IT Transformation

Inside Swisscom’s move to the cloud

How an amoeba-like org model helped the giant telecom innovate

Telecom digital transformation to cloud

When the Swiss government closed schools and nonessential businesses in March, and sent people home to wait out the COVID-19 pandemic, countless companies scrambled to make sure their IT systems would hold up during a period of forced work from home.

Not long ago, Swisscom, Switzerland’s largest telecommunications provider, would have been ill-prepared. But thanks to lessons learned during a seven-year digital transformation project, Swisscom’s $2.5 billion enterprise business is meeting the challenge.

The unit’s transition from a slow-moving legacy operator to a nimble, cloud-based operation has an unlikely secret: a novel organizational structure in which the business is managed in 10-week chunks, not by the annual budgets and multiyear product roadmaps of days gone by. At the end of each 10-week “program interval,” the whole organization—inclusive of operations, marketing, and line of business leads—meets for two days to reassess its priorities and then breaks into small teams to knock out specific tasks that support the bigger goal.

How Swisscom’s new operating model drove cloud transformation

The model, first adopted by a small group formed to change the way Swisscom builds software, has allowed the company to roll out a variety of cloud-based IT services for tasks such as backup, security, and database management. These now make up a healthy percentage of Swisscom’s IT services business—and the company expects it’s just a matter of time before they account for most of it.

“You can’t take a year or more to develop new services like we used to,” says Stephan Massalt, vice president of Swisscom’s Cloud Lab innovation center. “You need to move far faster. We’ve invested a lot of time and energy into becoming a digital company.”

The approach has now spread to other parts of the company, including the much larger group that is creating services that Swisscom could sell to run on its 5G network. Swisscom teams using the model are currently researching a wide range of new applications, from managing fleets of commercial drones to delivering new kinds of network services to cars.

“No carrier wants to just offer ‘dumb pipes,’” says Scott Raynovich, founder of market research firm Futuriom. “Those who change their culture to be more cloud-centric will have a lot of opportunity to move up the stack.”

Old model gets Agile

Swisscom’s transformation journey started in 2013. At the time, most of its IT business came from outsourcing deals, in which it ran some or all of companies’ IT operations using traditional methods. If a business unit wanted to roll out a new application or add a new firewall, it could take weeks or months for Swisscom’s staffers to write, test, and make the change. Amazon had already won over thousands of tech startups with its web services, which let them spin up or tweak services on the fly. When AWS began landing massive deals with the likes of the CIA and NewsCorp, Swisscom’s upper management took notice.

Within months, the company hired Massalt, a 48-year-old Dutchman and part-time coach of junior high school robotics teams, to lead the cloud charge. Rather than work as a part of Swisscom’s existing IT department, Massalt was tasked with creating a greenfield operation uninfluenced by old ways of doing things. His goal: build a cloud platform so Swisscom’s customers could also manage their IT with a few mouse clicks, and just as importantly, embrace modern development practices so that the telecom could create and improve its software as rapidly as any Silicon Valley company.

Progress was fast at first. Massalt moved to Palo Alto, Calif., and built a team that included new recruits with cloud engineering expertise and 30 or so veteran Swisscom technologists back in Switzerland who were eager to be part of a cutting-edge project.

The team quickly embraced Agile development, which speeds software production by letting small teams of engineers make frequent, iterative improvements to code rather than deliver massive new releases every few months. The engineers found the move liberating. By early 2015, the Swisscom Cloud Lab had created a basic cloud platform to offer customers as an alternative to its traditional IT services model.

“Finally, the engineers could work fast, on small teams, and without long decision cycles,” Massalt says.

Hitting cultural snags

Getting engineers to embrace a faster-paced approach to product development was one thing. Getting the front-line sales and customer service people to support it was another. In classic Agile fashion, the first cloud offerings were minimum viable products lacking features that most Swisscom enterprise customers had come to expect, such as multiple ways to back up data. The salespeople weren’t comfortable bringing what they saw as half-baked services to their best accounts, especially because the cloud team offered no long-term product roadmap that customers could rely on.

“They basically said ‘this is not going to happen,’” says Massalt.

Finding common ground was difficult. While Massalt and his team recognized the need for compromise, they were frustrated by all the resistance. Rather than push new software features out once or twice a month, sales teams wanted to stick with a quarterly release schedule so every change could be carefully tested. “Five-nines” reliability—uptime of 99.999% or more—remained sacrosanct, although a growing number of customers wanted to move to the cloud, even if it meant accepting minor tradeoffs in downtime.

“Our front-line people wanted a faster horse, when we wanted to give them a car,” says Massalt.

A radical path forward

By the end of 2016, the tension came to a head. Since they’d started using Agile years before, the cloud team had existed in a world of two-week “sprints.” Almost everything they did was focused on serving customer needs. But the rest of the company still revolved around annual budget cycles and long-term product roadmaps. As a result, the cloud team’s improvements often didn’t get into customers’ hands, and business units were frustrated that their long-range plans were being ignored.

“The difference in planning horizons was simply too big,” says Massalt. “The last missing piece was to get better alignment between the businesses and engineering.”

The solution presented itself in early 2017, when a consultant introduced a variant of Agile called SAFe, or Scaled Agile Framework. While it doesn’t replace two-week sprints or annual budgeting, this approach requires all teams—from engineering to marketing—to work together to manage the business in 10-week program intervals, or PIs. Frustrated by the chronic friction, Swisscom’s top executives forced the team to adopt the new approach.

Our front-line people wanted a faster horse, when we wanted to give them a car.

Adaptability is critical for today’s telecoms, says Chris Bauschka, general manager and area VP of telecommunications at ServiceNow. “The pandemic has increased pressure on communication service providers to use new technologies to meet customers’ needs.”

Here’s how Swisscom made it work: The business and engineering teams were collapsed into one 100-person “large solution” organization, made up of teams of around 10 focused on particular products or capabilities. During the last week of a PI, the teams submitted requests for what they wanted to work on for the next 10-week period. The leaders of the larger group would analyze the 60 or so requests and prioritize them for the next PI.

Each PI started with a two-day, all-hands meeting. After a first session covering business highlights from the previous PI, team leaders presented the new priority for the next 10 weeks. Each team then took a few hours to figure out what it could do to contribute toward the collective goal. Leaders then reconvened to identify any critical tasks that had to be accomplished for other teams to accomplish theirs. If gaps emerged that no one could address, a scrum team was pulled together with people best equipped to solve the problem. At the end of the two days, each team had to stand up in front of the group and confirm what they were committing to accomplish.

The approach worked smoothly from the start, says Massalt. Critically, it solved the lack of alignment that had caused so many problems. With the model, everyone understood that once priorities were set, debate was over. And people from both sides were able to understand one another better by working together on scrum teams.

4,000

Changes Swisscom makes to its network software per week

Due in part to its adoption of SAFe, the IT group is carving out an expanding niche providing cloud-based IT services, says Ray Mota, CEO of Synergy Research Corp. “Swisscom has done a really good job of striking a balance between IT services and traditional telephone company services,” he says.

And the rest of the company is becoming more agile. Swisscom now makes 4,000 changes per week to the software that manages its phone network, and teams are gaining expertise in creating new services. One unit is working with researchers at the Swiss Federal Institute of Technology Zurich to develop the software to manage fleets of commercial drones.

When the pandemic crisis subsides, more business opportunities will arise. “We won’t have two years to figure it out,” says Massalt. “We have a culture that can adapt much more quickly. We can evaluate our plans every 10 weeks. That’s the essence of digital transformation: to become more responsive to what the market requires.”