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TELUS International: Purpose built to be digital first responders

Accelerating success through successful acquisitions integration

TBR recently had the opportunity to catch up with TELUS International President and CEO Jeff Puritt, two years after the company’s inaugural analyst summit in Las Vegas and two $1 billion acquisitions later. Right from the start it was clear that the company has been able to preserve its most valuable asset, its culture, despite massive portfolio expansion and operating model transformation (TELUS International went public on Feb. 3).

The purchase of Competence Call Center (CCC) in February 2020 and subsequent acquisition of Lionbridge AI in December 2020 have not only provided the company with the breadth of offerings necessary to navigate an increasingly complex ecosystem bolstered by the advent of AI and consumer-generated content, but have also enhanced its value proposition; as Puritt positioned it, “Purpose built to be digital first responders.”

CCC added over 8,000 employees, mostly across European operations. Lionbridge AI provided access to both IP and a crowdsourcing community of over 1 million trained professionals with skills ranging from speaking multiple languages to holding, in some instances, advanced degrees. Integrating large-scale acquisitions such as these is not an easy task, but Puritt and his team are successfully executing on these transactions, guided by principles focused on employee engagement and customer satisfaction. In its first full quarter as a publicly traded company, TELUS International reported 57% year-to-year revenue growth to $505 million in 1Q21, with strong contribution from these recent purchases; absent that contribution, TELUS International’s growth was 20% on an annual basis during the same period. For comparison: In TBR’s IT Services Vendor Benchmark, we estimate on average total revenue for the 30 benchmarked vendors will expand by low single digits in 2021.

Mixing AI into employee culture at scale is not easy, but TELUS International seems to be mastering it

With AI permeating consumers’ everyday lives and enterprises’ IT and business operations, TELUS International has an opportunity to become a household name as an automation-enabled organization with human capabilities. The purchase of Lionbridge AI could serve as a catalyst of that transformation at scale, given the company’s AI platform and access to 1 million trained professionals that can support TELUS International in providing data annotation services for text, images, videos and audio.

While the future promise of AI depends on its ability to adapt and recommend with minimal human intervention, we do not anticipate the need for human support to evaporate any time soon. The increasing volume of user-generated content and the complexity and sophistication of systems will continue to necessitate the development, integration and management of algorithms and human involvement, which TELUS International can deliver. Managing quality and ensuring privacy and security requirements are met while tapping into the crowdsourcing pool is not an easy task, but TELUS International continues to build a human-centric culture that empowers both full-time team members and crowd community members to take charge of their careers while also acting as brand ambassadors in their local communities.

TBR witnessed this culture firsthand during visits to TELUS International facilities in Las Vegas and Sofia, Bulgaria, where the company has grown roots not only to expand its recruitment reach but also to build local trust, reflected in its extensive corporate social responsibility program.

Next phase of success will depend on managing the ecosystem

As TELUS International executes on its road map as a publicly traded company, managing stakeholders’ expectations through a well-grounded vision will be key to success. Alliance partners such as Google Cloud will play a critical role in TELUS International’s ability to scale performance, especially as the company strives to win AI services and solutions opportunities, an area Google enables through its Contact Center AI solutions.

TBR, along with Puritt, recognizes that TELUS International still faces opportunity areas where the company can continue to strengthen its value proposition, one of which is consulting and advisory services. While we do not anticipate the company will double down on becoming a management consultancy, we expect TELUS International will continue to pursue a more pragmatic approach toward building domain expertise through strategic partnerships. The company has an opportunity to deepen expertise around close-to-the-data annotation and moderation services similar to the way telcos offer consulting to their telco box. Maintaining trust within the ecosystem will also support TELUS International’s move to the next phase of opportunities, especially as the company increasingly relies on AI-enabled systems. As TELUS International elevates its brand and value proposition within the highly competitive digital customer experience market, trust will come from within, starting with successful employee management.

Competition from MVNOs and smaller rivals limits subscriber growth for Tier 1 U.S. and Canadian operators

Wireless revenue rose 2.2% year-to-year to $64 billion among U.S. operators covered in Technology Business Research Inc.’s (TBR) 4Q18 U.S. & Canada Mobile Operator Benchmark, driven by continued subscriber growth and adoption of premium smartphones. All benchmarked U.S. operators except Sprint were able to gain postpaid phone net additions in 4Q18 as opportunity remains to target first-time wireless customers in the country. Postpaid subscriber growth is also fueled by prepaid migrations as many subscribers are moving to postpaid plans for benefits such as bundled streaming services and increased LTE data limits for mobile hot spots.

4Q18 Wireless Revenue, OIBDA Margin & Year-to-year Revenue Growth

Subscriber growth for U.S. Tier 1 operators is, however, threatened by the growing momentum of new mobile virtual network operators (MVNOs) entering the market. Comcast’s Xfinity Mobile and Charter’s Spectrum Mobile are attracting wireless customers via low price points and the convenience of being able to enroll in multiple services through a single provider. Altice also plans on providing wireless services in 1H19, giving the company the opportunity to cross-sell mobility services to its current residential base of over 4.5 million customers. TBR also anticipates Google Fi, which was rebranded from Project Fi in November, will gain further traction in 2019 as the brand is launching new incentives to attract customers including bring-your-own-device options for most Android and iPhone smartphone models.

Combined wireless revenue among Tier 1 Canadian operators rose 6% year-to-year to $6.9 billion due to continued subscriber growth spurred by shared data programs and expanding LTE-Advanced coverage. However, subscriber growth for Tier 1 Canadian operators is limited by mounting competition from smaller competitors. Tier 2 Canadian operators, most notably Shaw Communications’ Freedom Mobile and Quebecor’s Videotron, which now have a total of about 1.5 million and 1.1 million customers, respectively, are accelerating subscriber growth via their pricing promotions and network investments. TBR anticipates Freedom Mobile will further disrupt the Canadian wireless market in 2019 as the company will expand LTE coverage to an additional 1.3 million Canadians throughout the year in markets in British Columbia, Alberta and Ontario.

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 or [email protected].

TBR Weekly Preview: March 11-15

We’re going all over the technology space this week, with reports spanning U.S. federal government IT services to long-established hardware and data center providers, plus a couple of European-centric companies.

Wednesday:

  • Talent continues to be the constraining factor on ManTech’s bright revenue growth outlook. Focus in defense and intelligence segments of the U.S. federal market on innovation creates healthy demand for ManTech’s labor-based technical services offerings, such as R&D, testing and evaluation of emerging technology. As a smaller competitor compared to many of its large prime peers in the federal sector, ManTech acutely feels the resource impacts of the security clearance backlog and overall tight labor market. TBR’s 4Q18 ManTech report, written by Senior Analyst Joey Cresta, will explore how ManTech uses adaptive learning, continuous monitoring software and new leadership hires to address the human capital challenges associated with scaling up its labor base to meet robust client demand.

Thursday:

  • As detailed in our initial response, Lenovo achieved its sixth consecutive quarter of year-to-year revenue gains, reporting $14 billion in revenue in 4Q18, up 8.5% from the year-ago compare, even as consolidation opportunities cool in the PC market. Despite these high notes for Lenovo exiting 2018, the company will still face hurdles over the next two years. Its PC and Smart Devices businesses will have to deal with challenging and shifting PC environments. Data Center Group continues to deliver on its promises, but it remains in the red despite improvements to its bottom line. Lenovo’s Mobile business is still teetering in profitability. Read our full report by Analyst Dan Callahan to find how Lenovo will navigate these challenges and tee up for a seventh consecutive quarter of revenue growth in 1Q19. 
  • Our detailed assessment of Atos will note that the company’s Digital Transformation Factory portfolio accounted for 30% of revenue in 2018, up from 23% of revenue in 2017, positively affected by increased activities with clients in areas such as orchestrated hybrid cloud, Digital Workplace and cybersecurity. As Senior Analyst Elitsa Bakalova will report, Atos’ efforts to position as a trusted partner for clients’ digital journeys are starting to pay off, and the new digital services strategy will shape the company’s activities over the next three years.
  • As reported in our initial response, Hewlett Packard Enterprise’s (HPE) revenue fell 1.6% year-to-year to $7.6 billion. While revenue growth is always a goal, TBR believes HPE is more focused on improving profitability in the near term before it shifts to boosting revenue growth. In our full report Analyst Stephanie Long will dive into the long-term strategy of CEO Antonio Neri and how it will impact 2019. Key cost-cutting initiatives and strategic investments, such as in high-performance computing and the edge, will be likely highlights in 2019.
  • Analyst Kelly Lesiczka will be reporting that T-Systems’ portfolio and organizational investments continue to improve its ability to gain wallet share in newer areas and stabilize revenue growth in 2018. Building out its emerging technology portfolio offerings, such as for IoT using DT’s product offerings, enables T-Systems to provide more comprehensive and personalized solutions to clients and generate larger-scale engagements to accelerate growth.

As promised, we published a new report last week by Senior Analyst Boz Hristov on Accenture Technology, and today published a report on TELUS International from Boz as well as a report on Mobile World Congress Barcelona 2019 by Principal Analyst Chris Antlitz.

While we do not have a webinar scheduled for this Wednesday, the next one will be on March 20 featuring Senior Analyst John Caucis talking about healthcare IT services.

In an emerging world managed by bots, TELUS International’s culture tells us why humans still matter

TBR perspective

Since the dawn of outsourcing, BPO has allowed enterprise buyers to trust third-party providers with the support of many internal and external processes. While in the past, the risk associated with managing IT and business assets was heavily weighted toward the buyer, in today’s age, where social media is leveraged as a sounding board for both positive and negative customer experiences, there is a heightened expectation for services vendors to deliver brand promises. During its 14-year tenure as an active participant in the CX support services market, TELUS International has successfully navigated the ever-changing dynamics of the BPO space by investing heavily in its employees. The company has an average annual attrition rate of approximately 25%, which is about 50% below the BPO industry average, as its employees and executives trade on trust and share a common goal of servicing customers. Deploying and managing learning and collaboration platforms globally as well as adopting many of the same technologies used to support clients, TELUS International’s approach to people, processes and technology shapes the company’s culture in the era of the machines. While the CX support space has been augmented by the increased use of AI-based technologies and one might consider the BPO industry to be highly commoditized from a labor arbitrage perspective, TELUS International continues to build a human-centric culture that empowers staff (most of whom are millennials) to take charge of their careers while also being brand ambassadors in their local communities. Touring TELUS International’s Las Vegas delivery site, which is one of the company’s 27 global hubs, during the event helped bring TELUS International’s strategy and vision around its employees and investments in innovation to life, further supporting the “from slides to code” trend TBR has observed in the industry over the past 18 to 24 months.

Moving forward, we expect TELUS International to continue executing on its standardized approach to customers’ digital enablement and to carefully select and manage its client base, including pursuing opportunities with enterprises that are also involved with approving TELUS International employee recruitment and training. As the BPO market evolves, the emergence of new pricing models, including outcome-, subscription- and license-based pricing, will compel the company to take on additional risk and retune stakeholders’ expectations around its P&L profile. As a result, TELUS International will need to continue its transformation into an increasingly automation-enabled organization with agent capabilities. 

At its inaugural Analyst Summit, TELUS International brought together industry analysts, company executives and clients. The company used the two-day event to prove why, according to President and CEO Jeff Puritt, TELUS International is the “best kept secret” when it comes to company culture, employee engagement and customer satisfaction in the highly competitive customer experience (CX)-enabled BPO market, especially in the area of talent.  

Opportunities for wireless subscriber growth remain plentiful for U.S. operators

Cable providers are disrupting the U.S. wireless market

Subscriber growth for U.S. Tier 1 operators is being limited by the growing momentum of Comcast’s Xfinity Mobile brand, which outperformed AT&T and Sprint in postpaid phone net additions in 3Q18 and now has a base of over 1 million subscribers. Xfinity Mobile will become a stronger competitor in the U.S. market over the next several years as it expands its retail footprint and Comcast gains additional broadband customers to which it can cross-sell wireless service. Spectrum Mobile, which became available across Charter’s footprint in September, will also disrupt the U.S. wireless market by offering similar pricing incentives as Xfinity Mobile.

 

TBR’s U.S. & Canada Mobile Operator Benchmark details and compares the activities of the largest U.S. and Canadian operators, including financial performance, go-to-market initiatives and resource management strategies. Covered companies include AT&T (NYSE: T), Verizon (NYSE: VZ), Sprint (NYSE: S), T-Mobile (Nasdaq: TMUS), U.S. Cellular (NYSE: USM), Rogers, Telus and Bell Mobility.