When people think of Telstra, most people think of a phone company, rather than one of Asia’s fastest growing cloud services companies. But that could all be about to change.
David Thodey’s Telstra is in the middle of a radical transformation. Unfortunately for the local economy, many of the jobs created are likely to be offshore.
To find out what’s happening and why, we need to go back to July 1, 2005, when Thodey’s predecessor, Sol Trujillo, took over as Telstra’s chief executive.
The Telstra Trujillo inherited
While Telstra under Trujillo is often maligned, it’s important to remember the company he had inherited.
Despite its recent privatisation, the public service mentality ran deep in the company. The different divisions – residential fixed lines, business fixed lines, internet (BigPond), directories (Sensis), mobiles (MobileNet) – often operated as if each were entirely separate entities. Each of these fiefdoms had its own separate systems, management structures and contact centres.
While revenues from internet and mobiles were growing, the company’s bread and butter business, fixed line phone services, was in decline. Voice Over Internet Protocol (Voip), Skype and calling cards were draining its once lucrative long distance and international calls business. Meanwhile, its mobile network was divided between two incompatible technologies: CDMA for rural areas and (2G) GSM in the city.
Trujillo’s four key changes
Aside from a major shift in corporate culture, Trujillo implemented four important changes.
The first big change was replacing the old CDMA network with a new network that used the latest 3G GSM technology, known as High Speed Data-Packet Access (HSDPA), which could use the old 2G mobile network in the cities as a fall back. The new mobile network, branded as Next-G, cost about $1 billion to rollout.
The second was to implement a policy called “one factory”, which saw the company’s key infrastructure business units become more integrated with one another.
The third, related to “one factory”, was an IT transformation, which replaced the myriad of legacy It systems across the group with a single, integrated set of internal systems. This was important because it made Indian IT and outsourcing firm Infosys a key partner, as articles at the time showed.
Unfortunately for Telstra, the fourth never got off the ground. Trujillo proposed that the telco would roll out a next-generation fibre-to-the-node broadband network, as long as the Howard government gave it a “regulatory holiday” on the new technology.
A transformative deal
Despite intense lobbying, Trujillo’s vision of a Telstra-controlled broadband network fell through. In June 2011, Telstra’s then-new chief executive, David Thodey, signed a landmark deal that will eventually see it paid $11 billion to decommission its copper network as the National Broadband Network is rolled out.
The deal was transformative for the company. Instead of being the incumbent owner of Australian fixed-line copper phone network, Telstra was a company with a bucket load of money to invest in any business it chose.
Thodey chose to grow the company’s cloud-based services arm – or in Telstra language, Network Applications and Services. The target was the lucrative and growing cloud computing market in Asia.
But would it be Australian workers, or employees overseas, who would serve these new, international customers?
The Infosys deal
Last July, the company signed a second, equally important but less commented upon deal. As BRW reported at the time, it agreed to outsource the roles of 170 full-time staff and 90 contractors from its NAS division to its old Trujillo-era partner, Infosys.
David Burns, Telstra’s head of NAS, revealed the company’s growing international base would be serviced as part of the Infosys deal.
“Should the decision be made to proceed, we’d begin to move these services to India from October of this year  and it would take a period of six to 12 months to occur. These roles are located in all of the major capital cities including Hobart and Canberra.
“[With the move,] I get the ability to respond to growth, I get the ability to meet customer demands internationally [emphasis mine] and domestically and I get the ability to do that in a responsive and competitive way.”
Thodey’s transformation: From telco to cloud IT company
Since the key Infosys and NBN deals were put in place, Telstra has been busy selling off traditional telecommunications assets – such as directories or overseas mobile carriers – while purchasing cloud service providers.
The shift has seen Telstra acquire cloud-based services businesses O2 and NSC, form a cloud computing joint venture with Telkom Indonesia and begin offering a cloud-based multipoint video conferencing service called Blue Jeans Network in Australia.
At the same time, Telstra recently sold a 70% stake in its Sensis directory advertising business to US-based private equity firm Platinum Equity for $454 million.
The telco also divested its stake in Hong Kong-based mobiles business, CSL, to HKT Limited for $US2.425 billion.
Thodey’s biggest announcement yet
While these deals gave Telstra access to cloud-based services such as video conferencing and a large reseller in Indonesia, it still lacked a global cloud-based delivery platform.
Getting this in place is crucial – after all, you can’t have a global cloud computing company with customers across Asia without a platform to deliver those services, now can you?
This piece of the puzzle fell into place earlier this month, when it signed a partnership deal with network equipment manufacturer Cisco.
In turn, this week Cisco announced it would build a global network of cloud computing services, dubbed the ‘global Intercloud’, with Telstra announced as a key partner in the project.
A big IT transformation, but few new local jobs
Telstra is now on track to become a major cloud services company across the Asia-Pacific region.
It remains unclear how many of the 170 job losses announced as part of Telstra’s deal with Infosys are still to come.
What is clear is that Telstra plans to, in the words of Burns, “meet customer demands internationally … in a responsive and competitive way”.
Unfortunately for the Australian IT sector and local tech workers, a significant part of “responsive and competitive” delivery appears likely to be done with outsourced jobs.