VimpelCom plans to shift most of its business support systems over to a cloud platform developed by Ericsson in the next two to three years, a senior executive has revealed.
The operator this week announced a $1 billion deal to replace the legacy IT systems it maintains across 11 of its 14 markets with Ericsson AB (Nasdaq: ERIC) technology as part of a project it calls its Digital Stack -- a move it hopes will lead to cost savings and spur revenue growth in future. (See Eurobites: Ericsson Boasts $1B BSS Transformation Deal From VimpelCom.)
For now, the scheme covers all of VimpelCom's operations (see graphic below) bar the territories of Italy, Laos and Zimbabwe.
"We have a pretty clear plan and believe that in a two- to three-year timeframe we should be through with the major steps of the transformation," says Yogesh Malik, VimpelCom Ltd. (NYSE: VIP)'s chief technology officer, during a conversation with Light Reading.
VimpelCom intends to migrate most of its existing offerings over to the new platform in the same timeframe, and says it will roll out new services as the transformation takes place.
That such a target would be seen as relatively ambitious indicates the scale of the challenges associated with the digital transformation of telco back-office systems, some of which took shape before mobile and data technologies first appeared.
"We've been on the sidelines looking at over-the-top players go extremely digital in the consumer market," says Malik. "This deal is to pioneer us into the digital world with Ericsson as our partner."
Despite the obvious technical hurdles, the biggest challenge for VimpelCom will be to change the mindset and culture within its own organization, according to Malik. Operators have traditionally worked on technologies using a "waterfall" approach, whereby different phases of development happen sequentially and in a highly structured manner. But VimpelCom is now trying to acquire the "DevOps" agility of the web companies, which have been able to design and release software in a speedier and more flexible way.
"Our competence will become more about data and data science, coding and creating new channels to customers," says Malik. "We would be moving towards that while being more product-based so that we can roll things out much faster."
This organizational transformation will clearly be a major undertaking for VimpelCom, but the operator has already begun retraining staff and hiring new employees with DevOps expertise.
It is also approaching its digital transformation as much more than a back-end system replacement. "The focus is on the front-end consumer offering and business processes and we are working hard with product people, business process people and technical people and in all the countries at the same time," says Malik.
Ultimately, the overhaul is expected to lead to various benefits. For one thing, VimpelCom hopes to reduce IT costs by more than 50% through the "simplification" of its systems, meaning it will spend just 2% of Group revenues on IT in future.
"Today we have a lot of data but it's stored within apps and this [Ericsson] deal will allow us to have a common data layer," said Malik in describing some of the efficiency benefits. "That will relieve us of a huge amount of data management and bring us closer to the Internet world."
The operator also wants to be able to introduce new services much more quickly and in a more streamlined fashion than is currently possible. Much like Deutsche Telekom AG (NYSE: DT) in central and eastern Europe, VimpelCom believes that by using a single platform across a number of markets it will be able to launch the same offer in several neighboring countries at the same time. (See DT's Pan-Net Picks Up the Pace.)
From a consumer perspective, the objective is to make VimpelCom look more like Uber and less like a traditional telco, says Malik, referring to the online taxi company that has been such a dramatic success.
"Everything will be much simpler and the data which is given is not going to be rechecked again and again for authentication," he says. "On a real-time basis consumers be able to communicate with the operator to switch packages and add on new services."
The BSS overhaul is to run in parallel with the project to virtualize network infrastructure on which VimpelCom has also recently embarked.
In April, Malik told Light Reading that VimpelCom was planning to hold a global tender for the virtualization of its networks following preliminary work with China's ZTE in five of its central and south-east Asian markets. (See VimpelCom Plans Global NFV Tender.)
"The telecom model is stable but it's not getting the next hockey stick of growth and attraction from end customers," he says. "To remain relevant these steps are essential."
Due largely to currency and economic headwinds in key markets, VimpelCom saw revenues fall by 12% in the first three months of the year, to about $2 billion, and suffered a 19% drop in EBITDA, to $758 million, compared with the year-earlier period.
— Iain Morris, , News Editor, Light Reading