NelsonHall recently attended T-Systems’ Digital X 24 event in Cologne, the flagship event of its parent company, Deutsche Telekom. T-Systems provided an overview of its key portfolio focus areas across the cloud, including sovereignty, digital solutions, AI, including GenAI, and its array of strategic ecosystem partners.

T-Systems' headcount is ~26k, with Q2 2024 revenues up 2.3% y/y at €981m. Key target industries include automotive, manufacturing, public sector, health, public transport, retail and logistics, and financial services. T-Systems’ business units are comprised of advisory (Detecon), digital solutions, cloud services, and security in support of planning, building, and running.  It supports ~1k clients across these industries with major strategic delivery hubs in Germany, Spain, Hungary, Slovakia, and India.  It also has local business units across multiple countries, including North America, Mexico, Brazil, and the Nordics. T-Systems also has eight SOCs globally defending against 36m attacks per day.

While discretionary spending has been impacted across Europe, the cloud is still viewed as a critical enabler for digital transformation, and we expect budgets to improve further between Q4 2024 and Q1 2025.

In this blog, we look at some of the key focus areas and investments for T-Systems across cloud, AI, and workplace services, including:

• Cloud and mainframe transformation services
• Enhancing Sovereign Cloud capabilities
• Digital solutions, including AI and GenAI.

Supporting clients’ cloud transformation initiatives

T-Systems utilizes its Detecon consulting capability as the tip of the spear to engage clients in design thinking consulting-led engagements to understand client cloud maturity and business requirements.  It provides a Cloud Readiness Assessment, which runs alongside assessing the client’s business challenges and goals. It then provides a proposed application-led transformation solution outlining the target systems within a multi-cloud environment; and then supports migration through its Cloud Professional Services unit, enabling the client to leverage the potential of various cloud providers.  

This includes not just lifting and shifting but enabling applications to run in containers, making them scalable, and covering the entire 7R (e.g., rearchitecting, refactoring, etc.), enabling clients to take full advantage of the cloud. T-Systems also focuses on FinOps, full-stack monitoring and observability, and DevSecOps. This approach will resonate with clients as they increasingly seek to reduce the complexity of their hybrid multi-cloud environments, reduce costs in response to current macroeconomic conditions, and drive better predictability through full-stack monitoring. 

T-Systems provides a holistic portfolio of multi-cloud services with horizontal-based offerings, making these modular to combine industrial services for the vertical-specific needs of clients through its application-centric, ecosystem-driven, and multi-cloud platform approach, including security and sustainability. T-Systems’ key private cloud offering (with VMware) enables clients to bring IT systems together on one platform.  Its managed private cloud bridges the gap between legacy and on-premises systems and public and private clouds. Its future cloud infrastructure is offered in an as-a-service model, providing a highly secure private cloud environment with the look and feel of the public cloud. Clients can use it as a hybrid cloud in their own or in T-Systems’ twin-core data centers.

T-Systems offers managed services in support of AWS, Azure, and Google Cloud. As part of managed services, it integrates into the client’s DevOps, for example, taking part in daily sprints to understand the client’s environment and quickly fix potential issues through an SRE-led approach to cloud operations. We expect this approach will resonate with clients as they increasingly seek to improve the predictability in their IT environments through a co-innovation and co-collaboration approach with vendors.

T-Systems’ zFuture offering also supports clients who need to maintain and modernize their mainframes with next-generation IT infrastructure, hardware, and platform optimization. It provides consulting and advisory services through a mainframe migration to public, private, or hybrid cloud environments. T-Systems also uses GenAI, including automated code generation and translation with GitHub Copilot, with translation from COBOL to Java to modernize the application. It further utilizes GenAI tools to understand source code in legacy mainframe environments. This approach enables clients to expedite legacy transformation and improve the overall developer experience through GenAI tools.

Aiming to become DACH region’s #1 sovereign cloud leader

T-Systems Sovereign Cloud powered by Google Cloud, provides full compliance with German regulators while retaining the public cloud functionality of a hyperscaler. It also offers T-Systems’ Open Telekom Cloud, which is based on OpenStack as a plug-and-play solution offering private cloud security and providing IaaS from the public cloud with two dedicated data centers in Germany and one in the Netherlands. T-Systems is also developing capability with AWS when AWS’ European Sovereign Cloud is launched in Germany in 2025. Also, through open-source collaboration services, it enables GDPR compliance in a Microsoft public cloud through its Cloud Privacy Service and offers managed security for a fixed monthly fee.  

We expect further traction across Sovereign Cloud as clients increasingly focus on regulatory compliance, especially from clients across the DACH and Europe region. In addition, we expect to see more leverage of this capability across digital workplace services for clients operating in highly regulated environments.

Increasing emphasis on AI within its digital solutions unit

T-Systems’ digital solutions unit drives multiple AI, GenAI capabilities, and POCs across the organization. This includes conversational AI and virtual avatars with numerous industry use cases across public, utilities, HR/IT, health, and financial services. Example use cases include information system municipalities, utility appointments, HR bot, pharma information, and the ability to take out simple insurance. It aims to improve the employee experience with agent assist and CX through ease of engagement. It also has multiple GenAI POCs running with AWS across its primary industries, including predictive maintenance in manufacturing, passenger tracking in public transport, and fraud detection for telcos.  

Across AI, client outcomes include creating an automated quality assurance process for a German automotive client using AI to enable zero outages and significantly reduce errors. Another example is a faster MTTR through AIOps, which resulted in a 15-20% cut in operational costs. We expect T-Systems to continue to ramp its capabilities across AI and GenAI and in supporting skillsets, where it currently has ~1.6k dedicated AI specialists and IT architects, 700 scrum masters, and 300 agile coaches.

Outlook

We expect T-Systems to continue to expand its AI capabilities, including GenAI, and across Agentic AI, and build up its LLM hub across Open Telekom Cloud through the OpenStack approach. In addition, LLM capabilities will be increased across key hyperscalers, such as AWS, Azure, and Google. It will also need to focus on OCM to drive the adoption of GenAI, including greater use of AI in OCM to drive personalization.  

It has an opportunity to leverage its mainframe experience and use of AI to drive legacy modernization for clients and support hybrid multi-cloud initiatives. Its focus on FinOps and full-stack monitoring and observability, DevSecOps, and its ability to tailor cloud services aligns with client needs. We anticipate T-Systems will expand its cloud privacy and sovereignty services across BFSI, the public sector (including education), and midsize enterprises.

In support of digital workplace services, we expect to see more expansion of its Microsoft 365 CoE capabilities and the provision of an SRE-led approach across workplace and cloud operations. In addition, its commitment to 100% full circularity for technology and devices by 2030 will align with client strategies as clients seek to expand their Evergreen services and meet ESG agendas.

T-Systems’ strategic partner ecosystem approach will resonate with clients as they increasingly seek to leverage their existing tooling investments, as will its vertical cloud capability to drive specific business outcomes. Finally, we expect T-Systems to increase its focus on AI specialists, platform SMEs, and business-value leads and build SRE CoEs supporting delivery locations.