During Huawei Connect 2016 last year in Shanghai, Thomas Aschenbrenner, director of sales and marketing for Open Telekom Cloud at T-Systems International, spoke about the importance of the cloud, cultural changes and the launch of the Open Telekom Cloud platform.
Good morning, Shanghai! It's my pleasure to be here in this astonishing and impressive high-tech metropolis of Shanghai. Thank you for inviting me.
Cloud is really impacting, moving and changing IT and the business world. This has been a trend over the last couple of years, as stated by Gartner. Some big analysts have already prognosticated that cloud, IoT and Industry 4.0 will be the main trends. It will be the main trend. They will push it and even accelerate it very much if you go to the numbers driven not only by technology, but also by businesses and customer requirements and a sort of new digital DNA and other areas where we are getting into.
There is a big digital meteorite punch hitting the IT and business world. And those companies and customers who are not really following that trend might be pushed out very soon. So there is a digital revolution going on, or the so called "survival of the fittest" in terms of a digital change. So the question of being cloud or being out continues to be the main trend in terms of the forecasts and prognoses.
We all know the autonomous cars and intelligent cars. This is also a subject and a field where we are heavily engaged with Daimler, BMW and Audi. About 75% of the vehicles in the future might be completely autonomous, being driven by IoT and big data, and connected to the cloud. And this is also a huge business in terms of future devices being connected. So there will between 40 billion to 50 billion devices being connected through IoT in the future. And the IoT business, according to Gartner, is about $1.9 trillion across various markets by 2020.
So the cloud is actually everywhere, and the cloud is growing. It's also a nice comparison if we look at our children. I mean, if we look back, we just realize how big they became during the last couple of months and years, and this is pretty much the same for the cloud business.
The total revenue that Gartner prognosticated for cloud is about $1 trillion. IT spending within the next five years on the cloud will be most affected by IaaS [infrastructure-as-a-service] and platform-as-a-service [PaaS] would be about $300 billion. So we will turn in huge numbers for the next five years. And 46% of the spending from the IT department will be IaaS in 2020, according to IDC.
The growth rate of public cloud in 2015 already exceeded 50%, according to Synergy Research Group. Cloud has already become mainstream across the classical tipping point stage, and it will continue to be the main trend in the future.
Digital management, cultural transformation are key
Finally, the question is not only about technology and business. This is why I bring it up very often when I'm talking cloud. It's also about a sort of digital DNA: digital management and leadership. Obviously, the question is: Are we on the right-hand side, being a classical and hierarchical organization top-down, stiffly regulated, strategic long-term release cycles and planning organized and cost-driven, rule-driven step-by-step approach, with complex solutions and being heavily planned?
Or, are we working on the other side in terms of how we run our company and how we go to customers in terms of being a digital leader, being free-spirited, working dynamically, fast-speed task forces being tactically decentralized, having a loose organization which is not only focused but has the freedom and flexibility to innovate and go further?
Normally, I'm not quoting competition, but I've just found a very nice quote, which is from Amazon Web Services Inc. They just have one principle. They have a "two pizza" rule. I'm not sure how many people know that rule. The "two pizza" rule says that a team that cannot be served with just two pizzas being ordered late at night might be too big, too complex and too slow.
Google (Nasdaq: GOOG) also has a very similar principle, something like improve something by ten times rather than by 10%, which will be a business rule in terms of revenue and customers, and everything of innovation coming from everywhere. This is a very nice saying and rule for this digital leadership and DNA.
What I also found interesting in terms of the change of the cultures and thinking in this digital area and cloud world is thinking about the stages of digital transformation.
There are different models, and I have just picked up one. Starting with the first stage, where we might just do business as usual with no changes, and cloud, Internet and digitization are just nice. But things are just going on, and it's a more or less a wait-and-see approach.
The next stage is where active customers who are already aware that first pilots are running, and that projects and cloud are being tested, and there are several projects of experimentation going on.
The next stage is being more formalized: You have plans and projects structured to waves of innovation going on, up to the strategic step. I think this is a major step from formalization to strategic. Within this strategic step, you will have full high-level executive support and involvement in a transformation process and change process within the company.
Converge is the next material level. Within that converge model, you are setting up dedicated digital organizations in your company. You have dedicated systems in place, which are leading in terms of innovation. You have a digitization quota of over 50% within your company.
Last but not least is the highest level, that is the innovative model, running really leading-edge projects. I'm not talking about basic cloud or online shops or applications. This is really about trying to be on the top of the evolution, and everything within the company might be digital. You have been setting up completely new ecosystems, teams and structures, and you are facing constant change and dynamic transformation within your company. So I think the question for all of us is: What do you honestly think might be your current stage? I think many of us might probably be in the first three or four levels, and the five or six are exaggerated, very down the street.
Open Telecom Cloud launches
So let's get into the products and projects we have had together with Huawei. I want to thank you again for asking me to be here at this huge conference. Huawei and T-Systems started our partnership about two years ago, talking about how we can really access the cloud business with a new product called the Open Telecom Cloud, which is a simple, secure and affordable public cloud platform for the international market. I will come to that in a couple of minutes.
Let me just highlight why this partnership is so important and so successful. On the one side, Huawei Technologies Co. Ltd. is an undefeated player and one of the biggest players in terms of competencies like IT hardware, data center networks, storage, IoT, big data, mobile and all of those things being converged in a cloud go-to-market model. Huawei also has a very strong footprint in the Asia Pacific. I think an expansive worldwide approach is one of the big pluses of having Huawei working with Deutsche Telekom.
On the other hand, Deutsche Telekom AG (NYSE: DT)and T-Systems International GmbH are market leaders in telecommunications from a carrier and network perspective in Europe, and also we are the number three brand in the US with our mobile business. In terms of cloud, over the last five years, we always have been the top player in private and hybrid clouds in Germany and Europe. So working with hundreds of large companies, such as Shell, BMW, Bosh, SAP and Allianz, allows us to leverage our public cloud business from this a very strong starting point and also from this strong positioning.
We have set a very ambitious goal for ourselves: Entering the public cloud market and competing against the big established competitors. So we set the target of getting 20% of the market share within the next five years in Europe, and then extending that business on a worldwide basis.
According to those huge targets over the last 365 days, I just try to do a quick recap of what had happened last year in Shanghai, and this year in Shanghai again. For the Open Telecom Cloud, let me just give you two impressions.
We signed the contract on the board level in October 2015, so this was just one year ago. Then we finalized the product for the Open Telecom Cloud in just a couple of months. All of you know how dynamic and complex this market is. You can imagine how fast these development and go-to-market cycles were. We briefed to the entire press in Europe and analysts before the launch, and trained over 2,000 sellers and account managers and experts within our corporation. We had a huge pre-launch already in 2015 in Europe, spending millions of euro together with Huawei entering that market.
This has been topped by a significant -- I would say -- the biggest product launch during the last couple of years. At CeBIT 2016, which is the biggest IT expo in Germany, this was the major product launch. There we had (Huawei CEO) Eric Xu and (Deutsche Telekom CEO) Timotheus Höttges as the CEOs that jointly introduced the Open Telecom Cloud to the customers, the press and analysts.
After that, we had a mega world advertisement and online PR push just to give you some impressions about the level of activity and spending we had to really make the Open Telecom Cloud known, recognized and successful. I think the most important aspect of all is that you have full top management attention, and this is what we are having with Huawei and T-Systems. So we are in every boardroom regarding the top management and executive levels for the Open Telekom Cloud. This is one of our top priorities.
Now we need to look forward into the next steps, next moves, next roadmaps and topics we are developing. The race is on. We have a very competitive offering in the market, being positioned as a simple-to-use provisioning platform. It is highly secure, that's another important thing, especially in the large enterprise market, and this is something we have been leveraging, especially in Germany with data, compliance, standards and requirements. And finally, it is affordable. Due to this big partnership and cooperation, we are able to undercut existing prices of competitors on a regular basis, and we will continue to do that.
On the other hand, it will go onwards, with a couple of next things and features that are coming. We are not thinking in the standardized big release cycle. We are developing more agile processes and having new orderly release cycles. So we are pushing the next steps, which will be the extended cloud container engine.
We have already brought this up with the current releases, but we will continue extending that container engine. We are going to have RDS, TPU and VTPU services. SAP will provide support in terms of the HANA cloud platform, and SAP Sweep will come in the fiscal year 2016, dedicated to provide cloud support and bandwidth-as-a-service, because this is a big thing we can use as a carrier on the one hand, and on the other hand as a system integration house bringing together both strengths and opportunities. Migration-as-a-service and virtual-desktop-as-a-service will come in 2017. And also we are discussing – this is not an official announcement – international extension in terms of availability zones and data centers in the Asia Pacific as well as in the US and Americas.
There is quite a lot going on, and I just came out of a meeting with Huawei where we talked about additional features and being very driven by customer requirements and meeting them. I said at this meeting: "There is no fixed dedicated roadmap. This also goes down to this new digital DNA, processes and leadership. You have to move fast and be flexible like big companies like Deutsche Telekom and Huawei."
The cloud, the change and the new culture. I would say it is on. And also the Deutsche Telekom cloud is. There are big opportunities for everybody and this huge market.
And last, I would like to quote a saying: "When the winds of change blow, some people build walls while others build windmills." Let's build big windmills, especially IoT-connected windmills, hopefully. And let's take our customers through the cloud above. Thank you!
— Mike Robuck, Editor, Telco Transformation