands. The provider has been certified to provide hosting services for the SAP HANA Enterprise Cloud, which enables it to provide end-to-end big data services from the cloud. It also has a strategic partnership with Cloudera to deliver cloud-based analytics solutions via the Apache Hadoop framework. The partnership involves joint solution development. Big data analytics will be key to T-Systems overall future growth strategy, along with cloud and IT transformation, digital business models, and seamless international IT. Other areas of focus for innovation include workspace applications, secure , and futuristic telecommunications services. The SME long-tail opportunity needs to be addressed better. Telekom Deutschland s Business Marketplace, which is based on AppDirect, is the largest cloud SaaS marketplace in Europe in terms of its offering. However, with only 34,000 subscriptions, it is one of the least successful. Its slow traction has been the result of limited channels to market, multiple marketplaces for various verticals, and general customer concerns about security issues. These concerns are mainly caused by media coverage of Edward Snowden and a general lack of knowledge about cloud computing and its self-service features. Ovum views this as a missed opportunity given the strong uptake of SaaS by SMEs globally and the large number of SMEs in the German market, representing a significant portion of the German economy. Cloud service overview Cloud portfolio T-Systems cloud portfolio addresses enterprises, SMEs, and consumers with a consulting arm. Its cloud services portfolio comprises IaaS, PaaS, SaaS, and desktop-as-a-service. The offering is complemented by services available from Deutsche Telekom's Business Marketplace, such as Office 365, Symantec Endpoint Protection, TeamLike, Strato HiDrive Pro, and a range of other applications, as well as mobile device management, managed video, and several other applications. Complementing the cloud services, T-Systems has a wider portfolio offering readiness services, migration and application transformation services, and integration and brokerage functions. SME Telekom Deutschland s Business Marketplace is at the center of its cloud SME strategy. In this marketplace, SMEs and enterprises can access approximately 49 applications and services on a single secure cloud platform. These applications include Office 365, Symantec Endpoint Protection, TeamLike, and Strato HiDrive Pro. SMEs can either procure them directly via flexible subscription models or test them for 30 days. Ovum anticipates improved traction Telekom Deutschland is expected to increase its sales and marketing efforts for Business Marketplace. Since CeBIT 2015, Business Marketplace has become a core component of the Digitization Made in Germany campaign, through which German SMEs needs are expected to be addressed. A series of bundles combining tariffs, hardware, and cloud apps from the Business Marketplace will give them access to social intranet tools such as TeamLike and Deutsche Telekom s online storage tool, TeamDisk. The portfolio is expected to be continuously revised to improve the customer journey through a focus on contents and simplifying booking and usage processes. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 3

4 Other cloud solutions for SMEs include DeutschlandLAN, which focuses on business communications. Based on Lync, it gives customers a PABX, with accounts and company address books. Voice and videoconferencing solutions can be added as part of the bundle. Further solutions include cloud MDM and D , a maximum security cloud system that enables companies to send highly confidential documents In 2014 Deutsche Telecom launched its SME plan, which was intended to allow SMEs in Germany to have a customized range of ICT services. The program was based on new integrated offerings from Deutsche Telekom and its cloud, IT, M2M, and communications partners. An important component of the initiative is the increased provision of integrated products and cloud solutions. New cloud offerings include Managed Workplace, which offers hosted desktops from the private cloud, and a social enterprise network to help businesses easily and professionally cooperate with customers. Deutsche Telecom is expected to take end-to-end responsibility for the provisioning, management, and billing of the entire solution. In early 2015 DT launched five Wirtschaftswunder packages targeting SMEs. These packages allow companies to gradually migrate their business processes into the cloud and master key challenges such as greater flexibility and productivity, better collaboration, and greater customer proximity. The five packages are: IP Digitization, which allows companies to migrate to IP-based communications. Office Digitization, which helps companies lay the foundations for their digital offices and includes Microsoft Office software, social collaboration software, Cloud Storage (hosted in Germany), and a security application. Hotspot Plug n Play, which allows companies such as small restaurants to offer their guests free Wi-Fi by sharing their existing Internet access with customers. Industry 4.0, which opens the potential of connected industry by enabling SMEs to network their machinery quickly and simply and monitor production conditions. MagentaEINS Business, which includes fixed network, mobile communications, and cloud applications (e.g., storage and audio and video conferencing) in a single, comprehensive package. In addition, there are add-on options from its portfolio. Ovum believes that T-Systems can go further in improving its Business Marketplace by either partnering with more ISVs or by nurturing newer solutions via its PaaS offering. These newer solutions could be horizontal, vertical, or even role-based applications. There is strong evidence that SMEs would like a cloud-in-a-box offering from a single provider; this would include a bundle of communication and managed services, along with a series of cloud offerings. Rivals such as Azure, SoftLayer, and AWS have far more extensive marketplaces that allow SMEs and even enterprises to have a one-stop shop experience with a single cloud provider. The ability to bundle communications services and collaborative applications, security, and hosting services with cloud is one of the strongest cards that telcos can play in the cloud industry. Enterprise T-Systems is recognized as one of the pioneers of cloud services, having launched its utility computing service in Since its inception, T-Systems has invested heavily; it has close to a global footprint, with more than 20 datacenters, but it has concentrated on companies with their Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 4

5 headquarters either in its home market, Germany, or the rest of Europe. It is arguably the most experienced cloud provider among telcos, with more than 2,800 deals in 2014 and cumulative revenues of $2.1bn between 2011 and Its key global and local cloud deployments include BP, Shell, and Singapore Sports Hub. T-Systems strongest trump card in the cloud game is its partnership with SAP: it is SAP s largest telecoms service provider partner globally. It has extensive SAP experience and capabilities, which gives it enormous credibility with enterprises that have a large SAP installed base, particularly manufacturers. T-Systems IT consulting arm has experience in cloud assessment and migration and is often used as a door opener as cloud becomes an increasingly consulting-led engagement. Its integration capabilities are also highly sought, especially in a hybrid cloud environment, and it also offers dynamic service for SAP applications. T-Systems other enterprise cloud services include: Dynamic Services for Infrastructure Dynamic Services for other applications SaaS Dynamic Services for Collaboration, which leverages the Microsoft suite of products (Lync, Exchange, and SharePoint) Dynamic Services for UC with Cisco (hosted collaboration solutions) Unify (video production platform for OpenScape). Dynamic Workplace is offered through Managed Workplace Services, where T-Systems focuses on helping enterprises virtualize their applications in a private cloud environment. The provider has also been certified as a hosting partner for SAP HANA and has a strategic partnership with Cloudera, providing end-to-end big data solutions and consulting services to enterprise customers. It believes that big data will be a major component of its overall growth in the next few years. T-Systems also has strong cloud integration and orchestration capabilities, which are critical in hybrid cloud environments. In early 2015 Telekom Deutschland will launch a number of new cloud products and services, especially for larger enterprises: The Digitization Portal, which is based on the Business Marketplace and enables companies to create their own cloud app stores and thus monitor the centralized administration and distribution of applications more effectively. Deutsche Telekom helps companies with integration and hosts the platform in its German datacenters. The new enterprise version of the social business collaboration application TeamLike, which will be run on dedicated servers servers operated exclusively for the customer in Deutsche Telekom s German datacenters. The upgraded Managed Workplace, which offers a fully fledged managed workstation from the private cloud and includes an integrated IP PABX as well as a video and collaboration solution with support for call swipe. New modules from its private cloud portfolio, Managed IT Services, including Managed Backup to the Cloud. The big data solution SAP HANA, which is based on the database technology underlying SAP s in-memory computing. Deutsche Telekom ensures secure operation of the SAP infrastructure in its highly secure German datacenters. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 5

6 Go to market Structure T-Systems sales function has a regional and industry sales structure. It is segmented by regions (Germany, EMEA, Asia-Pacific, and America) and has industry sales specialists across the automotive, manufacturing, public, and healthcare sectors, among others. Sales teams and personnel have dedicated cloud growth targets, reflecting the provider s strong emphasis on growing cloud services. There are also dedicated pre-sales resources that provide sales support capabilities. Go to market For the enterprise market, T-Systems continues to take a direct approach. It believes this is the best way to articulate its Dynamic Services differentiation as well as to bundle additional ICT services. At the same time, it has strengthened its partner-focused sales approach. The partnerships it leverages as a sales channel include ISV and software partners such as Microsoft, SAP, and Salesforce Ovum s assessment IT and SAP capabilities are key differentiators The cloud market is increasingly dominated by global service providers that leverage their scale to price their services competitively. It has reached a critical junction where the pricing pressures that the industry is facing mean it is almost impossible for any telecoms service provider to compete head-on with providers such as AWS, Google, Azure, and SoftLayer. T-Systems has managed to carve itself a foothold in the marketplace by focusing on helping its enterprise customers migrate their SAP and Microsoft workloads to the cloud. This strategy has enabled it to largely avoid the brutal price war that has characterized the cloud market over the past 12 months. Its focus on the higher end of the market and on cloud integration and orchestration puts it in a very different position and allows it to command a premium. T-Systems has also been successful in upselling application performance, lifecycle management, and modernization services with its cloud engagements. These are high-value services, especially given that most enterprises are moving toward a digital era. The provider touches on critical technology segments such as workspace, mobility, and big data that will help that deliver the next level of growth. It has also extended its relationships with Salesforce, VMWare, Microsoft, Cisco, and Unify to expand its portfolio of enterprise cloud services. Ovum believes that T-Systems focus on SAP and its IT integration heritage give it a lot of credibility in the marketplace. The provider can become the de facto trusted advisor to the large T-Systems SAP installed base that is still on-premise and has yet to make its way to the cloud. Looking ahead, T-Systems should consider broadening its capabilities beyond SAP and Microsoft in order to expand its addressable market. Its deep IT heritage should allow it to move smartly up the food chain. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 6

7 Brand recognition beyond Europe T-Systems continues to underperform in regions outside Europe, where it does not enjoy the same brand recognition in board rooms as it does at home. Ovum believes that T-Systems has made a deliberate decision to focus on its home market and be successful before investing in other regions. However, it must recognize that the larger and greater growth opportunities lie outside Europe, in markets such as Asia-Pacific and the Americas that have large numbers of manufacturers and healthcare establishments (T-Systems traditional target verticals). The telecoms service provider community does not include any global cloud providers. T-Systems unique combination of ERP software integration, cloud IT infrastructure, and vertical solutions makes it the perfect candidate to be the first to achieve that status, provided it selectively places investments and bets in certain key markets outside Europe. Cloud is a channel game, especially in the SME segment Scale can bring many benefits, especially in cloud. T-Systems should focus on building a larger and more creative channel and partner strategy and consider how it can leverage its traditional partner ecosystem more effectively. Its decision to join Cisco s Intercloud program is a positive development. Further areas that it can explore include partnering with other system integrators and cloud consulting firms that focus on manufacturers, or SAP customers that could eventually leverage its Dynamic Services for SAP solutions. T-Systems has also done well in nurturing an ISV ecosystem, but it could do more to bolster its Business Marketplace. Channels are also critical in the SME space, given that this is the best way to achieve scale; this is another area on which Deutsche Telecom should focus. Appendix Further reading Cloud Strategy Snapshot: Telefonica, TE (March 2015) Author Adrian Ho, Principal Analyst, Enterprise Services [email protected] Further reading Ovum Consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Ovum s consulting team may be able to help you. For more information about Ovum s consulting capabilities, please contact us directly at [email protected]. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 7

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