BuyIn operates for two large market players in the same industry. Both Deutsche Telekom and Orange (formerly France Télécom) are each 50 percent owners of this procurement joint venture, founded in 2011.
Together, both partners comprise a purchasing volume of EUR 28 billion (USD 30 billion) and operate in the four areas of network technology, devices for end customers, digital home and service platforms, and IT. What is unique here is that BuyIn works for two different companies in the same industry. In his role as managing director, Volker Pyrtek, who earlier led procurement at Deutsche Telekom, is responsible for 370 employees.
How did this consortium come into being, and who had the idea? How is one to understand such an initiation of businesses? And why Orange and Deutsche Telekom, precisely?
Orange and Deutsche Telekom collaborated in many areas even before the formation of BuyIn, for instance in Poland, where we share networks. There is something of an overlap in the markets of both companies, and therefore we are not direct competitors. This means that there is very little potential for conflict. The chief technology officers of both groups have a good relationship, which contributed to the formation of a joint venture. Outsourcing the strategic procurement of direct materials and goods has enormous consequences. For this reason, the preparation of the joint venture took an entire year. All negotiations were very confidential and took place on neutral ground.
BuyIn: Foundation brought a need for change
BuyIn was founded in 2011; how would you characterize the results to date?
The formation of BuyIn was very complex, of course, but nonetheless an important strategic step. We operate in a market that has become highly consolidated in recent years. The need for change ran very deep; for instance, we had to standardize devices for end customers. Through BuyIn, we have succeeded in making Deutsche Telekom and Orange even more competitive, to the extent that the larger purchasing volume allows us to achieve sustained savings.
Who makes the decision in the consortium, especially in cases of conflicts of interest?
In procurement, we normally seek a consensus. In cases of procurement decisions, different departments always have different interests. Needs in the areas of technology, marketing, development and finance all play a role. For this reason, procurement directors already have to consider diverse requirements. In our joint venture, it is simply twice as many as normal. After four years, I still see this as an enriching process.
For instance, are there an equal number of employees from Deutsche Telekom and Orange? Are you yourself always able to remain neutral, or do you tend to occasionally give preference to the interests of your original company?
I am from Deutsche Telekom, but for the last four years I have lived in Paris and also am very close to Orange. So I am fully integrated into both. Whenever there is a conflict situation, as there is in every good relationship, I see my role as that of a good advisor to both parties.
BuyIn: dynamic, open, international, multicultural and collaborative
BuyIn has more than 370 employees, with one third coming from Deutsche Telekom, one third from Orange, and one third from outside. Is this an asset or a risk?
Some 25 different nationalities are represented, and we therefore have a very heterogeneous culture, which in my eyes is a great strength. Nevertheless, many still feel connected to their parent companies, which helps us in our day to day business. The balance that we have come to find in this area is important. In an employee survey, our culture at BuyIn was described as: dynamic, open, international, multicultural and collaborative. That says it well.
Is there still an area of procurement between the partners that is not under the control of BuyIn?
Yes, there are local procurement areas in which we cannot achieve any advantage through the joint venture. Those areas remain with the individual companies.
There are certainly cultural differences between the French and the Germans when they work together. How do you manage this?
As I already said, I see it as an enrichment that we are culturally heterogeneous, but only if you succeed in working together without having to adapt oneself too much, by which I mean, to give up parts of one's own culture. That is the biggest challenge. We have initiated special, required German- French professional development training for all employees, in order to better understand how the others "tick". The management chose this very conscientiously. For this, we worked together with the expert Jacques Pateau, who has several decades of experience in the area and has always supported us.
No competitors, guidelines control mutual exchange
You are allies, and yet competitors. Are there countries or cases in which there is a conflict or competition? How do you address this?
One of the reasons for the success of BuyIn is that Orange and Deutsche Telekom are practically not competitors at all. On the contrary, our portfolios are actually rather complementary. There are only three markets in which both companies compete with one another. In these countries, the technological infrastructure and customer needs are fairly similar with regard to end devices. As far as these countries, we have guidelines that control mutual exchange, and everything is held in strictest confidence.
How did suppliers respond to the joint venture? Is pricing pressure greater for suppliers than it was before?
We are large, but not so large that we have a market-controlling position. For that reason, we cannot dictate prices. But of course our influence on prices is greater now than it was before, and where the partners earlier paid different prices, the differences have been eliminated.
Are there advantages for the suppliers?
Of course! Their sales platform is now twice as large. Once a supplier has been qualified to supply for one of the firms, the doors to the other are automatically open to him.
Do you plan to expand the joint venture with other partners, or is the relationship to remain as is?
Both partners pursue a strategy of growth. With this in mind, I can well imagine an expansion of BuyIn.
Procurement alliances are trend in the telecommunications industry
Is the concept going to spread in the telecommunications industry, in your view? Are other telecommunications providers going to come together in procurement? What would that mean?
There are already other procurement alliances among telecommunications providers, in addition to BuyIn: The Vodafone Procurement Company, Telefónica Alliance or the BIG Group between Softbank and Sprint. Ultimately, the smaller providers attempt to form alliances amongst themselves.
Is the concept interesting for other industries as well? Who could profit from it?
Of course there are already such alliances in other industries, for instance in the automotive industry, between General Motors and Peugeot, or in the chemical and pharmaceutical industry. But there the focus lies mostly on indirect materials. Possible procurement alliances for direct manufacturing materials fail, in my opinion, due to market overlap on the customer side. In order for an alliance such as ours to function, one needs a high potential for synergies, but on the customer's side there may be little no or competition.
What does the telecommunications industry look like at the moment? What has changed in recent years, and where are things going?
At the moment we are under great pressure from providers that offer similar services, for instance, via the Internet and which therefore must not be regulated as strictly. On the other hand, there is a virtually insatiable hunger for good communication and bandwidth. The Internet of things will interconnect everything and everyone in the future. Since 2015, Deutsche Telekom and Orange have been growing again, so I see the future in a positive light.
On the topic of the "Internet of things": What general trends do you see from the perspective of telecommunication?
As I said already: Everything will be interconnected. Many new business opportunities arise from this for established companies, but also for new market players. In my view, Europe is on the right path, but we need to cooperate more and act more quickly, because in the Internet of things economies of scale and networks will decide whether you succeed or fail. In this regard, we need to catch up to America and China.
This interview was first published in February 2016 in the Interroll Magazine 'moving'.order 'moving' or read online