BT has signed a five-year deal with Amazon Web Services (AWS) to modernise its internal infrastructure and accelerate the digital transformation of the company. The deal shows the cloud hyperscalers can make ideal partners for telcos embarking on digital transformation projects, an expert told Tech Monitor, even though they increasingly compete in the same markets.
The agreement with AWS will be part of BT’s drive to “transform legacy infrastructure and internal applications” so that they become cloud-first, modular and reusable across its business. This agreement, announced today, also aims to save BT £2bn a year by the end of financial year 2024.
The agreement is the latest step in BT Digital’s push to transform its business. It has previously invested £30m in Distributed, a UK start-up that provides on-demand access to freelance software developers, in a bid to give the company an expanded and agile digital talent pool.
Why does BT want to accelerate its digital transformation?
BT’s revenue for the year to March 2021 was £21.3bn, with profit of £1.8bn. The company will be looking to improve this profit margin, and mitigating the impact of legacy technology could be one way to do that, says Dimitris Mavrakis, senior research director at ABI Research. “BT is a very big network operator with significant legacy technologies, especially after the acquisition of EE,” he says. BT purchased the mobile operator in 2015 for £12.5bn.
Mavrakis continues: “[BT’s] digital transformation progress is likely to have been a monumental effort to consolidate and homogenise internal applications and processes, including the in-house cloud computing platforms that have been used for many years.”
He says the partnership with AWS illustrates that the cloud hyperscalers like AWS, Microsoft Azure and Google Cloud are “perhaps best-equipped to help network operators manage their digital transformation”.
“This trend started with telecom operators outsourcing or selling their data centre assets and continues with aggressive partnerships with hyperscalers,” he adds.
Though the hyperscalers make natural partners for telcos, they are also increasingly competing in the same space. Tech Monitor has reported how the big cloud providers are increasingly offering telecoms products and services, particularly with the advent of cloud-native 5G and software-defined networks.
Today’s announcement says BT intends to make more “significant investments and use of AWS technology” over the next five years, focusing on application workloads via containers and serverless technologies, showing that its investment in the hyperscaler is far from finished.
How is BT going to digitally transform its business?
The agreement between AWS and BT Digital is intended to help the company build and innovate faster on a new suite of digital products and services, as well as reduce costs in IT maintenance. It is also expected to deliver more value for its consumer, enterprise, global and Openreach customers.
AWS will also help BT Digital deliver an “industry-leading” cloud-first architecture for BT Group, which the company describes as a “dramatic simplification from the company’s current IT estate.” It will be cloud-native, microservices-based and fully modular, providing BT with the ability to provide rapid responses to customer needs, include easy access to digital services, optimisation for mobile use, greater choice of how to contact a company and greater security. The priorities were identified in the company’s 2017 CEO survey, which also found that while digital customers liked using chatbots, badly designed bots would turn them off a company.
The chief operating officer of BT Digital, Thomas Dücke, says that the company has a “big opportunity” to modernise its infrastructure and accelerate BT’s transformation. The company aims to retire its legacy applications, associated infrastructure and data centres by the end of 2024
Covid-19 accelerated digital transformation by ‘several years’
BT joins other companies that have accelerated their digital transformation since the start of the Covid-19 pandemic. According to McKinsey, the pandemic sped up the adoption of digital technologies by several years, as customer interactions moved online during the multiple lockdowns. McKinsey reports that between 2019 and 2020, digital adoption for customer interactions accelerated by three years; from 32% in December 2019 to 55% in July 2020.
The need to work from home has also reflected the demand for a more digital approach to working environments. BT Digital has said that its transformation will have “security, privacy and compliance by design”.