Can David Thodey escape his Big Blue shadow?


opinion One cannot help but feel that there was a certain irony to David Thodey’s life yesterday which must have been impossible for the Telstra CEO to ignore.

The executive’s first major engagement of the day saw him spruiking the benefits of Telstra’s rapidly expanding cloud computing strategy to a sizable room full of Telstra staff, Telstra customers and Telstra partners … oh, and a small handful of journalists and analysts which happened to be along for the ride.

Surrounded by those with a vested interest in seeing Telstra’s cloud computing strategy succeed, in a high-tech conference room in the telco’s demonstration facility at 400 George St, Sydney, it was hard not to jump straight on board Telstra’s rocketing cloud vision and head straight for the stratosphere.

On paper, Telstra’s launch yesterday had everything. The right, top-tier partners (Cisco, Accenture, Microsoft, VMware), a headline splash of funding ($800 million), a flashy new infrastructure investment (a new datacentre for Melbourne) and a clutch of new customers, all keen to sing the virtues of Telstra’s strategy.

And it went well for the most part. Aside from a few tough questions from the floor and the sighs of the audience when the inevitable fluffy video case study was played, there was a note of triumphalism in the air; as if by speaking a vision aloud, Telstra could truly make it so. But it was only when the hour-long Telstra love-in broke up that the irony of Thodey’s day became clear … and some reality set in.

I believe it may have been Telstra spokesperson Craig Middleton, MC’ing the event, who mentioned at that point that Thodey had a tight schedule to meet, so the Telstra event could not run over time. It was time for the Telstra CEO to speak at another event — one which could not help but bring the ghosts of Thodey’s past back to haunt him.

Across town, the wizards at IBM were kicking off another public relations exercise designed to rocket their own company’s profile into today’s newspapers, and yesterday’s web pages. In case you’re not aware, this week the industry’s grizzled warhorse is celebrating 100 years in business — and all across Australia and the globe, IBM workers are shaking off the Big Blues which have bedeviled the group over the past few years (think Lotus Notes) and letting their hair down in style.

In Australia, IBM yesterday gathered five of the past managing directors of its Australian division — plus the current one, Andrew Stevens, to impart their wisdom and give a sense of history to the occasion. In the room listening were many of the same journalists who attended Telstra’s presentation that morning. In fact, Thodey could have given a few a lift across town to the ritzy surrounds of Bilson’s Restaurant in the Radisson Hotel in his Corolla — I’m sure he could have squeezed a few hacks in the back seat.

And of course, Thodey, who led IBM Australia from 1999 to 2001, had to be on stage with his former colleagues to share in the glorious nostalgia.

But how galling, it must have been for the Telstra chief executive, to sit there on stage and listen as IBM Australia’s current leader, Andrew Stevens, spoke at length about the company’s own plans to capitalise on the growing cloud computing revolution … the one which Telstra so desperately wants to conquer.

One wonders just what Thodey’s reaction must have been, with Telstra likely being IBM’s biggest customer in Australia, as Stevens explained how IBM wasn’t afraid to “cannibalise” its existing business in order to focus on cloud.

That morning, Telstra had boasted that it had spoken to no less than 160 Australian organisations about their cloud computing strategy. What then, must Thodey have thought, sharing the stage with Stevens, when the IBM chief noted Big Blue had had some 2,000 cloud computing engagements located around the globe?

What, precisely, did Thodey think, when a Computerworld Australia interviewer questioned him this week extensively about the difference in his experiences at IBM and Telstra? When the same interviewer mentioned to him that Telstra was now a cloud company, “too”?

The Telstra chief executive’s situation this week, which saw him caught between two worlds, between two companies who each compete with each other yet are each other’s major local customers, one Australia’s biggest traditional technology company, and one Australia’s biggest telco, must have weighed heavily on his mind.

And there are indications that it has done so for some time.

In his time at Telstra, Thodey has often been unable to escape the Big Blue shadow which seems to follow him around.

The executive joined Telstra in April 2001 to lead its fast-growing mobiles division, but held down the position only for 18 months before being shifted into a role which he seemed almost typecast for — swapping the mass consumer market of the mobile sector for Telstra’s Enterprise and Government division, which serves large corporate customers like Westpac.

Because of this switch, it was now-departed Telstra executive David Moffatt — who joined Telstra in the same year as Thodey and was likewise seen as a CEO contender from that time — who spearheaded the company’s mobile expansion throughout the past decade, while Thodey dined with many of the same corporate customers he serviced at IBM — Westpac being one of the biggest.

During Thodey’s time at the Enterprise & Government wheel Telstra also made its ill-fated decision to buy IT services upstart KAZ — which had begun fighting multinationals like IBM and EDS tooth and claw in the Australian market. While Telstra has since disposed of the troubled acquisition, it is that buy, and Telstra’s struggles to integrate the people-focused KAZ with its networks-focused telco business — that Thodey is most remembered for during most of his past decade at Telstra.

Under Thodey’s tenure as Enterprise and Government chief, Telstra bought KAZ, which Thodey was ultimately responsible for overseeing. And it was one of the last actions of Thodey’s predecessor in the CEO seat — Sol Trujillo — that KAZ was finally sold to Fujitsu in 2009.

Now Thodey appears to be giving some indications that he is winding Telstra’s clock back … into the trouble-plagued world of IT services.

With the departure of long-serving network engineer Michael Rocca from Telstra’s COO seat has come a new COO for the company — Brendan Riley, a long, long-time IBM executive who Thodey must have known from his days at the company, and who on paper appears to have virtually no experience running a major telco … which is now his job.

From a prior history at now HP-owned IT services business EDS (as well as a more recent tenure at Tabcorp and other organisations) has come Robert Nason, who is steering Telstra’s internal Project New revamp. And from Hewlett-Packard has come Gordon Ballantyne, who now has overarching responsibilities for Telstra’s Consumer and Country Wide divisions.

Detecting a pattern here? You should be. Through his prior history at Telstra, his recent lieutenant appointments and his current strategy of taking Telstra into cloud computing (which in reality, is just the next generation of enterprise and consumer IT services), David Thodey is not treating Telstra as a networks business or a telco at all.

He is starting to shape Telstra into a traditional IT company.

The dangers of such an approach are manifest. First, and most obviously, it’s a path Telstra has visibly failed at before with its botched integration of KAZ, a saga legendary in Australia’s technology sector.

Telstra doesn’t do “IT” well; an idea best represented by the fact that it has traditionally outsourced the majority of its IT infrastructure operations to IBM and the development of its platforms to companies like Accenture. These are the same systems that the company is now turning around to spruik as solid cloud computing platforms to major Australian enterprises and government departments.

But there is also the fact that in pushing so hard into the cloud computing market, Thodey is positioning Telstra for a major turf war with existing industry giants. And there are some big names in there — names much, much bigger than Telstra’s on the global stage. HP. CSC. Fujitsu. Google. Amazon. Even (despite its local partnership), Microsoft. And of course IBM.

There is a great deal of validity to Thodey’s contention that customers will in future want their networks integrated with their cloud computing provider’s systems; it simplifies things and has the potential to deliver technical advantages such as higher levels of stability and speed.

However, ultimately one also has to question whether major Australian organisations want Telstra to run all of their infrastructure … from telecommunications, to storage, to servers, to operating systems and even some applications. It’s a soup to nuts strategy; but as many chief information officers would say, you’d be nuts to put all of your eggs in one basket; especially when that basket can sometimes be a former monopolist basket case.

Then again, one has to question why Thodey is pushing hard into this market at all.

Telstra’s Enterprise and Government division has always been a minor part of its business; the far larger piece of the telco’s pie is in its consumer divisions: traditional fixed line, BigPond, and now, increasingly, Next G. These are the big money spinners, so what’s Thodey doing with his head in the cloud … especially in a week when Telstra is due to finally reveal its $13 billion deal with NBN Co?

Now, none of this means that Thodey’s the wrong man for the Telstra CEO job. In a short time he has succeeded in silencing most of his critics; he’s finally righting Telstra’s customer service wrongs and we expect big things from Telstra’s deal with NBN Co and its internal renewal. God knows the company can’t do anything wrong when it comes to its Next G mobile network.

But it does suggest that Thodey’s IBM past still weighs strongly on his current mindset. He’d better get his head back in the telco game. Or someone — likely whoever takes over Optus when Paul O’Sullivan finally steps down — is going to pull a fast one on him.

Image credit: Telstra


  1. Interesting perspective on IBM’s Centennial event yesterday Renai – can’t remember seeing you there?

    • No, I didn’t go, as I primarily saw it as a PR exercise. However I did attend the Telstra event and read all the coverage from the IBM event :)

  2. Cloud computing should provide enormous benefit to Telcos without them directly participating as a service provider. Moving more of the storage and intelligence into the cloud, and away from the end user, means a lot more data needs to zip back and forth, between increasingly lightweight and mobile devices. So Telstra has every reason to encourage its growth, but why try to compete with these guys? Telstra would better to focus on providing them the most reliable physical network possible, with the greatest coverage, security and bandwidth. A lot more money to be made there also as the competition is not so intense.

    Another big player in the space (well likely to be) worth watching is Apple.

    • I agree with much of what you’re saying; it makes sense for telcos to continue to focus on the network. However, I disagree that Apple will be a big player in the cloud computing space. Apple will not be in the business of providing infrastructure as a service or software as a service to business and government. They’re a consumer-facing company.

      • +1

        Apple is consumer focussed. They’ve made big inroads into the personal computing space with Macs, iPods/iPhones/iPads, and done it with what are arguably superior products. For the consumer.

        When it comes to the corporate space, legacy issues alone make wriggling into that space a thousand times harder.

        In all my time trawling through/working inside various data centres – some with thousands upon thousands of RU’s of rack space, I’ve only ever seen ONE Apple server in place.


        • I agree when it comes to bespoke mainframe applications at the core of an enterprise you won’t find corporate CIO’s heading to Apple. Still there’s a lot of corporate computing (the bulk of it perhaps) which is quite generic: email, word processing, spreadsheets, utility functions( storage, backup, maintenance etc) for which there are a number of capable providers who could possibly do it better, and definitely cheaper, than an in-house IT team. Many of these applications are also popular in the consumer market, hence the crossover.

        • I don’t think Apple even make servers (at least blades) anymore anyway. You need a chunky desktop based server, which is ridiculous for enterprise needs.

          • Its not about the server hardware. That might just be some no-name PC running Linux, with VMWare it could be anything, anywhere – that’s the point. Research in Motion have already shown that a mere handset manufacturer can be a cloud service provider to large enterprises in a specific application. No doubt they will be first in Apple’s sights since Apple has the superior handset at present. Would not surprise me if they took aim at MS Office next, iPad being the weapon of choice.

          • I agree, it is not about the server hardware. If Apple really wanted to push into the server hardware market they have the facilities to do that, but the mobile device market is a lot more attractive to them. Server hardware is a small margin and commoditized marketplace.

            Apple’s success story has been iTunes. If you think about it, iTunes took the bricks and mortar record shop and moved it into the “cloud”. Does Telstra win on iTunes? Sure they do, more demand for data services. Does IBM win on iTunes? Sure they do, more demand for server, desktop and laptop hardware.

            Apple’s next success story has been the iPhone “app store”, once again they took a bricks and mortar concept (selling software) and moved it to the cloud. Same success formula — keep the price of purchase low, concentrate on convenience, get the hipsters into it as first movers to drag the sheep along with them.

            Of course, Apple aren’t exactly original in what they are doing, google have been doing it with gmail, and google apps, and google docs and google payment system, etc. Microsoft had a go at taking on google in much the same space. Telstra also had a go at it with sensis. What sensis was supposed to do was/is a fusion of a phonebook, geographic mapping, advertising, search engine and perhaps a hint of helpdesk and sales, all working in a “cloud” type environment. Personally, I’m not thrilled by sensis, but competition is good for the industry and you can see where the general trend of these things is going.

      • Different markets, same cloud. Apple is very much a consumer focused company, IBM etc big business and government, perhaps Telstra is aiming more at the SME market which is a traditional Microsoft space.

        But these market may become increasingly blurry as organizations start using iPads, smart phones etc that may be tightly integrated with specific cloud services (e.g. Apple’s iCloud, google). Will also be interesting to see what MS does with Office in this regard.

        What’s certain is that whoever succeeds in these markets higher up the stack, they will be built on top of a physical network very likely owned by Telstra. Telstra needs to perhaps find some more innovative ways of “clipping the tickets”.


    All I can think of anyone someone mentions cloud computing.

    I swear one day I’ll have a client I’m advising who wants to migrate their systems to the cloud and my response will be “We can’t deal with the downtime caused by the Roomba.”

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