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October 25, 2016

AT&T's Business Transformation: From Connectivity, to Services, to Experiences

Posted by Anurag Vardhan Sinha (View Profile | View All Posts) at 10:25 AM

AT&T's Business Transformation: From Connectivity, to Services to Experiences

Last Saturday AT&T's CEO Randall L. Stephenson announced that AT&T Inc. has reached an agreement to buy Time Warner Inc. for $85.4 billion, including the Time Warner Inc's debt and cash, the purchase is valued at $108.7 billion. AT&T has agreed to pay $107.50 a share, evenly split between cash and stock and when the deal finally closes, Time Warner shareholders will own 14.4 % -- 15.7% of AT&T shares.

This is a landmark in the history of AT&T, as with this announcement, they have transitioned from a communications company to a media conglomerate. This will result in the largest vertically integrated media company, with a combined market capital of over $300 billion (AT&T has a current market capital of $230.64 billion and Time Warner Inc. has a current market capital of $69.7 billion). With this acquisition, AT&T will be able to combine content from Time Warner, a vast library of TV and movie properties, including HBO, CNN, TBS, TNT, Cartoon Network, and the Warner Bros. film studio, home to the Harry Potter and DC Comics franchises entertainment, with AT&T's distribution network of mobile services, broadband and TV in the U.S., Mexico and Latin America.

In the last few years, the industry has been witnessing large mergers that create media behemoths out of communication companies. In 2009, Comcast acquired a 51% stake in NBC Universal for $ 5.8 billion and the deal, as a whole, valued NBC Universal at $30 billion. By 2011, Comcast bought the rest of the stakes at 'specified intervals' from GE. In 2015, Verizon bought AOL for $4.4 billion and a year later, they acquired Yahoo, the search pioneer and web portal juggernaut for $4.8 billion.

There has been resistance to such mergers as well. In 2000, WorldCom and Sprint called off their whopping $129 billion merger after the United States Department of Justice filed to block the deal. AT&T's $39 billion bid for T-Mobile was withdrawn in 2011 after the Department of Justice filed an antitrust lawsuit to block the deal. The Federal Communications Commission declined to approve Dish's proposed $29 billion merger with DirecTV in 2002. However, Stephenson has confidently cited that this deal will be approved by regulators.

The trigger for such mega mergers has come from the challenge faced by communication companies to their traditional line of business by new entrants. Being a capital intensive industry, it is estimated that in the US, communication companies collectively invests upward of $65 billion in capital expenditures annually, to provide both the access networks and the digital backbone. Since 1996 it is estimated that these companies have invested about $1.2 trillion, but they have been unable to benefit from these massive investments. Instead, the value has been largely captured by digital newcomers who have built successful business franchises 'Over-The-Top' of the communication company's networks. New age technology / media companies have skillfully utilized the concept of 'net neutrality' to decimate the entry barrier of high capital investments and forced an unequal but 'imaginary' level playing field with communication companies.

The new IP centric "Over-The-Top" (OTT) players like Google (YouTube), Amazon, Apple, Deezer, Microsoft (Skype), Spotify and Netflix have encroached on to the communication industry's traditional revenue streams, marginalizing them to the role of mere access providers. For example, Netflix competes with operators' of IPTV/cable TV services and is estimated to consume as much as a third of the total network bandwidth in the US during peak times! Or consider free calling apps like Skype, Viber and Nanu -- it is rumored that Skype alone takes away an estimated $1 billion in voice call revenue from the global communication market every day!

The communication industry responded to the challenge by consolidating, differentiating and transforming, and taking the battle into the enemy camp. In order to differentiate and transform, communication companies focused on offering newer service lines, newer ways of monetization and adoption of 'internet standard cost structures'. Innovation based on network functions virtualization (NFV) and software-defined networking (SDN) helped communication companies migrate to 'cloud standard' cost structures. AT&T undertook the ambitious Domain 2.0 strategy to convert their existing networks into an elastic, programmable, and dynamically manageable next-generation cloud/IP platforms, which can operate at internet timescales and transaction volumes. Verizon defined their SDN/NFV architecture along with industry leading OEMs like Cisco, HP, Intel, Redhat and Samsung.

The third part of the strategy was to transform themselves into technology and media companies with extensive expertise in distribution. The current set of mergers and acquisitions point to the communication industry's zeal for transformation. Since these mergers and acquisitions are cross sector or cross industry, they do not attract the level of regulatory interference as in the case of a horizontal- same sector M&As.

It is interesting to note that the two traditional competitors -- AT&T and Verizon have taken a non-competitive approach towards creating their own version of integrated media companies. Verizon's investment in AOL and Yahoo will help them compete with technology rivals like Facebook and Google for advertising sales online, while AT&T seems to be betting on pay TV and movies, with acquisition of DirecTV and Time Warner Inc. Combining Time Warner's content along with the backbone, reach and customer base of AT&T and DirecTV, it can take on potential technology competitors like Netflix, Dish, Comcast and Sling TV. AT&T has already started flexing its muscles by offering 'zero rating' or exempting DirecTV streaming video and U-verse app. from data caps on AT&T mobile internet service. It was estimated that Netflix had spent over $5 billion on acquiring content this year. AT&T can choke their plans by raising prices or refusing to license content to online services that compete against them.

Management guru Peter Drucker advised, 'Plans are only good intentions unless they immediately degenerate into hard work.' The biggest roadblock that AT&T and the communication industry in likely to encounter will be the integration of the acquired companies and synthesis of a common culture. Time Warner's $165 billion AOL acquisition in 2001 is a case in point. Organizational incompatibility, negative financial synergy created due to the 'dot-com' burst, and failure to realize synergies, ended the merger with the separation of the two companies.

AT&T is taking on $40 billion by way of bridge loans to finance the Time Warner deal. It has already added to its debt by financing the DirecTV deal last year and the spectrum auction in 2015. Independent analysts' estimate that AT&T's debt will grow to as much as $170 billion if the deal is approved, making it one of the most indebted companies, and adding to its execution level pressure.

It will be interesting to see if the acquisition of Time Warner Inc. by AT&T and NBC Universal by Comcast will trigger a new wave of consolidation, forcing 21st Century Fox, AMC, Discovery Communications and Scripps Networks to seek alliance of their own.

AT&T's Business Transformation.jpg

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October 11, 2016

Creativity May Lie Outside the Workstation

Posted by Krishnamurthy Shankar (View Profile | View All Posts) at 7:59 AM

What happened when we asked Infosys employees to connect two dots on a sheet of paper [Source: https://www.youtube.com/watch?v=blQO4zUwm6Y]

Many of you would have heard about how Google came up with a bold experiment for increasing innovation. The management encouraged employees "not to do their job" daily for about 20 percent of the time they were at work. The idea was to increase the overall health and happiness of employees, who often felt overwhelmed by emails and, more specifically, the demand that they respond to those mails immediately. The reason behind this move, according to the company management, was that sometimes just being not connected for a while could be a way to encourage employees to relax and innovate.

What happened next was nothing less than extraordinary. By some accounts, over 50 percent of the company's new products were invented during that 20 percent 'down time.' Clearly, the assumption that letting employees relax and feel unconnected can have a positive result was verified by the benefits of the program. Then there was Intel, which experimented with 'Quiet time' every Tuesday and 'No Email Day' on Friday, so that employees were given time to think, collaborate and work on projects without interruption.

In today's hyper-innovative environment, I do believe that every technology firm that is diving head first into the digital age should concentrate on the 'purposeful' aspect of their work. In other words, why is it that the more technology and computing power we have at our disposal, the less likely we are to feel satisfied with the work we perform in the allotted time? This feeling is something that technology is yet to address. There also remains the question of why companies spend less time studying the expectations of their employees than they do those of their customers. After all, making both sets of people satisfied is equally important.

I'm particularly drawn to a TV commercial by the luxury carmaker Mercedes-Benz. The voice-over tells us that the car is a veritable supercomputer that the driver has the pleasure of pushing to its limits. Notice how the selling point isn't a passenger being pulled along by some self-driving technology but rather the fun and satisfaction coming from controlling the supercomputer on wheels. My take on the advert is that plenty of focus groups told Mercedes-Benz what I've outlined: that executives feel so connected to their digital devices and so subservient to them that they welcome the opportunity to take control for themselves, and in this case by getting behind the wheels of a car.

Not unrelated to this topic is the fact that despite companies investing in technology that allows employees to stay constantly connected, there is still a cultural emphasis placed on being in the office. Perhaps, some would feel that they would not get any work done if they decided to telecommute. But for others who have to sit in traffic for hours, getting to the office is becoming more ridiculous as technology makes it easier to work and connect with colleagues from wherever. Plenty of enterprises are losing valuable time of their employees that could be spent innovating and focusing on projects because of their cultural demand that all employees come to the office each day.

A case in point was Yahoo, which did away with their telecommuting in favor of having employees report to the office. Not surprisingly there was no discernable improvement in productivity, and employee morale actually took a hit.

While flexibility in work timing and work place are gradually become the norm, it is vital for companies to enable their employees with structures, tool and mechanism that facilitate and stimulate innovation, and keep their imagination humming in a larger environment.

To pique the creativity of our employees, we engaged them in an innovative, fun activity in which they were asked to connect two dots on a sheet of paper. The drawings were eye-openers, and feedback from employees pointed to why humans will continue to play a central and inventive role in any organization even while it increasingly transitions into automation and A.I.

To stimulate innovation, companies could adopt tools, but they could also go the time-tested traditional way, that is to become more personal and interactive.

October 5, 2016

Why India May be at its 'Good to Great' Moment Today

Posted by C. N. Raghupathi (View Profile | View All Posts) at 7:13 AM

Why India May be at its 'Good to Great' Moment Today

The World Economic Forum's India Economic Summit 2016 is scheduled to be held on 6th & 7th October this year in Delhi, and Infosys is proud to be a strategic partner of the Forum. The theme of the event is 'Fostering an Inclusive India through Digital Transformation', clearly articulating the inflection point that India is at now. To explain our situation, I would like to borrow from the well-known book by Jim C. Collins, 'Good to Great', in which he describes the example of an egg. By itself, an egg may seem rather ordinary, until a chicken is hatched. And that is the wonder of nature, because there were some complex growth and developments happening in the background, before we witnessed the transformation.

As a large diverse country, the elaborate changes underway in India may similarly not be obvious. I wanted to share a couple of examples of how I believe India is becoming inclusive through digital transformation. One big launchpad is education. VJTI Engineering College, Mumbai is doing some innovative work through their smart grid CoE Lab, where they are building the intellectual capital around smart grids. The recently launched PSLV satellite had equipment designed by engineering students from PESU, Bangalore. In this, we get a glimpse of a growing population of youth who are almost literally aspiring, and can aspire, for the moon. The digital revolution sweeping across the country is making this and so many other things possible. The 19,000 startups in India, as of 2016, is yet another testimony to India's potential of becoming 'good to great'.

Continue reading article on Medium»

October 4, 2016

Fortune Favors The Learners

Posted by Claire Hockin (View Profile | View All Posts) at 5:01 AM

Fortune Favors The Learners

In 1956 the Fortune 500 looked radically different than it does today: over 80 percent are no longer in this exclusive group. Many do not even exist anymore. And the pace of change has increased. A third of those in the ranking a decade ago are no longer listed. Most of these companies had innovation departments... so what went wrong?

Is innovation an expert skill, or a mindset? The key to surviving, and thriving, is about having a workforce with the right skills to be able to anticipate, respond and scale at speed in an uncertain future. This was the message Dr. Vishal Sikka conveyed to the audience at Oracle Open World in San Francisco recently - which you can watch here.

The ubiquity of computing and an 'always-on' digital culture is powering the relentless advance of new, smarter technologies. As industries converge we see technology revolutionizing traditional products - a smartphone is a "supercomputer in your pocket. And a self-driving car is not simply a car, but a computer in the shape of a car" explained Vishal. Some day in the very near future, we will no longer be able to avoid (or likely live without!) technology. Perhaps some of us are there today. Technology will be invisibly embedded into everything around us. After all, "every company is a tech company, but most haven't realized it yet".

Technology will connect us, help us make sense of the world around us, and help us do things that we once could only dream of. We are at the cusp of another revolution and this time it's a human revolution, powered by technology.

And so the language of the future is universal - and it's the language of code. Vishal brought two external views to the audience - that of Alan Kay, the computer pioneer, talking about learning and human behavior, and of Vandana Sikka, chairperson of Infosys Foundation USA, talking about computer science education. Vandana explained that digital literacy today is lower than actual literacy in the Dark Ages. This illustrates an astonishing skills gap that must be filled in order to understand and thrive in an increasingly digital world. Computer science education is a fundamental cornerstone of this process, especially as it encourages hands-on learning and problem-solving - skills, which are key to staying relevant and being creative.

This thinking is reflected in the Infosys grassroots movement called Zero Distance, which has taken hold across all of our teams and projects, with the help of Design Thinking. More than 110,000 employees so far have been trained in Design Thinking, and are learning to better understand and even anticipate our clients' needs. That doesn't make every one of these people a designer, but it instills a sense of curiosity, creativity and problem-finding, rather than simple problem-solving, so that we can amplify the work we are doing in a more meaningful way. These are the soft skills which complement and accelerate our people's technology expertise.

Learning has been the key to change across all cultures and generations. Today, the difference between being disrupted or being a disrupter is in honing a culture of, and passion for, learning. At Infosys, learning has been at the heart of our values from our inception in 1981, and today moves us beyond the original principles of competency training to the challenge of learning to 'unlearn' - the very ethos of Design Thinking. In this way, we can protect ourselves and our clients from becoming irrelevant - like those 438 Fortune 500 companies.

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