Introduction: The role of skills and culture in telco transformation
Skills and culture are the biggest barriers to transformation
It is generally accepted that the telecoms industry is currently undergoing a major process of transformation. In very general terms, telcos are engaged in a transition from being primarily operators of physical infrastructure and networks designed for the efficient delivery of analogue voice and packet data services, to being providers of cloud-based (distributed software, IT and virtualised) infrastructure, platforms and digital services (including communications).
STL Partners has documented this sea change in numerous previous reports focusing on different aspects of the transformation: technology, processes, business models, organisation and culture. This report focuses more closely on two interrelated aspects: skills and culture.
A recent STL Partners ‘summit’ workshop of leading SE Asian operators found that skills and culture are presently seen as the greatest barriers to transformation:
Figure 1: Benefits of and obstacles to transformation
Source: STL Partners
The above chart, reporting the results of a snap survey of attendees of the SE Asia summit, could be interpreted as implying that skills and culture change are of very little direct benefit to telcos, given that only two respondents indicated that it had “the greatest value” to their organisation. But at the same time, telcos are clearly focused on addressing the skills and culture issue, as this was overwhelmingly the most salient transformation challenge that the senior operator executives picked out. And the results of this small but high-quality survey are entirely consistent with STL Partners’ findings in other parts of the world, including research conducted for this report (see Sections 2 and 3 below).
There is a chronic shortage of essential software and IT skills in the industry
Precisely why have skills and culture emerged as such a critical challenge at this time? The skills issue is easier to analyse. The new business and technology model to which operators are transforming places a much greater emphasis on software and IT skills than traditional telco operations: skills such as software development and coding; digital product development and operations (DevOps), and marketing; cloud and IT infrastructure deployment, maintenance and support; etc. There is a chronic shortage of highly-skilled people in these areas, which varies country by country but could rightly be described as a global shortage owing to the international character of the telecoms industry. It is the top talent that is needed right now given the complexity of the technological and IT challenges that are involved in the migration from the legacy Telco 1.0 to the telco-cloud service provider (Telco 2.0).
Telcos have adopted a variety of methods to try to close the skills gap. These are discussed in more detail in Sections 2 and 3 below in the context of conversations on skills and culture we have had with five operators from different parts of the world. On skills, these operators have adopted three broad approaches:
- Aim to fulfil the skills requirements of the business from existing staff as much as possible by giving every employee the opportunity to up- and reskill (AT&T)
- Try to meet the skills needs of the business through a combination of selective hires and retraining; but accept that a given percentage of positions in the company after the transformation phase can only be filled by new hires, and that existing staff whose functions have become redundant or who cannot adapt will need to be let go (Telkom Indonesia, Middle Eastern operator (MEO), and international enterprise networking provider (EO))
- Accept that the business needs to transform radically and rapidly, and a relatively high percentage of people without the requisite skills or whose roles have become redundant must be let go (former developed-market incumbent (DMI))
- Executive Summary
- 1. Introduction: The role of skills and culture in telco transformation
- 2. AT&T: A textbook exercise in re-skilling and culture change
- 3. Two other models of skills development and culture change
- 4. Conclusion: Skills are necessary but not sufficient, without culture
- Figure 1: Benefits of and obstacles to transformation
- Figure 2: Old and new telco cultures and business model
- Figure 3: MRI scans showing parts of the brain activated by social rejection and physical pain