Industry Spotlight: Ernie Ortega on GTT’s Transformation, Outlook

April 24th, 2023 by · Leave a Comment

After a trip through restructuring, GTT is officially back.  The company looks a lot different now, with a streamlined set of assets and a new focus on providing managed network and security services to the global enterprise marketplace.  A year ago we talked with former COO Don MacNeil about the path forward, and today we are joined by CEO Ernie Ortega.  Ernie is of course an industry veteran, having started his career with MCI back in the day.  He has done stints with the likes of XO, Cogent, Colt, and TowerStream, and took over the CEO role at GTT near the beginning of the restructuring process before shepherding the company through the pandemic period.  Here he’ll offer his take on the road ahead.

TR: What brought you to GTT?  What opportunity did you see?

EO: I actually came to GTT as the company’s President of North America. As a result of their 44 acquisitions over a period of a dozen years or so, I had an idea that they probably had a very disparate sales strategy.  So I reached out to Rick Calder, the CEO at the time, and offered my help with strategy, go-to-market philosophy, and things like that. So there I was, about a year into the job, when a lot of changes began to happen: turnover and turmoil. The board tapped me on the shoulder and asked me to take over and clean things up.  What a journey it’s been since then: two and a half years of restructuring, the sale of a $2 billion asset, the Chapter 11 event, new owners, new equity partners, etc.  And now we have emerged from Chapter 11 as a transformed company.

TR: Now that that process is complete, how different is the GTT of today as compared to the one you originally joined?

EO: Completely different. Over the past 30 months, we have been very inward looking. During the restructuring, we couldn’t control the external environment and how it was going to react to our situation.  So we really made a conscious effort on focusing on the areas of the business that we could control. We have shut down legacy networks. We’ve turned away some customers who weren’t a fit for our business . We’ve shut down about 14 different legacy products. One past acquisition gave us 1,700 colocation sites; we have shut down 1,400 of those, and the remaining 300 are due to be closed by the third quarter of this year. And what we’ve done is refined who GTT really is and who we go after. We have focused on bringing our flagship products of SD-WAN and security to the marketplace, and the global 500 is our sweet spot. Our target market is enterprise customers having multiple locations across three or more continents. Of course, we sell to the high-end enterprise and mid-markets as well. But our sweet spot really is in the global space.

TR: Is there still integration work left from the prior acquisitions in order to pull everything together into the new structure?

EO: Yes.  In addition to all of the work of carving out things that weren’t germane to our future, we are still continuing integrations of acquisitions that, let’s just say, were less than finished. To that end, however, the transformation that has taken place over the past two and a half years is actually starting to garner a lot of results. Our service delivery has improved dramatically, improving our intervals by about 40 to 45%. Our customer satisfaction scores are up by 80%. And the integration overall has enabled us to really focus on customers and their experience, and thus improved our level of operational excellence.  We’re achieving levels of efficiency today that the company never had before.  There is not one organization within the company that has not gone through a substantial transformation over the past two and a half years. We have completed the initial phase of transformation, and now what we’re getting into is continuous improvement so we can get to that best-in-class status.

TR: What will it take to achieve that?  Where are you putting your resources this year?

EO: The next phase of our transformation entails the delivery of the new systems that we have invested in to augment our existing ones. As an example, we have spent a huge amount of time creating disciplined processes and policies over the past few years. When you have such a disparate, global group of employees, if you don’t have disciplined processes and policies, it is a formula for disaster. Now with that in place, we are building the systems to support those processes and policies. For example, we’re implementing Oracle as our ERP, Connectbase as our CPQ tool, and Genesis for delivery. Once all of these are implemented this year, we will be at a level I would consider ”best in class.”

TR: What does the overall product portfolio look like when refocused around SD-WAN and security?

EO: We’re really focused on the cloud, the data transmission for critical data networks across the world at multiple locations across multiple continents. That’s our core. You can almost categorize us as a boutique carrier. We’re not going to be a big player in the traditional voice marketplace, but we still have a compelling SIP trunking offering.

TR: Are there products you’d like to add to the mix?

EO: There will be several complementary products that we’ll be adding to our portfolio that we’ll probably announce within the next few quarters. For some, I can’t let the cat out the bag on yet.  One that I can telegraph is that we’ll be moving methodically into the other side of the demarc, into the LAN. LAN/WAN convergence is upon us, and we’ve gone far enough up the stack today that it just makes sense to move up another rung or two and incorporate LAN into our product portfolio. Customers are asking about it. There are other entrants into this marketplace.  But it’s going to be a very slow, methodical entry.

TR: Global enterprise is a broad category, what verticals or types of industries are you seeing the most success with so far?

EO: We provide a fantastic service regardless of  vertical, but we have had an extraordinary level of success with manufacturing and retail businesses. We have done a great job in the retail aspect of the global enterprise market. One reason for that is our ability to reach hard-to-get-to places across the globe. When you have a retail footprint with thousands of locations in a number of different countries, that’s a hard solution to put together. It’s not concentrated just in CBDs in major cities around the world, but also in rural and suburban areas, in strip malls, and just in places where you aren’t going to have a lot of access options. You have to be creative, and that’s where we excel. We’re somewhat agnostic regarding how we transmit data: fiber, fixed wireless, or 5G. At the end of the day, we’re very flexible when it comes to finding solutions for all of our customers all over the globe.

TR: GTT doesn’t have an extensive last mile footprint of its own, so how do you manage so many global endpoints?

EO: Through our strong, extensive relationships with our partners: carriers and other service provider. There was a point in time when the company had around 4,000 relationships.  That was just too much to effectively manage, and we have done a really good job of consolidating down to a very manageable preferred provider organization.  That organization enables us to cobble together a solution for a distributed footprint and meet our customers’ buying demands so they can just have one relationship to manage.

TR: Historically, GTT has been focused mainly on North America and Europe.  Do you foresee expansion into other global markets going forward?

EO: Yes.  with our transformation complete, we can now operate the business and execute on some of the strategies for growth that we have designed. We are going to be expanding our footprint. We are pretty comfortable with Europe and North America, although there are always further expansion opportunities. We will be expanding into APAC as well as into South America over the next 18 months. Whether we do it via a physical PoP or a virtual PoP remains to be seen, but it will probably be a combination of both.

TR: Is that an area we might see GTT re-enter the M&A arena?  Or is the story an organic one for the near future?

EO: I would have to say right now it’s an organic story. That doesn’t necessarily mean there won’t be things to look at. We’re always open to looking at different ideas and opportunities.  But for now, we’ve made a conscious effort to refine everything that we do so that we can operate the company organically.

TR: GTT went through this transformation in the shadow of the pandemic.  How did that affect the company you have become?

EO: Just like every other company that has a global presence, it has impacted us tremendously. It was of course a difficult period for employees and customers, and our priority was to ensure we supported them as much as possible. We have had positive feedback on many of the changes we made during this period that have had a positive impact.  We made a concerted effort to move towards a hybrid workplace.  With the exception of our headquarters in McLean, Virginia, everyone across North America has moved to a hybrid working environment . Prior to the pandemic, we had an employee organization that was dispersed throughout the 48-state contiguous footprint, so having offices everywhere across the country just didn’t make sense. As a result of COVID we were all working from home and were just as if not more productive, and we realized that we could move to a remote workforce and not lose any productivity. In Europe it’s a little bit of a different footprint because they did have concentration of personnel in specific cities across the continent. So we are keeping a few offices open in Europe, however we still give our employees there the opportunity to have a hybrid work schedule. Typically some of our employees end up coming into the office a few days a week. I think we have achieved a good balance, as indicated in our last employee survey.

TR: Have disruptions in the supply chain affected you much?

EO: It’s the same for us as for others. Every time we review our delivery intervals, we see some effects from supply chain issues. We’re no different than any other service provider that relies on the equipment manufacturers. We have tried to inventory as much as we can, but again, you’re only allowed to buy so much inventory because everyone else is trying to do the same thing. We have robust business continuity plans in place that we stress test regularly, but sometimes you just have to  fight through the challenges to deliver for customers.

TR: What’s the biggest challenge ahead for GTT over the next year or two.  How about for the industry as a whole?

EO: Our challenge is similar to the challenge facing the industry as a whole, which is how do managed services providers reshape themselves and the industry to keep pace with the demands of a software-driven world, especially when you think of the rapid rise of machine learning and AI. You can go down the list of service providers, and we’re all going through some sort of metamorphosis.  Many , including GTT, have divested themselves of their physical network infrastructure, a move that would have been unthinkable not so long ago. We’re all trying to reshape ourselves to become more digital and more efficient in order to become more profitable, all while delivering more value-added services to our customers.

Thanks to the business transformation we’ve been through over the last two years, we have a head start, but it’s still a major challenge given the dynamic pace of change.

TR: Why do you think that trend of metamorphosis is so strong right now?

EO: When I first entered this marketplace before the turn of the century, the talk was about how the players that would dominate this telecom industry would be the supercarriers. They would go from local to global to local; they would be able do everything for everyone and have a product portfolio longer than your arm — everything to everyone.  But technology in our industry changes so often.  You can almost set your watch by a pretty significant technological change happening every seven to eight years.  It just becomes too costly and complicated for a supercarrier to have to continue to invest to keep the lights on with the legacy business while also investing in R&D to stay relevant with new technology. That’s why a lot of companies are really changing the shape of who they are and what they go after.

TR: Thank you for talking with Telecom Ramblings!

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Categories: Industry Spotlight · Managed Services · Security

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