Since founding TelcoDR in 2020, Danielle Royston has firmly established herself as the leading public cloud evangelist in our industry. So, she was an obvious and well-qualified choice to be our first invited guest on Silverlinings’ new Cloud 9 series of executive interviews.
In 2021, TelcoDR announced a $1 billion fund to acquire companies and software products that can be deployed in the creation of profitable telco cloud networks. Its goal is to “cloudify” the entire telco stack.
It spent $100 million for Totogi, and more acquisitions are expected, especially given the current distressed condition of the telco market.
But there’s a lot more to Danielle “DR” Royston than just money and M&A. The next 10 years will determine the fate of the telecom industry.
Will it embrace cloud, and make a success of it, as it has with so many other transformations, or will it drift quietly into the night, replaced by younger innovative hyperscalers with more money, energy and confidence?
Royston brings the drive, passion and intelligence to her role as public cloud evangelist — much needed in the often-fusty world of carriers. We need more leaders like her if the telcos are to make a success of cloud.
Check out the interview above, read the transcript below, and read and hear more of Danielle’s analysis where its hosted, right here on Silverlinings.
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Steve Saunders: Hi, I'm Steve Saunders on Cloud 9 and my guest today is Danielle Royston, or DR, telecom's leading public cloud evangelist who is on a mission to convince telcos to migrate their operations to public cloud infrastructure. DR, hi and welcome.
Danielle Royston: Hi, Steve. It's great to be here.
Saunders: You've been explaining the economic benefits of public cloud adoption to service providers for quite a while now, including savings of 50% or more on total cost of ownership. But you are also now putting some serious capital to work via your billion-dollar Telco Transformation Fund, which has been on something of an acquisition spree recently. Tell us how that's going, and also what's the end goal of your M&A strategy?
Royston: Well, as you mentioned, I'm on a mission to move the industry to the public cloud. And when I look out on the landscape of all the vendors and what they're building, I don't really see people going as far as I'm willing to go, and seeing where the industry is going, with respect to the public cloud.
There’s three parts to the Telco Transformation Fund, the billion-dollar fund that you mentioned. So obviously, number one, I think the industry needs an evangelist. They need someone like me out there talking about all the benefits of using the public cloud, the right way to migrate, and how to get all of those benefits.
Obviously, I'm funding the builders, and so my company, Totogi, is a software startup, Silicon Valley style. And so we gave them $100 million to go build from scratch, the right way, a modern stack specifically focused on telco.
And then as you mentioned, we are acquiring telco software companies. And so again, I look out on the landscape, I don't see people really modernizing the stack. They're doing the bare minimum, and the way the capital markets are right now, it is a perfect time to go buy, and so we're going to try to buy as much as we can as quick as we can.
Balancing that with our own operational capability, we obviously want to return for our investors and make hay while the sun shines, as they say. And so we're trying to buy as much as we can, focus on software, and focus on telco.
Saunders: I mean, that's a really aggressive strategy. What type of companies are you looking to buy? Is there a specific profile for them? Are you buying technology or are you also buying customer base? Obviously, the price is right, right now — how many acquisitions do you plan to make before, say, the end of the year?
Royston: It's going to be balanced by our operational capability. We just bought two very close together — they closed within literally seven days of each other. I think our organization grew by 500 people overnight on a pretty low base. It's like when you see a snake eat a mouse, you can see the mouse inside of the body right now.
But back to your question, in terms of what's our acquisition criteria? So number one, we're looking for assets in any state. They could be near bankruptcy, we just bought Kandy out of bankruptcy. Could be a divestiture, the STL asset was a divestiture of a telco software products.
Or it could be a whole acquisition — just buy the whole company — but it's always enterprise software where the end buyer is a telco. I'm not so interested in telco-esque software that sells to an enterprise, for example, like UCaaS for example. There's a lot of UCaaS properties out there that they sell to the enterprise. We're not so much interested in that.
But Kandy, for example, has a UCaaS product, their end customer is a telco, and so that's why it made a lot of sense for us. So enterprise software, focused in telco, any size, any place, any state. But it's always software, not really hardware. And that's really our acquisition criteria at this point.
Saunders: How much interest are you seeing from the telcos in this stack that you are putting together? And can you name names?
Royston: I think there's some really big names out there, but going back a couple of years ago, I felt like an ant shouting. I'm not sure if people were listening to me. But since we took over the Ericsson space at MWC-21 and we created Cloud City, that definitely put us on the map. And I feel sometimes, it's like a runaway train.
When you look at the globe and telco the industry, it's a very global industry. It obviously varies by regions — it's super easy for European, especially Western European and U.S. telcos. This is the epicenter of [cloud] hyperscaler regions. This is where the regions were first built, and so I think that's pretty obvious that that's some of the first places where it was adopted and people were experimenting. You look at Africa, people wanted it in Africa, telcos wanted it in Africa, but there were no regions so it's a little bit more difficult.
I think some of the two slower moving places in the world would be the Middle East and Latin America. They're picking up the pace, especially in the last, I'd say, six to nine months, but they're still further behind than other parts of the world.
But to your question, in terms of what are the big, public stories out there about telcos moving to the public cloud? I like to always use four examples. So there's obviously the AT&T and Azure relationship, they've always been a little bit cagey about how much they're moving to Azure and what they're moving to Azure, but I think it's pretty significant. They bought their network cloud and that came with, I think, both technology and people.
There's the very public project that Vodafone's doing with respect to analytics with Google Cloud. And I think that's one of [Google Cloud’s] marquee flagship customers, as far as telco goes, and they put out nice blogs and stories about how that project is progressing.
I think Dish in the United States, the fourth network, they're building as much as possible on AWS. And so I think that's a really interesting story to watch and keep tabs on.
And then a smaller telco out in Asia and Singapore, M1. Nathan Bell was the Chief Digital Officer. He since has moved on, but they started with a cloud-first mentality of how much we can move, and then the parts that they couldn't, they either abandoned or designed out of their telco. So those are four great stories to keep tabs on.
Saunders: But it’s just getting started, isn't it? I mean, what is the attitude of most telcos that haven't adopted public cloud yet when it comes to the hyperscalers? I mean, is it friendly? Are they enemies? Are they frenemies? Are they being irresistibly drawn into this like some force of gravity because they have to? Or do they actually want to embrace it?
Royston: Yeah, I think it's going to be different by telco and different by their position in the market. I always talk to people about separating. We like to put these issues together of, well, how much can we move technically? And how much should we move strategically? And so, I think answering the technical question, I think you can move a lot. Obviously, not the radio, I mean that's a physical tower that's not going to be in the public cloud, but I think you could be pretty aggressive on that, technically.
And every day, the hyperscalers are advancing their offerings to make that more and more of a possibility and meet the carrier-grade public cloud requirement that they need to do. I don't think they're totally there yet, but I think they're advancing that ball.
But your question around strategy — should we, or shouldn't we? I think it's too big of an opportunity. It's too much software. The price is too attractive for telcos to ignore it. I think people are nervous about it. They're still playing the friend or foe.
When I speak to telco executives, I'll say, "If you're nearest competitor decided it was a friend and went all in very aggressive and got the cost savings and the agility and the speed-to-market, where would that leave you?" It always leaves them with a very stunned look on their face because they're [say something like], "We would be behind, and we would be compromised."
I think it's a double-edged sword, I don't think it's a no-brainer decision, but it's a conversation in every C-suite and probably at every board — should we, or shouldn't we? And it's facing our industry for sure.
Saunders: It does seem like we're going to end up with this hybrid world where telcos own the edge of the network, perhaps, and the cloud operators own the heart of it. I mean, first of all, do you agree with that? And is that border of edge to core, is that a natural demarcation? You mentioned wireless. We're not going to start virtualizing that part of the network, that's going to be owned by telcos, it seems. That seems like a natural demarcation point between these two worlds. Do you agree with that, or do you think the telcos could end up going deeper into the core? Or conversely, could the public cloud end up moving closer to the edge of the network? What are your thoughts on that?
Royston: There's some physical assets that'll be very difficult to replicate in a public cloud, but I disagree that they'll own the edge.
I think as the hyperscalers continue to build out regions, they’ll build that technology that can sit at the edge and access the regions and some software. As we move into more advanced networking applications that require super low latency or tons of data processing, they're going to want to burst into the public cloud and use that technology. So I think that's our future. I think that's not where I would recommend telco's start experimenting. I always tell people, “Start with the easy stuff. Move the easy applications first, move the application that you can move there, and move back as you experiment with this technology."
But if I look at the long arc of time, I think the telcos that are going to succeed are the ones that end up embracing this technology. Build a culture around building software that can adopt it. It's going to change all the operational runbooks. You almost have to throw it all out and rewrite it and build a telco from the ground up all over again. So yeah, I think it's going to be in the core, I think it's going to be at the edge, and I think those are going to be the telcos that end up winning.
Saunders: And they have to embrace the software, obviously, just as you are with your own M&A strategy. You're not buying hardware. That's a difficult cultural shift for telcos. They do love their hardware. And why not? It's easier to understand and you can literally get your arms around it. Can they embrace a software-defined world, such as the one which we're heading toward? And what would your advice be to a telco who's really wrestling with that transition?
Royston: We hear a lot of talk in our industry about moving from a telco to a tech-co, and I think that transition's going to be very difficult. I mean it's everything from a cultural shift, a compensation change, a willingness ... I'm going to go ahead and say it, a willingness to maybe even take power away from the network-centric culture that we have, or even the financial-centric culture that we have, and give it to R&D and innovation and the software team.
I mean, you're going to need leaders that totally embrace that, and it needs to be the entire leadership team and not just the CEO and the CMO that get it. So, I disagree with this move to become a tech-co. I see it everywhere. I'm like, "I don't think you guys are going to be successful in that."
But I do think that they can embrace the hyperscaler as their R&D partner. I mean these people, the hyperscalers, have 50,000, 100,000 of the best technologists in the world. They pay them two or three times what telcos pay them. This is your opportunity to leverage that team for your benefit.
Now, of course, I just said five minutes ago, friend or foe? But if you can get over the fact that they're not a foe, that they actually just want all the enterprise workloads, and they don't actually want to take over the network, you can build an organization that learns how to adopt public cloud software and leverage that technologist team that they've built.
Don't build for repatriation. Don't build for cloud agnosticity. Build very deeply in a public cloud native way for the hyperscaler that you're using.
And get over your “Not invented here,” or, “If it's not under our roof, it's not good enough.” I think you can approach that tech-co without actually having to build a tech-co.
I always like to look at banking, that's one of my favorite examples. Jamie Diamond over at JP Morgan Chase, I mean, I think this was seven or eight years ago, was like, "Never are we going to move workloads to the public cloud. We're going to build our own private cloud. We're regulated, our data's too valuable." And it's the same excuses that I hear in telco. And two years ago, he was on stage with Andy Jassy at their big conference, Re:Invent, saying, "We're all in." Last year he was like, "If I could spend $3 billion to get to the public cloud faster, I would."
He's just had a change of heart there, but he's not not saying, "I'm going to turn my bank into a tech-co." He's still, at the end of the day, a bank.
Saunders: Well, telcos have always outsourced their R&D anyway, haven't they? Because they outsourced it to the Ericssons and Nokias and Ciscos of the world, because telcos typically spend 1% of their revenue on R&D. They've always outsourced it. So now what you're saying is, really, choose a different place to outsource. Go to the people who actually understand this stuff at a software DNA level. That's really insightful and I think that's really helpful.
Royston: The pace of innovation coming out of the hyperscalers, compared to a Nokia or an Ericsson, is just radically different. I mean, they're pumping out technology that you get to experiment with at the API level and pay as you go.
Whereas the model at Nokia and Ericsson and Huawei is, you've got to commit to this multi-million-dollar upfront cost before we start doing anything. And so that kind innovation, I mean, it's insane. And so, we do it at Totogi. I suggest that telcos start building in this very rapid way. And when they realize that they can spend $100 and test a technology to see if it works, and then say, "Hey, yeah, this works for us. Let's keep going."
Compared to what you get from the old school, I'm going to say it, dinosaur vendors, they're going to be like ... That's the mindset change that's going to happen in a telco and they're just going to start rapidly ingesting public cloud technology.
Saunders: Yeah. I mean, the hyperscalers have unlimited intellectual capital. They have virtually unlimited capital capital as well, actually. Which makes them a pretty good business partner, I would imagine. DR, tell me, where are you in your journey with your billion dollar telco transformation fund? What can we expect? I don't mean to make this sound like a job interview. Where do you see yourself in two years time with what you are doing?
Royston: I think this is a 10 year, at least, journey. I'm 52, that would put me at 62, we'll see where we are then. But what's really nice is to have a lot of inbound interest from investors that want to be a part of the telco/DR story. They love it. Especially the way capital markets are, very thankful for that opportunity, but I would like to see Totogi putting out more products — we have a lot more products coming out. They're not ready for prime time yet, but you're going to start to see little announcements, a little trickle. And I always tell people, it's going to look a little random at first, but we’re advancing that ball and providing more things for people to play with.
We fancy ourselves like, what would AWS do? If they were building a telco startup and telco software, how would they use AWS components to help telcos? And we wake up every day thinking about that.
We want to solve hard, valuable problems. We want to help telcos grow their [recovery point objective] RPO. We think there's an amazing opportunity. We have all of the data, the network data of how subscribers use the network. Let's start to use that and take back what some of the other tech players have taken away from telco. I think there's still a great opportunity to do that, but we got to embrace the public cloud, use this technology for our benefit and not be afraid and go after it.
On the Skyvera side, I hope that we've done 50 acquisitions. That would be wonderful. Two a month, I don't know that we have that capability today, but we're always looking. Again, lots of inbound interests. I get a lot of company summaries from people who are looking to divest or be acquired. And so obviously, I’m really happy to be seen as a strategic buyer in the industry, and as a good person to sell to. So we always want to take care of that asset, we want to take care of the customers, and pivot those products to the public cloud. So I think, in two years’ time, hopefully we're a bigger player on both sides — on the Skyvera and the Totogi side, and more of the telcos are adopting the public cloud.
Saunders: Fantastic. It's been exciting to watch you moving at such incredible speed with these acquisitions and with the growth of the organization. And you're right in the heart of the cloud infrastructure market and I'm very interested to see where you take everything. Thanks so much, DR, for joining us on Cloud 9 today. It's been a pleasure.
Royston: It's been great talking to you. Thank you so much, Steve.
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