Intellectual capital

There are many definitions of intellectual capital. We like a very simple definition that explains that the intellectual capital in a business has three sources: products and intellectual property; human capital; and the knowledge and expertise that resides in the way things are done in a business, which includes systems, procedures and protocols. There is no doubt that intellectual capital is a real business asset, although measuring it can be difficult. Certainly the investment we make in training our employees and community members will contribute toward our business value for many years and we would refer you to the Human capital section on page 83 and Social and Relationship capital section on page 87 of this report in that regard.

• Despite retrenchments Telkom’s reputation with its employees overall improved 2.1% year-on-year and levels of trust increased 7.2% year-on-year
• Telkom’s reputation with its management increased
  8.7% year-on-year with trust levels increasing 16.1% year-on-year
• Our network employs some
  10 000 network specialists
• IT OSS/BSS stacks are separately supported for Wholesale and Retail in IT
• New systems are being developed to replace all legacy IT systems over the next four years

Some IT facts

• Telkom has a team of about 800 IT people who develop systems, solutions and products and support and maintain them
• Telkom currently has 314 legacy systems that are being replaced
• At any one time our IT team is working on over a thousand IT initiatives
• Our data centre operation, Cybernest, has seven data centres
• Radical application design/joint application design development processes are used to deploy new systems
• 20 IT strategic partners assist IT to develop and support systems
• Telkom uses SAP IT systems for finance, human resources and procurement

The role of IT in Telkom

Telkom’s approach to IT is to invest in the key systems and processes that will enable the business to meet its growth objectives. This includes overhauling our IT capabilities and building cost-effective systems that will ensure Telkom becomes a more efficient and customer-friendly organisation.

Our IT challenge is about transforming our technology so that it fits and supports our new business model at the speed at which our business needs to mobilise. This is a very significant challenge because of the complexity of the organisation where we currently have 314 legacy and duplicate systems built over decades that need to be either replaced, upgraded, rewritten or decommissioned. Many of these systems were written 30 to 40 years ago when packaged solutions were not available and they were coded in computer languages now mostly forgotten; and subsequently customised. There are few people remaining in the organisation who have knowledge of these systems. This is a significant risk and another reason we need to move off these systems as quickly as possible. There is the added complexity of managing the overhaul of technology systems that are integrated with South Africa’s biggest and most complex network.

Telkom is running behind its global counterparts when it comes to updating, upgrading and changing its IT systems. The one advantage this has given us is that we are able to learn from others and avoid the mistakes they made. We will also be using strategic partners to provide solutions more than we have done in the past. This will speed up the process by using available off-the-shelf solutions and reduce our IT risk levels.

The strategic IT projects we are currently busy with are in our top priority business areas: customer experience, the new generation network we are building, and new products. The priorities for these projects are based on process efficiencies, data migration, revenue generation and systems security.

One top priority project at the moment is to have a single integrated view of our customers, which will provide our customers with a seamless experience across fixed-line, mobile, voice and data services. Underpinning this change is a new operations support system (OSS) and a new business support system (BSS) stack that will incorporate our fixed-line and mobile products.

This project will be followed by the interfaces for Telkom Business, which is more complex and will provide a flexible open capability which will allow business to provide customers with fast purpose built solutions. This system requires the convergence of a number of systems such as PABXs, routers, billing systems and other services an enterprise business would want from Telkom. We plan to release this system capability in the next calendar year.

The next big challenge is the splitting of our retail and wholesale systems. This includes financial and human capital systems, billing and assurance, warehousing and order management. Our IT team is working with our retail and wholesale divisions to finalise product strategies, which will affect the system architectures of Telkom. This is a very big IT project with a four-year timeline. This systems separation will facilitate two separate business models, one for retail and one for wholesale.

Building the Telkom brand

At Telkom our biggest challenge is ensuring that we become and remain a more customer-centric business. As a technology company we need to deliver in the present while leading the way to the future. To achieve this we must understand and anticipate the needs and desires of our customers. We are in the enviable position of being able to shape our customers’ relationships with technology and play an integral part in their lives. But in order to do that we have to be invited in, we need to be a welcome addition to their lives, providing a seamless, effortless connection between them, the world around them and the future.

Our brand essence is about giving our customers tools to create a better future for themselves so they can live better. We recognise that Telkom won’t be a favourite brand in the near future, but that is ultimately where we want to be.

We recognise that a brand is not a product or service, but a promise. The fulfilment of this promise builds trust. A product has no emotional connection, while a brand does.

Underpinning our brand are our values that drive how we behave, guide how we move into the future, and underpin our strategic intent of putting our customers first.

It’s that emotional connection that makes people come back time and time again, even when there are new competitors offering lower prices. That’s what we want from our customers, but our customers aren’t going to give their loyalty easily. They form opinions about us based on everything they experience – our service, products, logo, call centre, history, other people’s opinions of us, an SMS. So we need to make sure that what they experience is always aligned to what we want them to believe about us and what we want them to tell their friends and family about us.

We believe that everyone at Telkom can create a better world for our customers through connecting with them and putting them first.

During the year under review we invested 34 percent of our marketing budget in brand building and sponsorships that positioned our brand and this investment has paid off, particularly in our consumer business unit. This communication seems to have resonated with SMME owners, but we have yet to see the commercial benefit. Our Enterprise marketing has drawn strength from increased and closer engagement with the top 1 100 chief information officers (CIOs) in South Africa. We introduced CIO round tables with the top 1 100 CIOs.

The results of our 2015 Rep Trak Pulse survey, which provides insights into a company’s reputation, whether it fulfils its governance requirements, if its current reputation will allow it to achieve its strategic goals, reputational risks and information that can help a company protect its reputation appear below.

About our brand

RepTrak© research results

How stakeholders rated our reputation in FY2015 in comparison with FY2014:

• 9.8 percent increase – overall external stakeholders
• 6.1 percent increase – overall customers
• 4.6 percent increase – business cust
• 15 percent increase – government customers
• 16.1 percent increase – corporate customers
• 5.1 percent decrease – residential customers (this result was affected by the poor service we provided at the time of the changeover of our contact centre to an outsourced specialist facility)
• 21.7 percent increase – wholesale customers
• 23.2 percent increase – investors
• 18.8 percent increase – media
• 18.1 percent increase – regulatory authorities
• 21.2 percent increase – opinion leaders