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Core Strengths

Portugal Telecom leverages knowledge to expand abroad and infrastructure to grow at home.

by Fred Sandsmark, November 2013

The global telecommunications market has seen unprecedented upheaval in recent years. State-owned or monopoly operations were sold off or broken up. Investors brutally punished under-performers. Data-hungry mobile phones became devices of choice. Demand in emerging markets exploded. The internet blossomed, and television went digital. A large percentage of global communication today—including voice telephone calls—is an application on a converged digital network.

Portugal Telecom

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Portugal Telecom (PT) has survived and thrived through all this turmoil. In two decades, management has transformed the company from a hamstrung incumbent in a small market into a flexible and increasingly global provider of converged communications, IT, and cloud services. In the process, developers at PT have worked with Oracle to create IT solutions that streamline and standardize business and operational processes to keep the company competitive. And they’re augmenting this intellectual property with investments in data centers and infrastructure to extend the company’s reach, both at home and in growth markets in South America, Africa, and the Pacific.

“This is our new core: investment in infrastructure, computation with communications, and value-added cloud offerings that we can take to emerging countries,” says Miguel Moreira, managing director of Portugal Telecom Sistemas de Informação (PT-SI), PT Group’s independent IT division.

Birth of “Telco in a Box”

The company’s story begins in 1994, when Portugal’s government began privatizing its century-old state-owned telecommunications enterprise. By 1997 the new company, now known as Portugal Telecom, was 75 percent privately held—the most privatized European carrier at the time. But privatization was just one part of PT’s 1990s metamorphosis; indeed, the very business was changing. Leadership rolled out internet access and mobile phone service—including MIMO, the world’s first prepaid mobile phone—in the first half of the decade.

We’re trying to lower the barriers of adoption for very good technology. That’s why we are partnering with Oracle.
Miguel Moreira,
Managing Director, Portugal Telecom Sistemas de Informação

In 1998 management made the company’s first overseas investment, in the Brazilian mobile phone company VIVO. These ventures confirmed what PT managers knew intuitively: communication networks were becoming virtualized, meaning that differentiation and competition would occur in telecom services, not in access. “We saw that the market was changing,” Moreira says. “The telecom business was becoming more and more commoditized.”

To adjust to these market changes, PT’s leadership began planning triple-play services (television, internet, and telephone), expanding wireless offerings, and building an IT services business within Portugal. But this expansion required business and operational processes that were radically different from those PT used as a phone company. PT needed to tightly integrate back-office IT functions such as provisioning, charging, billing, and customer care to swiftly address customer demands and competitive pressures; old systems that might take weeks to activate a new phone service simply wouldn’t cut it. A team at PT-SI began redesigning the company’s business applications to meet these new demands.

Carlos Palito, PT-SI’s general manager and a 10-year veteran of the PT Group, remembers the challenges they faced. “If you want to build a triple- or quadruple-play operation, you can’t do it with a legacy approach,” he recalls. A solution remained elusive until 2006, when PT leaders learned about the nascent Oracle Communications solutions. PT management admired Oracle’s strategic vision and chose Oracle Communications solutions as the foundation for its new solution set.

Collaborating with Oracle and Accenture, PT-SI developers devised a modular, integrated, preconfigured business support system and operations support system incorporating customer relationship management, analytics, reporting, and more within an application integration architecture. They called this product “Instant Telco” because it supported very rapid launch of new telecommunications products and services.

And management didn’t stop there. The PT-SI team and PT Inovação (the company’s R&D division) also developed modules to support governance, change and campaign management, convergent service delivery, and online charging (on top of the online charging system created by PT Inovação—a system that provides service to more than 130 million real-time service users worldwide, including 75 million in a single installation), among other functions that a converged carrier needs. The architecture for these modules was based on Frameworx, an industry-standard process model from TM Forum (formerly TeleManagement Forum). Together, the modules provide a global convergent solution that delivers “quadruple play” capabilities—television, internet, mobile, and fixed-line services—also known as nPlay in the telecommunications industry.

Portugal Telecom


Number of transoceanic cables that make landfall in Portugal
10

Percentage of revenue Portugal Telecom has reinvested in its business—roughly double the industry average—since 2008. Most investment has gone to infrastructure.
22%

Percentage of homes in Portugal served by Portugal Telecom’s fiber-to-the-home (FTTH) network. (The percentage is capped by regulation.)
40%

Percentage of the Portuguese population served by Portugal Telecom’s 4G wireless network
90%

The PT-SI team began deploying modules in 2009, and the wisdom of their strategic choice was quickly apparent. “In the past, the time needed to create new products was as long as a full year,” says Palito, noting that existing IT systems couldn’t respond to changing business strategy. “Today, the company can launch a new product, and align systems with the product, in only two months. And in cases where a rapid response is especially critical—for example, when a competitor launches a new offering—PT can move even faster, launching a competing offer within 24 hours.” The overall solution was named “Telco in a Box,” and today it has 14,000 users within PT and supports 12.7 million quadruple-play customers.

Reaching Emerging Markets

As Telco in a Box took form, the PT-SI team realized that it represented a new concept for the industry. They also knew that new and existing telecom operators in emerging markets were scrambling to meet burgeoning demands for services on converged networks, so Telco in a Box—which was designed to reduce time to market for new products and services— could complement and support PT’s goals for growth outside of Portugal.

“In Telco in a Box, we had an asset that we could sell and deploy for operators—even the smallest ones—to solve their problems, the same way we had done,” Palito says. Palito and his team knew that Telco in a Box would have traction with telecoms because a telecom had developed it. “We [telcos] have a different approach, and a different skill set, that cannot be found in a normal integrator,” he explains. “We speak the same business language, and with Telco in a Box we’re sharing our proven experience.”

Telecom industry knowledge helped PT-SI’s developers design Telco in a Box with core functionality that could be deployed quickly and customized rapidly. Their goal was to deliver 70 to 80 percent utility out of the box; within the remaining 20 to 30 percent, the solution could be customized to support specific customer and local market needs, such as taxation schemes. The delivery model incorporates both onshore and offshore activities to reduce costs and optimize execution.

The solution’s architecture enables PT-SI to fold enhancements that it makes for one customer back into Telco in a Box when those enhancements can benefit other customers. “The framework evolves based on real customer and business needs,” Palito explains. “Each new functionality is designed and coded by PT-SI, reviewed by Oracle to guarantee best practices, and tested in the field before being integrated into Telco in a Box.”

The first Telco in a Box deployment outside of Portugal occurred in 2010 at Cabo Verde Telecom in Cape Verde, an island nation off the west coast of Africa. There, Telco in a Box enabled a quadruple-play business with 430,000 customers. Two years later, Telco in a Box was deployed at Timor Telecom in the Southeast Asian nation of East Timor to support a triple-play network serving 700,000 customers. In both environments, time to market for new product bundles, services, and promotions has been reduced to as little as three weeks. By the end of 2013, Telco in a Box will be deployed at Mobile Telecommunications Limited in the southern African nation of Namibia to enable a triple-play offering reaching nearly 2.2 million customers.

In the past, the time needed to create new products was as long as a full year. Today, the company can launch a new product, and align systems with the product, in only two months.
Carlos Palito,
General Manager, Portugal Telecom Sistemas de Informação

Simultaneously, the company’s footprint in Brazil expanded through investment in and partnership with Oi, that nation’s largest telecommunications provider. In Brazil, PT leaders have been leveraging their company’s success in developing innovative, technologically advanced solutions for corporate customers, fixed-mobile convergent offers, mobile broadband, pay TV, and quadruple-play services. These offerings have improved Oi’s operational and financial performance and increased the potential for future growth.

PT-SI teams delivered Telco in a Box in Cape Verde, East Timor, and Namibia using a three-year build-operate-transfer (BOT) model, with PT-SI providing support. BOT financing enables the local carrier to acquire a more robust solution than they might otherwise be able to afford, understanding that payback will come as revenue grows. (In a classic virtuous circle, revenue will be more likely to grow if the carrier provides excellent service, which Telco in a Box can enable.) “We’re trying to put in a software and technology package that can serve them for the next 10 years,” Moreira says. “It may be a little overengineered right now, but it’s not going to be overengineered in two or three years.” Although all Telco in a Box deployments to date have been on premises, a cloud version is possible in the future (see the “Ahead in the Cloud” sidebar).

Power of Partnership

Telco in a Box is PT’s intellectual property, but its development and deployment have been a cooperative effort between PT-SI, PT Inovação, Oracle, and Accenture. Each party has brought strengths to the partnership: PT-SI understands real-world telecom operations, Oracle brings technical prowess and a solid technology foundation, and Accenture provides worldwide reach and knowledge of global business practices.

“We have been working on this concept together with Oracle and PT since the beginning, in order to build up a market solution, not a Portugal Telecom–only solution,” explains Eduardo Fitas, managing director at Accenture. “Accenture and Oracle can give the market confidence that Telco in a Box is an independent, market-leading solution that any telecom operator can leverage.”

PT’s teams are rightfully proud of their contributions to Oracle Communications solutions. “Since 2008, we have participated in the development and the roadmap of Oracle Communications products,” Palito explains. PT-SI, which is an Oracle Gold Partner in Oracle PartnerNetwork, sends people annually to meetings of the Oracle Customer Advisory Board and Oracle OpenWorld to share with the Oracle development team what works, what doesn’t, and what can be better. “Oracle hears us, and we see our recommendations reflected in future releases,” Palito continues. For example, in 2011 PT-SI recommended improvements to the roaming model in Oracle Communications that, based on PT-SI’s experience, would reduce the need for localization, and those improvements are now incorporated into the core Oracle product.

The goal of the partnership between PT and Oracle is more-powerful and more-flexible products for PT, its subsidiaries, and its carrier-customers. “We’re trying to lower the barriers of adoption for very good technology,” Moreira says. “That’s why we are partnering with Oracle.” Looking forward, as Oracle Communications solutions become even more complete and integrated, PT and Oracle developers plan to jointly evolve Telco in a Box, making PT’s solution even more agile and beneficial to customers. Moreira foresees that PT will expand its engineering systems and extend its solutions to improve business performance and lower total cost of ownership in additional functional areas within the telecom business. He adds that PT and Oracle have also collaborated on PT’s cloud initiatives and new data center, and that Oracle and Accenture are both helping PT explore how the Telco in a Box model might apply to solutions for healthcare, education, and other markets.

“We are looking at the long term,” Moreira concludes. “Our main revenues and profitability still come from connectivity, but that’s changing. We have to prepare for the future.”

Fred Sandsmark is a regular contributor to Profit.

 
 
Snapshot
Portugal Telecom

    • Location: Lisbon, Portugal
    • Industry: Communications
    • Employees: 70,103
    • Revenue: €6.6 billion in FY 2012
Snapshot Miguel Moreira
    • Managing Director, Portugal Telecom Sistemas de Informação
    • Length of tenure: 11 years
    • Education: BS in mechanical engineering, Instituto Superior de Engenharia de Lisboa
    • Personal quote/mantra: “Technology innovations and process reengineering go hand in hand.”
Ahead in the Cloud

Portugal Telecom delivers cloud services from stylish, efficient data center.

On September 23, 2013, Portugal Telecom (PT) connected a new cutting-edge unit to its network of global data centers via high-speed optical data network. Located in the mountain city of Covilhã, Portugal, PT’s new tier 3 data center is a stylish LEED Gold–certified structure that includes a large photovoltaic array providing renewable energy. “Free cooling,” which takes advantage of Covilhã’s often-chilly mountain air, reduces energy usage—in fact, the center boasts a power usage effectiveness of just 1.25. When completely built out, PT’s data center in Covilhã will be the largest in the country and one of the largest in the world, capable of hosting more than 50,000 servers in four 3,000-square-meter modules.

The Covilhã data center and PT’s six other domestic data centers are home to PT’s cloud-based IT services known as SmartCloudPT. The solutions range from infrastructure services such as virtual private servers to customer relationship management, enterprise resource planning, collaboration, and communications applications. João Dolores, head of PT’s Cloud Business Unit, says PT and Oracle are working together to make Oracle applications part of the SmartCloudPT mix soon. “We want to make sure that we bring together the best of Oracle solutions and PT’s infrastructure and market reach to provide leading-edge, affordable services to companies of all sizes,” Dolores says. “The ability to render these solutions in a utility, or pay-per-use, model is very powerful, since it opens up unexplored market segments for both PT and Oracle in the IT space.”

The cloud-based IT approach is being mirrored by PT in Brazil. Dolores and his colleagues are responsible for defining the IT and cloud strategy for both PT and Oi, as well as managing strategic partnerships with a global perspective. “We don’t just look at the Portuguese market anymore,” Dolores says. “In fact, the investments we’re making position the group at a global scale in terms of IT and cloud services. For instance, the new data center in Covilhã will be connected to our existing data center network in Portugal, Brazil, and Africa. This global data center network, together with the strategic partnerships we’re establishing with players such as Oracle, enable us to serve customers on several continents with leading-edge solutions at very affordable prices.” Dolores also notes that Oracle has been a key partner in assisting PT with data center consolidation.

PT managers estimate that just one-sixth of the Covilhã data center’s eventual capacity will be needed for domestic needs. Coupled with the transoceanic cables from Africa and the Americas that PT co-owns, the new data center may soon be serving cloud-based applications—including Telco in a Box—to lands far from Portugal. “We believe that cloud is not a new line of business, but a new way of doing business,” Dolores says. “And we believe it is the basis for all the services that we will offer in the future—even voice.”

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