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Hyperscalers and micro-scalers: how BT is reinventing partnerships large and small

August 2022
Read time: 9 minutes

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BDO Partner Jonathan Rowan discusses plans for hyperscale and start-up partnerships with BT executives Meg Blight, Start-up Partnerships Director, and Stephen Hall, Director of Strategic Partnerships.


Telecommunication leader BT’s partners include Alphabet, Amazon and Microsoft plus smaller companies and start-ups working in areas such as drone technology and the health sector. Here BDO partner Jonathan Rowan discusses BT’s partnership strategy with Meg Blight, Start-up Partnerships Director, and Stephen Hall, Director of Strategic Partnerships.

What’s the value of BT’s approach to partnerships, and why are they superior, or complementary, to either build or buy

They’re complementary. It’s not cut and dry though, there are many shades of grey. For example, partnering to licence a specific IP which we can then repackage, build on top of and take to market is build, buy AND partner. Some of the most interesting deals are in the subtleties. Our approach is to play to the strengths of both BT and the partner. We're looking to take better products to market and get the best deal for customers. 

Increasingly, much of the opportunity is global but it also requires local variation. 

That’s one of BT’s strengths. Across all our geographies, we’re deeply connected to our millions of customers. The value to partners, big and small, is that we work in a way that's beneficial to all. There’s an amazing constellation of innovations out there. Take AI [artificial intelligence] solutions such as computer vision, for example. Often the most innovative solutions solve a very specialist problem that is vital to a subset of our customers but not relevant to others. That might have a big global market but is a relatively niche opportunity when considered across our total customer base. It might not make sense for us to build it ourselves when there’s a global innovator we can partner with and scale their solution with our global go to market reach.

We can’t do it all ourselves. We’ve got to bring the best partners into the BT ecosystem to develop and test out new propositions and bring new opportunities. One of the elements of our Digital strategy is great partnerships. Talking to businesses gives us a spectrum to cover a whole range of possible futures.


BT

Industry: Telecommunications
HQ: London
Size: 10,001+ employers
Sub-sector: AIM/Listed business
Website


Describe your Hyperscaler relationships, how they’re set up and your goals.

We look at how we use technology from partners such as Amazon, Google and Microsoft and how it can make us more efficient and productive. Google is a strategic partner, thanks to a recent Google Cloud Platform [GCP] deal. With Amazon, it's moving our IT workloads to the AWS [Amazon Web Services] public cloud. Then with Amazon, Google, Microsoft and Apple, it’s us buying from and selling to, whether it's our connectivity, voice services or other solutions. 

Then we’re exploring possibilities to extend our partnership into new previously untapped areas, utilising the partners’ cloud technologies and BT’s infrastructure.

Have these relationships been a long time in development?

The BT, Google and EE relationship goes back many years in the consumer space but they're also trading partners because we would resell the mobile and Android devices. We started working with GCP three years ago. With AWS, we produce Amazon Prime sports; we started working with Amazon Web Services on public cloud 2018, and a recently announced five-year update on that deal which is enabling us to accelerate the modernisation of our application estate 

"Last July, we announced the Microsoft strategic partnership, which is a multi-year commitment."


I appreciate that BT is a lot more than just an incubator, but could you describe your approach with start-ups and explain what differentiates your approach from others?

The first thing I do is start with a brief from my internal stakeholders and end customers. We start with big problems or opportunities we can solve (with start-ups). This might be something for our own use; something we might be building for our customers that could be accelerated; or an area where we are looking for partner products to take to market. Either way, it’s centred in a real need.

That's different from a lot of other programmes that may start with a broad brief to find what is cool without line of sight to customer demand.

Time is vital for startups and they can potentially waste a lot of it on dead-end conversations with corporates who haven’t already done the work that we start our process with. Of course, we still do some horizon scanning but generally my team works on things that are already a strategic priority. 

Using this process, we can be faster and more targeted. We might find 100 companies that fit the brief, and then we can whittle it down to find the best fit. It's not just about what we need at BT, EE, Plusnet or even Openreach, it's also about what the startup needs. The partnership needs to have synergy in terms of missions and ways we can help each other. Once we think there’s something there, which we try to do very quickly, we arrange a pitch day between the startup and relevant BT decision makers. Our goal is to leave with a fast no or yes. 

If it’s a yes that’s when the real work starts to build the partnership.  It's very much a relationship. That's why we talk about amplifying startups. It’s not one size fits all.

"This is about finding the right partners and our process and approach puts that at the very heart of it, so it’s a better experience for the startup and us."


Are you able to put any numbers on this for us?

 The current team got going last summer and we’ve signed six deals since then. Four of those are reseller partnerships that may grow into other things in the health area, one was an asset acquisition and one was a bigger sweat equity investment with a start-up called Distributed

We have many more companies coming down the line. In the next year, I’d expect us to do far more. However, for a project we might start with a list of 100 companies but only do one deal. In terms of the engagement reach, the number of events and conferences we attend or host, it's a wide funnel. This isn't scattergun though. We have strong relationship with all the companies we invest and partner with. 

It’s quality over quantity. 

Tell us more about the deal with Distributed.

When Harmeen [Mehta, BT’s Chief Digital and Innovation Officer] joined BT, in March 2021, she had a clear mandate to revolutionise Digital at BT. We had the challenge of how we efficiently scale up and scale down teams to build new products. There’s a war on talent that can’t be filled with permanent employees alone. We wanted to find a UK company that was solving these problems in an innovative way. Distributed provide corporates with rockstar developers and other digital talents in a way that gives the freelancers the best of the freelance lifestyle but with benefits typically associated with permanent employment and makes the process easy for BT. It’s a new category of work.

Last summer, we made a commitment to spend £30m with them over three years. We're getting a great deal and it's a vote of confidence in them. Distributed’s CEO, Callum Adamson, told me it's been the first time for a long time he's been able to focus on running the company rather than fundraising. 

When it comes to Hyperscalers, are you facing competition from large corporations?  

There’s competition and understandably so. We overlap in a few categories, and work hard to find the differentiators that matter to our respective customers. There's competition in the consumer space also. However, our perspective is very much that with BT and Google, or BT and Amazon, or BT and Microsoft, the whole is greater than the sum of the parts. 

So, the partnership with Google can help our agenda on digital skills, training and culture. Google is broadly looking to explore many areas that could be opportunities for BT, and we believe we can get a lot of value out of these partnerships. 

Can you comment on the lessons learned in how BT works today, in both large and small partnerships?

What's important is strong executive alignment and a passion to make it work. There's a recognition across the organisation that partnering is critical. 

Ultimately, it's about being customer focussed, picking our bets and having the right people aligned, but testing, learning and failing fast! 

The partnership we've had for many years between BT, EE, Plusnet and Apple has been astonishingly good. Under our EE brand, we were the first in Europe to launch the Apple Watch with built-in SIM [Subscriber Identity Module], and the relationship with Apple has been second to none, while there are, of course, others that haven’t been as productive. 

The difference for me is twofold; one is alignment in objectives and the other is that in the past it’s been hard for a large organisation like BT to be focused. What’s really changed is that we've become more structured in terms of aligning relationships, ownership and collaboration.  

That’s what Steve's doing but it also relies on Philip [Jansen, CEO BT Group] and the executive committee, being engaged and supportive. 

From a startup and smaller business point of view, what has changed? 

Executive sponsorship is a huge aspect. As we transition from being a telco to being a tech-co, we recognised that to support our customers we needed to move further into providing them solutions and go beyond purely connectivity, devices and even things like cloud and cyber. 

We need to focus our permanent employees, and a lot of our resources, on getting our core strong, whether that be rolling out 5G or fibre. But we also need to solve our customers’ problems and sometimes the best way of doing that is through partners. 

What, if any, are the cultural differences between BT and your partners, and is that a challenge? 

It’s not as different as you think. Certainly, the culture in BT Digital is increasingly like start-up culture and not what people would expect at BT. Digital is committed to accelerating the transformation of BT. Inside BT there’s a revolution going on. It's about building upon points of strength. 

We co-locate teams and you wouldn't know who’s from Google or who's the Amazon or BT. The teams are empowered to develop the opportunity. It's their business and they create their culture. Our job is to enable it to happen. 

Can we hear about some of your case studies with drones?

Recently it was announced that the UK is set to become home to the world's largest automated drone superhighway within the next two years, we are part of a consortium with a fantastic drone company called Altitude Angel, to help build this 64-mile Skyway project connecting towns and cities. 

We’re partnering very closely with Altitude Angel, but also building out the connectivity and creating the network, along with a few other partners. We already partner with a company called DroneShield. 

We take their products to market in terms of counter-drone solutions.  We are working to build with them what’s basically the infrastructure to create safe flight across the UK. 

What about an example of partnerships in the healthcare space?

We’ve brought on four partners we’re currently promoting to the NHS, and one of my favourites is a company called Feebris. Increasingly, there are opportunities to use connected devices to measure key biometrics such as heart rate, blood pressure etc. this can be done in an hospital or at home.

One of the problems is people take the wrong measurements, so Feebris uses AI to alert the person as to whether they have taken it correctly and ensure accuracy. They're supporting care in the community and that has an opportunity to make things more efficient and ultimately help with patient outcomes, as well as reduce costs. 

Long term, there may be potential opportunities for us to integrate that technology into other services.

What are the potential synergies between start-ups and Hyperscalers? 

There will be opportunities as we become a greater seller and user of the cloud, which obviously comes from the Hyperscalers. 

One of the best ways of us utilising those services is through start-up partnerships, so they can build on the foundations of those Hyperscaler partnerships. 

There may be themes that we're exploring with Google and AWS that start-ups play a part in which can help them fulfil their potential. Logically, there will be synergies.

Can you summarise the outlook for the next 12 to 24 months? 

 Over the last year, I’ve created with my team a version 1.0. of what we're doing. We've got a good pipeline, and we're making a difference but sometimes how we do it is not as slick as we'd like. In the next 12 months, it's all about delivering twice the impact but half the pain. 

How we work and innovate is important. We’re looking to co-innovate, explore, develop and set up the teams. We want to get to an agreement with both Amazon and Google with that intent in mind—and crystallise that in the next three to six months.

Do you need support with digital strategy? Get in touch with your local BDO advisor at [email protected].

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