On 9 August, 2016, IBM India announced the renewal of its partnership with Vodafone India.
Building on an 8-year-old relationship between the two organisations, IBM India will help Vodafone transition into IBM Hybrid Cloud. Expected benefits of this partnership includes enhanced customer experience, cost optimisation, scalability of IT infrastructure and overall improvement in efficiency of network operations.
While a lot has been reported and speculated on this deal since last year, below are few nuggets that Greyhound Research believes need to be called out.
First things first, the deal size per Greyhound Research estimates.
Albeit IBM India refused to comment on the deal size, per Greyhound Research estimates, this deal has been signed in the range of USD 750 – 850 million and can be expected to cross USD 1 billion by 2023.
Critical to note the current contract is 25% bigger compared to the first one signed in 2007 (USD 600 million) – but there’s more to it. In 2007 the value of USD 600 million stood at INR 2,364 crore (calculated using the rate of USD 1 = INR 39.4). Per current exchange rate, USD 750 million stands at INR 5,000 crore (calculated using the exchange rate of USD 1 = INR 66.7).
Popular perceptions aside, Vodafone has chosen to play a safe bet.
In a reflection of the deal signed in 2007, Vodafone has approached the current deal in a similar manner. At the onset, the deal with IBM India has been signed for a period of 5 years and allows for extensions and additions that may be built over time. This may include additional contracts for IBM’s Softlayer and Bluemix among others.
Greyhound Research believes while most end-user organisations de-risk by the way of splitting contracts between multiple vendors, that is not the only prescribed way. Large enterprises like Vodafone follow a differentiated de-risking strategy, i.e. of continuing to use existing set of vendors to ensure near-to-zero risk to its existing operations. Such strategies are typical to businesses with high customer churn rate, intense capital requirements and thinning margins. Hence Vodafone’s decision to continue with its existing partner, IBM India.
If executed well, a Hybrid Cloud Strategy will add efficiencies.
IBM India will help Vodafone migrate to a Hybrid Cloud architecture. While workload specific insights and what can be expected to reside on what kind of Cloud is yet to be known, what is clear is the intent by Vodafone to use a Hybrid Cloud strategy between its main Data Centre (DC) and Disaster Recovery (DR) sites. It might be of interest to note that Vodafone has already been working closely with IBM India to manage and roll-out virtualisation of IT assets. The new deal is intended to help Vodafone make next steps on this journey of Virtualisation and migrate to Hybrid Cloud.
The rollout of this Hybrid Cloud is planned in two phases. Phase one will involve building an On-Premise Cloud, consolidating existing DCs and building a common management platform across Vodafone’s DC and DR sites. Phase two will involve using Public Cloud offerings.
Greyhound Research believes a Hybrid Cloud strategy will benefit Vodafone on multiple accounts. These potential benefits include improved customer experience and cost optimisation by using Public Cloud services for its consumer services like eRecharge and Value Added Services (VAS). Having said that, the company will need to use Private Cloud to host its enterprise customers to ensure SLA standards and manage other critical applications like Customer Relationship Management (CRM) hosted in their DC. Furthermore, Vodafone India stands to gain significant cost and efficiency advantage by using Public Cloud for its DR.
In real terms, IBM India will be expected to contribute to outcomes.
Vodafone revenue mix consists of both consumer and enterprise businesses. While the consumer business is highly skewed on experience and fulfilment, the enterprise services business hinges upon Service Level Agreements (SLAs).
Greyhound Research believes IBM will be expected to take ownership in aspects like number of tickets raised and turn-around time for resolution. Furthermore, the vendor can be expected to offer an outcome-based model (with OPEX payments) to make this engagement a true win-win.
Having said that, not all outcomes can be linked to revenue.
Two key pillars of this deal are Automation and Analytics. Vodafone already has specialised systems like Fault Management System wherein the onus is to reduce active faults and make use of intelligence by the way of integrating weather conditions across base stations. As part of this deal, IBM India can well be expected to help automate the data-intensive processes for such systems and reduce (if not eliminate) human dependence. Furthermore, the vendor will be expected to use its Big Data Analytics capabilities to make such systems more intelligent.
Greyhound Research believes Analytics and Big Data capabilities have been proven to add significant business value for telcos globally. Worthy to note that Vodafone and IBM India already have a long-standing relationship where the former uses IBM’s Netezza. With this fresh deal, IBM India will be expected to help Vodafone deliver multiple Digital Transformation outcomes including Automation & Efficiency, Experience & Engagement and Sales & Revenue.
Lead Analyst:
Sanchit Vir Gogia: Sanchit is the Chief Analyst & CEO of Greyhound Research, an Award-Winning, Global, Independent IT & Telecom Research & Advisory firm. He also serves as Chief Futurist, Founder & CEO of Greyhound Knowledge Group, a Global, Multi-Disciplinary Research & Advisory firm. Given his expertise and passion for Technology, Sanchit also doubles up as the CIO for Greyhound Knowledge Group companies and is building a technology-led Research & Advisory business. In his another avatar, Sanchit is an Advisor To The Board (for IT & Business decisions) of a US$100 Million+ organisation in the Metal Industry. To read more about him, click here.
Contributing Analyst:
Anshoo Nandwaani: Anshoo serves as a Vice President and Principal Analyst with Greyhound Research, an Award-Winning, Global, Independent IT & Telecom Research & Advisory firm. She also serves as Chief Human Resources Officer (CHRO) of Greyhound Knowledge Group, a Global, Multi-Disciplinary Research & Advisory firm. In her current role, Anshoo leads the research agenda for The Empowered Workforce theme. As part of this theme, she studies the impact of vertical-specific processes and workforce-centric technologies on workforce lifecycle and overall business alignment. At Greyhound Research, we refer to this as the Workforce Empowerment Systems (WES). To read more about her, click here.
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