- The refocused geographical target of Deutsche Telekom’s T-Systems ICT solutions business highlights a fundamental shift in ambitions from carriers’ earlier global domination goals in the enterprise market.
- Market evolution, technology developments, and commercial reality (the need to lower costs) have made carriers refocus onto more sharply defined target geographies and customers.
In the heady days of the 1990s, when telecom markets in the Western world opened up to competition, carriers developed plans for global domination – sometimes on a go-it-alone basis, but more often than not via partnerships and joint ventures. Who today remembers Global One (Deutsche Telekom, France Telecom/Orange, Sprint), Unisource (KPN, Swisscom, Telia), and Concert (BT-MCI, then BT-AT&T)? Billions of dollars were spent investing in worldwide expansion ambitions, but nobody emerged as triumphant in the battle to dominate the global enterprise market. More recently, Telefonica has been reducing its footprint in Latin America, Vodafone has refocused on Europe and Africa, and BT has been selling off its in-country assets outside of the UK. T-Systems will still support key strategic accounts under its revised strategy, reflecting a reduction in MNC account ambitions which is salient across the whole sector.
On the face of it, the strategies were logical: national markets were opening up to competition and the globalization of commerce was marching ahead. Telcos were basically following macro trends. So, what went wrong? First of all must be culture and mindset; with a background of domestic market domination, the assumption was that global domination was a logical next step, but deals were driven by spreadsheets, not customers. Business development was a list of key countries rather than an assessment of target customer needs. Next, you have to look at the actualities of expansion, with choices limited to partnerships or joint ventures. (There were very few outright acquisitions, and organic network investment was too slow and expensive.) And the problem with JVs and partnerships is that they tend not to work unless both parties have precisely aligned strategies, branding, and cultures. Finally, in terms of market size and attraction, management tended to obsess about the MNC segment when most business (and profit) remained in-country.
Looking at the market today, there has been a recognition of the limitations of global ambitions, with service providers realizing there is more to be gained by being strong and deep in a few markets than weak across multiple ones. So they are focusing on full-service provision in national markets, exploiting strength and depth of portfolio and networks, and leveraging capabilities across only as many countries where they can reasonably deliver successfully.
This does not mean that the MNC segment is being ignored, but technologies such as SD-WAN have changed the emphasis from infrastructure ownership to providing solutions using overlay/underlay networks. In the context of a deglobalizing world buffeted by pandemics and geopolitical competition, it is also more pragmatic to be able to serve global customers over third-party infrastructure and to focus on a reconfigured value chain with services such as security, cloud orchestration, managed mobility, and IoT, rather than dwelling on increasingly commoditized international physical infrastructure ownership.