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Why Vodafone Idea Sought IBM's Help

Gagandeep Kaur
5/6/2019
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Vodafone Idea's recently announced multi-million-dollar deal with IBM shows just how important the customer experience is becoming to India's big operators.

The tie-up is partly about improving that experience for Vodafone Idea's retail and business customers. It should also play a key role in helping the service provider to bring down IT-related costs following last year's merger between Vodafone and Idea.

"We will also be able to leverage collateral from the cloud partnership already announced between Vodafone and IBM in Europe," said Balesh Sharma, Vodafone Idea's CEO, in the statement about the tie-up between the companies. "Achieving synergies, post-merger from the combination of Vodafone India and Idea Cellular, is a strategic priority and we continue to be ahead of track."

Under the outsourcing deal to which Sharma refers, IBM is handling the management and development of Vodafone's cloud and hosting business. That should mean that Vodafone Idea can increase its usage of the cloud to reduce the cost of network management. Cloud-based systems also promise to give the operator more flexibility so that it can launch services and respond to competition more quickly.

Indeed, the Indian collaboration seems to build on the deal between Vodafone Group and IBM, announced in January this year. In addition, IBM already had strong relationships with both Vodafone and Idea before the merger took place. Its latest deal with the combined company may cover the re-negotiation of terms within those older contracts.

While the press release does not say how much the deal is worth, media reports peg its value at around $700 to $800 million. "IBM is also supporting Vodafone Idea with an option of extended flexible payment plan structure for the term of the contract through IBM Global Financing, its wholly owned subsidiary," says the press note.

The partnership clearly holds out the possibility of collaboration in various technologies, including cloud, the Internet of Things (IoT) and artificial intelligence (AI).

"We believe that use of IBM’s hybrid and multicloud, analytics and AI security capabilities will accelerate Vodafone Idea’s progression to an open, agile and secure IT environment," said Vodafone in its release. "It will also provide a platform for fast-track joint initiatives in AI and IoT."


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The competitive challenge from Reliance Jio and Bharti Airtel partly explains Vodafone's push into these areas. Unless it can meet new service demands in a flexible and low-cost way, Vodafone risks ceding market share to the country's other big players. Such concern also explains other deals Vodafone has recently signed, including mobile infrastructure contracts with Ericsson and Nokia.

Ericsson last week announced it would provide various cloud packet core systems to Vodafone Idea, helping the operator to meet growing demand for data services and prepare for the introduction of 5G technology. Nokia, meanwhile, is supplying radio technologies in several circles, or service areas.

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— Gagandeep Kaur, contributing editor, special to Light Reading

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