Vodafone renews IT deal with IBM for 5 years

Telecom giant Vodafone has renewed its multi-million dollar engagement with IBM to manage IT services support for its India arm for another five years.

Under the new contract, IBM will manage IT services support for Vodafone India's IT infrastructure and applications environment, a move that will help the telecom operator derive benefits like enhanced customer experience, cost optimisation, scalability of IT infrastructure and overall improvement in efficiency of network operations.

IBM will also support Vodafone India's IT environment transition into IBM hybrid cloud, allowing the telecom services company to leverage and integrate existing IT resources and data assets with private cloud environments.

The hybrid cloud platform will enable delivery of faster and more insightful data intelligence and support faster decision-making, the companies said in a statement.

The companies did not disclose the terms of the deal.

According to Greyhound Research estimates, the deal has been signed in the range of $750-850 million and can be expected to cross $1 billion by 2023.

"It is critical to note the current contract is 25 per cent bigger compared to the first one signed in 2007 ($600 million) - but there's more to it. In 2007, the value of $600 million stood at INR 2,364 crore (calculated using the rate of $1 = INR 39.4). Per current exchange rate, $750 million stands at INR 5,000 crore (calculated using the exchange rate of $1 = INR 66.7). Popular perceptions aside, Vodafone has chosen to play a safe bet," it said in a research note.

The agreement builds on the existing 8-year relationship between Vodafone India and IBM. Vodafone Essar had agreed a five-year IT outsourcing deal with IBM in 2007 and the partnership was later extended for another three years. While the companies had not disclosed the size of the deal, it was estimated to be around $1 billion.

IBM also has a similar IT management deal with Vodafone India's rival Bharti Airtel.

"We are a technology driven organisation and introducing the latest advances is key to delivering the best of experiences to our customers. Partnering with IBM will help us enhance customer experience with intuitive capabilities and build a cost optimised, flexible and scalable IT infrastructure," Vodafone India Director Technology and Network Vishant Vora said.

Vanitha Narayanan, Managing Director at IBM India, said the company's leading edge capabilities will help strengthen Vodafone India's vision of delivering differentiated client experiences.

Greyhound Research said the 'hybrid cloud strategy' will benefit Vodafone on multiple accounts, including improved customer experience and cost optimisation.

"We believe 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. Also, two key pillars of this deal are automation and analytics," Greyhound Research said.

As part of the deal, IBM India can well be expected to help automate the data-intensive processes for such systems and reduce (if not eliminate) human dependence, it added.