T-Systems’ Analyst Summit 2011 in Frankfurt was dominated by updates on the progress the company made regarding its restructuring projects. As a result of these efforts, T-Systems has created the basis to become a more efficient and agile ICT services provider going forward. Still, in our view, the period between mid-2010 to mid-2011 was a lost year for T-Systems — despite the obvious progress T-Systems made in addressing its past challenges.
In some respects, T-Systems had become a victim of its own success in 2009 and 2010. T-Systems was clearly overwhelmed by its multibillion deals (with clients including Linde, BP, Shell, E.ON, MAN, Continental, etc). Delivery capacities were stretched to the limit, manifesting in serious transition and transformation challenges. T-Systems was forced to allocate more capacities to big deals, thus depressing margins to just over 2% in Q3 2011 (see chart below). T-Systems still aims to reach the peer-group average EBIT margin.
Source: company reports
About a year ago, T-Systems began to restructure its entire operations in a mammoth project, effectively redrawing the entire organisational structure and reshuffling the top management team, except for the CEO and CFO. The Analyst Summit provided some insights that these efforts are beginning to bear fruit:
During its Fujitsu Forum, which was attended by over 10,000 customers and partners, Fujitsu presented itself as a company in transformation from a fairly disjointed business to a more streamlined international business. Fujitsu’s new strategy has three main components:
Focus on organic growth: Fujitsu is investing more in its sales and services structure as well as its internal IT systems. It aims to get better in what it has already been doing, such as exploiting its large software and hardware portfolio, including smartphones, thin clients, handsets, tablets, mainframes, laptops, and super computers. In terms of services, Fujitsu is pushing its multivendor maintenance capabilities and its IT outsourcing experience. Fujitsu considers its product knowledge and near- and offshore mix a key, unique selling point vis-à-vis its competitors. Given Fujitsu's weak marketing and sales structures of the past, we would believe that it is high-time to improve its go-to-market approach.
Target emerging markets: The main focus is on Russia, India, and the Middle East. Fujitsu is ramping up local operations and also adapting its go-to-market approaches. For instance, in India it is using its promotion campaign via auto rickshaw on “see-try-buy” basis. Fujitsu’s goal is to double emerging markets sales by 2015 from €800 in 2010. Given its Asian roots, it is astonishing how long it took Fujitsu to realise the opportunities at its doorstep.
During its European Analyst Summit in London, Huawei provided details regarding two crucial elements of its expanding market positioning: It outlined its intention to launch mobile devices and enterprise solutions. Although Huawei has been engaged in these activities in China for some time, it is a new and exciting step for its European strategy. Competitors should not underestimate Huawei’s ability to take business away from them in these areas.
Huawei’s mobile device range for Europe is small, but very effective. The company targets the low-end smartphone segment with a €100 device (Blaze), the mid-market (Vision), and high-end (Honour), in addition to a tablet (Media Pad). The marketing strategy is to position these devices as affordable, easy-to-use, and reliable (i.e., the “Volkswagen of the mobile devices”). All devices are touch, have fast processors, crisp screens, and retail at about €100 below competitors’ offerings. Timing is good for Huawei, given the relative weakness of the competitive landscape, especially RIM and Sony Ericsson. Initial customer feedback on sites such as Amazon.com reflects positive customer experiences.
The fact that Huawei has no consumer brand in many European countries should not be a great obstacle. Rather, Huawei could use this factor in order to involve its emerging customer base to build a brand using social networking and viral marketing. Traditional big-board advertising campaigns would be pointless: Nokia will dominate the traditional channels with its Lumia campaign in the coming months. The main channels for Huawei will be MVNOs like Fonic, consumer electronics outlets like Phone4U, as well as selected larger operators.