Orange to go big on digital services to revive ailing enterprise division

• New CEO of Orange’s enterprise unit rolls up her sleeves for major organisational changes
• Aliette Mousnier-Lompré sees digital services as the lifeline for the division, which suffered a major blow in the first half of 2022
• The company sees itself as an integrator and facilitator in an open environment rather than a telecom operator

PARIS – Orange Business Summit 2022 – Following a financial wake-up call in the first half of this year, the new CEO of Orange’s global enterprise division unveiled ambitious plans to save the unit from further earnings disappointment by shifting the focus from core connectivity offerings to IT and integration services, such as cloud and cybersecurity, which are in high demand from business customers. 

During a keynote presentation in Paris this week, Aliette Mousnier-Lompré (pictured, above), who was appointed CEO of Orange Business Services (OBS) in May, outlined a new strategy she is working on with recently appointed Orange Group CEO Christel Heydemann, to resolve “a paradox” at the enterprise division, which while operating in the “skyrocketing” IT services sector market has also been “really hurt” by a change in the way enterprises use communications services as a result of the Covid-19 pandemic.

That OBS has some work to do is clear from the unit’s financials for the first half of this year, during which it reported a slight 0.2% dip in revenues year on year to €3.88bn but suffered a near-50% drop in operating profit to €152m. Meanwhile, its IT and integration services represented some 43% of its revenues, boosted by 15% revenue growth in cloud, 13% growth in cybersecurity, and 8% growth in digital and data services.

Mousnier-Lompré explained that 57% of the business is still “telco-like” and focused on connectivity services, such as voice and mobile, but the overall segment is decreasing because fewer enterprises use fixed lines at offices as they shift to videoconferencing services, such as Zoom and Microsoft Teams.

“In this area, we are really transforming this core telco business into the new generation of connectivity at the crossroad between connectivity, cloud and cybersecurity. And being one of the biggest B2B telcos in the world [with] very large capacities in cyber defence, we are very well placed in this transformation,” she told journalists at the event.

According to the CEO, Orange’s IT and integration activities, such as professional cloud and cybersecurity services, data and artificial intelligence (AI), are seeing growth rates of about 10%, which she deemed in line with the market. But the operator plans to “go big” in these areas via both organic and inorganic growth.

To achieve this, she noted, the company is going through a transformation programme that involves pivoting the operating model for OBS from telco to a digital services company model.

“In the future, I want the company to be driven from a financial perspective through our geographies in a customer-centric way, rather than having the company monitored as it is today by business lines that are operating in silos. I’m also working on unifying our marketing teams to make sure we have a proper value proposition [that is] consistent end to end with what our customers are asking for. And I’m reshuffling the executive management team to bring [in] more different profiles that will be more IT driven, [and] have more IT experience and international profiles,” said Mousnier-Lompré.

She vowed the business lines of the division will be kept but that the company will address the needs of customers which, according to her, want OBS to “deal with their business outcomes and to fix their problems – whether they be technology or business issues. Ultimately, what matters is the end-to-end value proposition we are able to deliver”.

Focus for the future

The focus for OBS will be based on five value propositions: 

1. Transforming the digital infrastructure of its customers at the crossroads of connectivity, cloud and cyber; 
2. using data and AI to improve customers’ businesses; 
3. delivering collaboration tools and new ways of working to enhance the experiences of business customers’ employees; 
4. improving the relationship of its customers with their own customers via contact centres using cloud capabilities, data, AI and leveraging the networks; and
5. helping enterprise customers improve their performance across industrial processes and plans.

Essentially, what Orange is striving to do is address its customers’ demands for more flexibility when it comes to contacting their employees and customers, and to gain business agility by moving their applications to the cloud in a secure way.

In terms of its goal to poach customers that are migrating IT and systems and operational processes to cloud platforms, Mousnier-Lompré explained that most of its customers have a multi-cloud and hybrid strategy. Here, the Orange business division is looking to poach them by delivering cloud connectivity in a simple way, alongside options to monitor the security and the quality of the network.

Mousnier-Lompré said Orange has many experts who can help enterprises make the best use of the capabilities on offer from the major cloud providers, namely Amazon Web Services (AWS), Microsoft Azure and Google Cloud.

“We see ourselves as a kind of end-to-end orchestrator into a world which is open, with lots of innovation coming from everywhere. We want to work with many partners, we don’t consider that innovation will come solely from what we do. We really want to be kind of a composable, modular and open platform that will be able to bring together the connectivity to the cloud, which is our prime strength and asset, historically, together with solutions from partners and a layer of integration”, the CEO maintained.

She argued that OBS is “not a vanilla flavour digital services company” as it is “among the top-three more experienced players on what I would call the new generation connectivity”, which includes technologies like virtualised networks and SASE [secure access service edge]. And its “strength, assets and expertise in networks and connectivity” differentiate it from traditional integrators, such as Capgemini.

Without disclosing any acquisition details, Mousnier-Lompré noted that the company plans a “targeted acquisition strategy” in certain European countries (excluding France) where it feels there is a gap in skills and expertise in cybersecurity, cloud services, digital and data, for example.

Another organisational change will see its “green unit” strengthened and put “at the heart of our strategy”, allowing the company to better understand and monitor its own carbon dioxide emissions. It also plans to disclose the environmental impact of every product and service in its business offerings portfolio.

Cost hurdles

Finally, she acknowledged that global inflation “is hitting us quite badly”, while the shortage of chips is also causing delays to projects. She highlighted a challenge in the “war for talent”, with the cost of recruitment and training “quite high”. The company is working to propose more career path options, including international mobility and “more aggressive and proactive training strategies” to retain its workforce. The shortage of skilled staff at telecoms companies is widely seen as a problem within the industry - see Telecom has a “talent problem”, warns Colt CEO Keri Gilder.

Asked by TelecomTV whether inflation makes it harder to sell its business services, the OBS CEO noted the unit hasn’t seen such an impact. “The challenge is that our cost base is increasing very fast and we need to be able to increase our prices accordingly in some areas and it’s not always easy because competition is fierce in the market.

"We see that due to the energy price increase, the cost we have in terms of paying our datacentre providers everywhere in the world is increasing, the cost of hardware when we purchase equipment or servers is also increasing, and the cost of labour is increasing. All of this together [means] our cost base is increasing. For new projects, usually we are able to adjust our prices accordingly, but for our existing customer base, it’s of course a much bigger challenge. So in some areas, we are a bit into a squeeze in terms of profitability”, explained Mousnier-Lompré.

- Yanitsa Boyadzhieva, Deputy Editor, TelecomTV