T-Systems’ planned cuts will create a leaner business, but changes come with new risk

Following the recent announcement that Deutsche Telekom’s global B2B unit T-Systems began implementing a new transformation plan,

John Marcus, Principal Analyst for Enterprise Services at GlobalData, a leading data and analytics company, comments on the operational changes ahead for the German ICT service provider:

“T-Systems hired new CEO Adel Al-Saleh late last year to lead the implementation of meaningful changes to its operating structure in order to return the company to profitability. Al-Saleh is driving the company’s three-year transformation plan to reduce its workforce by 16%, approx – circa 6,000 jobs, while relocating another significant portion—4,000—from Germany to India. These actions could deliver EUR 600 million in savings, and by streamlining operations from the ground up the company believes this will provide a better platform for future growth.

“To make sure it doesn’t hurt its own progress, T-Systems will earmark half of the savings towards re-investment in areas of strength, and where it can reasonably expect more growth. These include the Internet of Things (IoT), cloud, SAP, cyber security, digital solutions, and its portfolio for toll collection and services for the public sector.

“T-Systems acknowledges that it is competing more than ever with agile tech-centric companies, making its re-invention as a leaner entity a matter of survival. By relocating a significant portion of its workforce to a new service delivery center in India, it must also accept new risks that won’t necessarily be mitigated by the cost savings. These risks include disruptions in service delivery, potential impacts on service quality, and pressure to recruit and train large numbers of suitable staff in India for roles which may lack a long-term career path. Having successfully traded in recent years on ‘Made in Germany’ service quality, the company is gambling on its ability to maintain service levels while also fundamentally changing its method of delivery.”

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