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TID: Leading the innovation at Telefónica

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Telefónica Investigación y Desarrollo (TID) is the research and development company within the Telefónica Group. Since it was established in 1988, TID has been leading the technological innovation at Telefónica. Francisco Jariego, Director of Technological Strategy, talks about how revamped TID is going to support the Group’s coming business growth.

WinWin: Can you introduce your organization, its responsibilities and role in the Telefónica Group?

Jariego: TID is the research and development company of the Telefónica Group. We run a complete open innovation framework organized around a network of innovation centres in Europe and Latin America. Our mission is to contribute to the Telefónica’s competitiveness through technological innovation in areas like networks, security, M2M, cloud, video, eHealth, communication services and platforms, user modeling & financial services.

WinWin: Can you give some examples of the most innovative products developed by TID that the Telefónica Group has launched in recent months?

Jariego: Let me start with Bluevia, the platform for developers to access communication services provided by Telefónica that has been recently launched, where TID has been the most relevant contributor. I would also mention GiffGaff, the UK based virtual mobile operator, built on Web 2.0 principles and oriented to participation and direct involvement of its user community. And not forgetting our over-the-top (OTT) video solutions that we are already commercializing in some of the countries where Telefónica operates, with different names like “Movistar Videoclub” in Spain and “Onvideo” in Telefónica Latam. Just to mention a few of them.

WinWin: We know you are striving to build a “new TID”. What are the main changes expected, and what new contributions will it make to the Telefónica Group?

Jariego: First of all, our top priority is to add new revenue streams. Therefore, we are trying to focus on creating new areas of revenue for the Group, specifically focused on Telefónica’s seven new vertical areas: cloud, M2M, eHealth, financial services, applications and Internet, security, and video. The Group is aiming for EUR1 billion of new revenue from each vertical business line in five years. So the new verticals will be an important asset in the coming years, and we are trying to contribute the R&D capability to achieve the goals.

But our activity goes beyond the needs already identified by the business. We are working on very different projects to explore new technologies and opportunities for Telefónica. And we are also promoting essential capabilities required nowadays like our “user experience” and research groups.

WinWin: What are the areas of research you are working on? Can you update us on the latest progress so far?

Jariego: We try to support Telefónica in its key R&D initiatives. Video and the Internet are two of our top priorities. The current Internet revolution is very important to us and we need to understand how to support the new applications and services and take advantage of our infrastructures. We have researchers working on this, collaborating with universities in the U.S. and Europe.

Another very important issue is to understand how customers behave. The new forms of communication that are currently evolving very quickly bring together voice, video and social networking; they are all evolving around how humans communicate. In order to understand our customers, we need to make the best use of data, after gathering, storing, and mining it. Data is a big enabler of M2M applications, which we are pushing as we enter new businesses.

WinWin: How important it is for Telefónica to work with global suppliers who are able to provide end-to-end solutions in every part of the network including applications, servers and new business without any conflict with operators?

Jariego: It is clearly very important for Telefónica to have solid global partners. We have always worked with them because the telecommunication industry is a complex industry where you need to put together different services, hardware, software and infrastructure from very different market agents.

For TID, partnerships are critical. We firmly believe in the open innovation concept. We don’t want to be a very large company, so we need to concentrate on our core competences and allow our partners to complement us.

The key to success is to have partners who understand what we are doing, and who can develop, extend and amplify the things we are doing. Telefónica today has a global presence and we need to have physical presences in many places. Having the capability to reach all the markets in which Telefónica is operating is important for us. It’s the way we want to move forward at Telefónica R&D.

WinWin: How would you comment on your cooperation with Huawei, and how can it develop further?

Jariego: Telefónica and Huawei’s relationship is relatively new but it is a very promising one. Huawei has managed to become one of the key suppliers of our network. Among our initiatives are joint innovation centers, where we collaborate and test the technology, so as to better understand how we can apply it in certain areas.

But I think that we must push our relationship further. Technology is changing very rapidly and creating lots of opportunities. Putting together the strength and capability of Huawei and our knowledge of Telefónica is a good recipe to create new opportunities for Huawei and Telefónica TID. I firmly believe that our relationship can be very productive.

WinWin: Since 2008, Telefónica and Huawei have been running innovation projects under the Joint Innovation Center initiatives; these projects involve network, mobile and service, among others. Can you share with us the benefits the joint initiatives have brought to Telefónica and its customers?

Jariego: Joint Innovation Center is a good example of collaboration within our open innovation framework. We are able to participate in the early stages of Huawei’s technology development, by introducing our needs and requirements, exchanging visions, data and experiences, and helping to focus our common effort. Thanks to these joint initiatives, we are together investigating on topics such as how to provide an excellent Quality of Experience for future LTE users, how to enhance xDSL performance, new functionalities on next generation FTTx access networks, and definition and design of future services that can run over the Service Delivery Platform provided by Huawei.

WinWin: What benefits is the strategic alliance between Telefónica and China Unicom bringing in terms of innovation?

Jariego: Of course, the alliance is bringing economies of scale, for example amplifying our capacity to profit from joint procurement initiatives. But perhaps, the most important aspect is that it is helping us understand the Chinese market.

China offers a huge opportunity for Telefónica, but if we want to succeed, it is necessary to understand a different culture, overcome the language barrier and learn a lot of new things. So I think that there is much to be explored in our relationship with China Unicom.

WinWin: In a speech by Telefónica Group Chairman & CEO Cesar Alierta at the GSMA congress this year, he emphasized the key role that telcos have to play in the ICT ecosystem. Similarly, Huawei has made a strategic expansion into the enterprise and device markets. Talking about ICT sector challenges, how can TID facilitate Telefónica’s move into the ICT sector?

Jariego: One of the things we are pushing is our knowledge of software technologies. I think most of what is going to come will be related to the mastering of certain software technologies and products and services based on software. Our industry has built on the magic of Moore’s law, the periodic doubling (18 months) of capacity of our basic infrastructures: the communications equipment based on hardware. Fortunately we are going to enjoy this magic for ten years more.

But we don’t have an equivalent of Moore’s law for software. And software is the raw material on which digital services are built. So mastering software, and understanding how to use and create useful software technologies and business models based on software is what we are doing right now.

WinWin: The telecom space is facing a different environment now, with new technology and new competitors like Google and Apple. How do you think Telefónica can compete in this environment?

Jariego: They are very formidable players. They have created a surge in innovation, and they are here to stay. There is a need to understand, from an industry point of view, the best way to sum, to put together our different and complementary capabilities and bring the best products to the market in a sustainable way. One of the things we are doing in this new market environment is opening our infrastructures as well as our R&D facilities, so that more companies can develop services on top of them. The company is moving in this direction with initiatives like Bluevia and WAC where TID is playing a key role.

However we cannot forget that we are competing according to very different rules. The telecom industry is a highly regulated industry while those Internet companies are competing in markets without regulations. If we solve the basic regulation problems, we can expect a very productive environment for innovations and new services.

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