As the next phase of reinvention begins under Vodafone Business’ new CEO, Vinod Kumar (formerly Group CEO of Tata Communications), the company is poised to put considerable effort (and investment) into the strategic pivot from ‘classic telco’ to technology communications company.
IntroductionVodafone Group did more than 50% of its €46bn ($51bn) revenue (fiscal year 2019) in the consumer sector; however, it is Vodafone Business, which currently accounts for about 30% of revenue, that is being positioned as the growth driver and innovation engine for the entire group, raising the profile (and the stakes). Growing faster than consumer services, some 50% of Vodafone Business sales comes from large companies and 50% from small office/home office and SMEs. As the next phase of reinvention begins under Vodafone Business’ new CEO, Vinod Kumar (formerly group CEO of Tata Communications), the company is poised to put considerable effort (and investment) into the strategic pivot from ‘classic telco’ to technology communications company.
Platform Vodafone is arising from the company’s internal transformation efforts, in its mobility, 5G, fixed, unified communications and IoT expertise plus the venture with IBM and other assets. The question is whether this will position the company to monetize its network and edge architecture and establish a more strategic role as technology/ industry platform provider.
Vodafone’s ongoing transformation will be key to success here – for example, a renewed focus on in-house digital service development plus co-creation with customers and partners. Historically risk- averse, the company recognized that outsourcing its IT development was a misstep, so it is bringing it back in-house under a new operating model (digital-first versus cost-cutting). Forty percent of development is now in-house versus 3% at its most outsourced, and 20% of sales are now digital versus 10% a year ago (driven by analytics, AI bots, digital marketing and kiosk models versus traditional stores). Also, 20% of sales are self-service in consumer, but only a tiny amount in business.
Vodafone’s internal development process is about 80% agile and 20% DevOps, although it is rotating toward DevOps. Although there’s a long way to go here, Vodafone believes this transition has already delivered a 22% faster time to market. It is using cloud and microservices with its App-Invent application development platform for internal developers and third parties (specifically, IoT and MEC/ MPN) plus the CPaaS communications, SD-WAN and MarketPlace platforms.
Platform culture
Leveraging its experience and expertise in mobility, 5G, IoT and SD-WAN, Vodafone is betting that automation and industrialization of networking in the form of scalable platforms will attract both IT and application/developer partners. In particular, it expects private networks enabled by 5G in the form of multi-access edge computing will support the migration of computing into the cloud and already has 20 private network pilot projects going in the field.
Target ArchitectureVodafone’s target architecture technology strategy requires all consumer and business products to be supported on standard APIs, which are exposed across Vodafone’s 12 platforms: Marketplace, MPN, App-Invent, CPaaS, SD-WAN, IoT, MEC, Digital eXperience Layer, TV, Comms, M-Pesa and Analytics.
These are delivered from a single private cloud platform (for networks and IT) supporting NFV, SDN, network services and IT back end (OSS/BSS, etc.) with the ability to support one billion IoT devices. This, Vodafone believes, will enable it to deliver the automation and industrialization of networking in the form of scalable platforms to better compete, respond to demand and improve time to market. The private cloud resides in Vodafone Technology centers, which connect to access nodes that deliver mobile/fixed services and internet (for public cloud access). Vodafone says it has migrated nearly 50% of its core network onto the private cloud (and that 59% of IT apps are in this cloud). Having re-platformed to containers and Kubernetes, Vodafone has now deployed more than 1,000 VNFs. Eventually, all applications will be containerized and be deployed using Kubernetes.
Going forward, data will only reside in source systems or in Neuron, Vodafone’s Google cloud-based big-data platform. Vodafone currently maintains more than 44 different data sources. Targeting what it believes to be a €1.3bn market opportunity growing at 71% CAGR, Vodafone’s SD-WAN strategy is partner-driven. Juniper, Cisco Viptela, Cisco Meraki and Velocloud are the key partners – over which Vodafone is building a management plane.
Cloud & Security unit
Vodafone’s Cloud & Security unit is now led by Vatsa Kalyanasundaram and is in its third phase of corporate development, which began when Vodafone acquired the Cable & Wireless datacenter and hosting business in 2013. In 2016, it built its own cloud and partnered with third-party public clouds, then in 2019 realized it needed to partner for the entire capability and selected IBM as its provider. It has transitioned from a ‘buy, build and partner’ approach to partnering and co-creation with customers, start-ups and partners. It sees its strategic capabilities as mobile edge computing (MEC, and ultimately, multi-access edge computing), quantum computing and cybersecurity.
The MEC strategy marries dedicated (mobile private networks) and distributed 4G/5G with services, a management platform and an application partner ecosystem. Key partners here are AWS, IBM/Red Hat and Digital Barriers. It is readying a platform for MEC in conjunction with IBM, which will enable customers to distribute applications to the edge at the right time (including its partnership with AWS on Wavelength where AWS customers will be able to select Vodafone 5G deployment environments from their AWS console).
Vodafone believes that quantum computing is going to disrupt computing, and it is preparing its own networks and its customers’ networks to be ‘quantum ready.’ It is now assessing options in its labs, realizing that it is important to get in now for when the opportunnity emerges in a few years’ time. In cybersecurity, Vodafone has managed services for large organizations delivered in conjunction with IBM, as well as services specifically aimed at SMEs.
The cloud & security group is working with three segments: startups, such as the 15 in its Pacesetter program, where it is looking for special use cases such as AR and VR, connecting them to customers and then taking them on to cloud; second is the SME market where companies don’t have in-house expertise; and third, multinationals where it works with customers on managed IT, cloud, SECURITY, edge and MEC deployments.
Regarding the venture with IBM (now a year in), the portfolio offers a service catalog of colocation, hosting, security, multicloud and professional services; a platform using containers, PaaS, DevOps and AppOps; and vertical co-creation for edge, AI, AR, SDN and MPN. Operationally, there are 600 people attached to the Vodafone/IBM venture.
Vodafone’s plan is to double the size of the cloud & security unit over the next three years. 451 Research estimated cloud & security to be worth a few hundred million euros in 2019.Competition
Vodafone faces competition from other telecom-heritage companies with similar approaches to internal and customer-facing digital transformation and ambitions to move beyond connectivity toward converged network/IT/application platforms. The IBM venture puts the company in a better position to compete for strategic business outcome-oriented opportunities involving cloud, IoT and edge capabilities into industry-specific offerings, but other major telcos (as well as the IT providers) are also crowding into this space.
Key competitors in Vodafone’s European enterprise services (fixed and mobile) markets include Telefónica and Orange in Spain, BT (domestic and global enterprises), along with BT-EE and O2 on the mobile front in the UK, InterOute (now owned by GTT) and Deutsche Telekom in Germany, and Telecom Italia in Italy. Cloud and IT services competitors include DXC, Accenture, Capgemini, Centurylink, Ensono and Rackspace.
SWOT AnalysisA platform-based approach to delivering integrated network and IT services enables providers to take advantage of IN-HOUSE, partner and third-party CLOUD, IaaS, PaaS, SaaS and new technologies – INCLUDING MPN and MEC, IoT, AUTomation and machine learning – and do this in a fast, consistent and scalable way.
There’s a major DISRUPtion playing OUT in the tELECOMMUNICATIONS market as the basic VALUE is no longer in being able to do network service provisioning better; it is in enabling BUSINESSES do things they COULD never otherwise do by themselves – in an on- demand and easy-on fashion, and now, to do this at the edge.
Vodafone is at the mobile edge COMPUTING frontier with its AWS agreement to bring AWS Wavelength to EURope, beginning with the UK and Germany (and with its IBM vENTURe in hand). It has the ingredients for enabling low-latency application development across DISTRIBUTed and dedicated environments with its platform and services approach.
The key UNKNOWN is the extent to which BUSINESSES will seek network and IT services from the ‘technology COMMUNICATIONS’ provider Vodafone is seeking to become, vERSUS all of the other market participants.None of the companies in this sector can declare SUCCESS yet; however, the transformation rEQUIRed to SUPPORT the new needs is UNDERWAY. Vodafone’s commitment to a platform CULTURe and software engineering (IN-HOUSE, partner, co-creation) is CRUCIAL here.
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