Telefonica’s CIO has said tackling legacy infrastructure is vital as the business adapts to the rapid emergence of Google and WhatsApp in the telco industry.
Speaking at Computerworld UK and CIO UK's Agenda 16 event in London, Telefonica’s Global CIO Phil Jordan said the business was spending half of its capex budget on maintaining legacy systems when he first joined in 2010 – but it now spends 65 percent of its capex on change programmes instead.
The telecommunications industry is no more exempt than any other when it comes to the disruption from relative newcomers like Whatsapp and Viber, and "particularly" with Google. To match that pace, Telefonica began a multi-year transformation project to modernise its 7,000 legacy systems.
“Look where the disruption has come for us,” Jordan said. “It came in our core product: messaging. WhatsApp was a messaging company – we were a messaging company and so were they and look how they are building their business.
“Without great IT and great digital experiences, the future of our business is in doubt,” he said, “which is quite an awakening for a network company historically.”
Speaking with Computerworld UK, Jordan asserted that transformation absolutely has to be dominant in any business. “If you’re overly burdened with complexity and lots of legacy like we were, and other businesses are, quite simply you end up just consuming all your resources on maintaining the status-quo," he said. "Maintaining legacy doesn’t drive the business forward.
“It’s a better use of resources if you can simplify and focus your investment on transformation. We’ve been driving a massive transformation for three, four years now. We’ve had the best operational performance year-on-year every year for the last four years, and that’s simply because we’re not changing old, obsolete legacy.”
Jordan estimates that in the medium term, up to 40 percent of revenue is under threat if the business does not change with the times: “That is about entering new markets, looking for growth in vertical markets, looking to partner differently, but we also have to reflect back on our core product and make sure we’re changing to be relevant in the digital world.”
Telefonica decided to transform the way it operated – from a model Jordan described as fragmented and constrained by a lack of convergence – and began to focus on processes first, as well as its policies and simplifying how it went about its operations.
“We needed to enable that as simply as possible with new technology,” he said. “Unless we were going to fundamentally change how this business worked from campaign to market we simply were never going to deliver the digital capability we needed.”
Telefonica began this change within Argentinian operations, but the programme was so successful it now has 15 countries running the scheme in parallel. This wasn’t what Jordan expected – he was hoping for one country every three years – but it was indicative of the demand.
Ditching legacy systems does not bring huge cost benefits quickly, however. “Typically you’re switching off things that are old, obsolete, they don’t cost much,” Jordan said.
But in doing so, firms can focus more clearly on their future.
“I think simplification is just virtuous,” Jordan said. “It enables you to channel your investment, focus your business, and actually things perform better for our customers.”
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