IBM past taking Thodey off his telco game?

commentary Yesterday, Telstra CEO David Thodey attended two major events: one in his capacity as the current head of Telstra, and one in his former capacity as a past Australian managing director of IBM.

David Thodey (Credit: Telstra)

It was ironic that the first event launched a substantial investment in Telstra's cloud, while the other — celebrating 100 years of IBM, and including five former IBM Australia managing directors — dedicated time to IBM's effort to capture the cloud.

Telstra had boasted that it had spoken to no less than 160 Australian organisations about their cloud computing strategy. IBM managing director Andrew Stevens, however, noted that IBM had had some 2000 cloud computing engagements located around the globe.

The Telstra chief executive was caught between two worlds; between two companies that compete with each other, and yet are each other's major local customers.

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

The executive joined Telstra in April 2001 to lead its fast-growing mobiles division, but held down the position for only 18 months before being shifted into a role that 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 that he serviced at IBM — Westpac being one of the biggest.

During 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 — to begin the motions which led to KAZ finally being 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, a new COO for the company has been appointed — Brendan Riley, a 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 in running a major telco ... which is now his job.

From a prior history at 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. 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. Firstly, and most obviously, it's a path that 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 on the global stage: HP, CSC, Fujitsu, Salesforce.com, Googleand Amazon. 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 to get 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. Goodness 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.