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Vodafone Business and IBM venture takes shape with London office, managed services

30 Oct 2019
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Nicole Henderson and Melanie Posey

A partnership between IBM and Vodafone Business in Europe first announced in January is taking shape with dedicated teams, a shared office space, and a portfolio of managed services that align with customers at every stage of cloud adoption.

Introduction

A partnership between IBM and Vodafone Business in Europe first announced in January is taking shape with more clarity around the shared objectives of the venture. From the recently opened headquarters in South London, the venture will sell a portfolio of cloud services enhanced with IBM’s professional/managed/security services and multi-cloud management tools, and integrated with Vodafone network connectivity (5G, SDN) and IoT/edge services. A recent joint customer win in the transportation sector gives IBM and Vodafone Business the opportunity to showcase how managed cloud services can improve service management and security, and lay the groundwork for future applications.

451 Take

IBM and Vodafone Business are making strides with a joint venture that combines multi- cloud and connectivity services in a single management framework designed to simplify the sales process for end-to-end technology offerings, and facilitate the co-creation of new digital products. The combined portfolio of cloud advisory, operations and management services – along with connectivity and emerging technology capabilities – gives Vodafone offerings breadth and scale, and provides IBM with edge/IoT reach and a base of potential new customers.

451 Research sees the complementary value of infrastructure building blocks (such as networking), multicloud management and managed services becoming increasingly clear. In response to our Voice of the Enterprise (VotE): Cloud, Hosting and Managed Services, Vendor Evaluations 2018 study, 70% of enterprises indicated that networking or connectivity functions were a key complementary capability for a provider of cloud- enabling managed services. In the same study, 55% of respondents indicated they were moving toward hybrid IT environments that combine on-premises infrastructure with external cloud resources.

The venture’s success will depend on several factors. One is how well the partners can scale the process of deciding which clients or prospects are best served by the venture. As of July, this is being determined mostly on a client-by-client basis. Another is the impact of the rollout of 5G technology, which is expected to be a decade-long transition, longer than the eight-year agreement between IBM and Vodafone Business. 451 Research believes that for customers still considering how to modernize applications and move workloads to the cloud, 5G may seem too far in the future and fall further down the priority list.

Context

Since announcing the joint venture, IBM and Vodafone Business have launched 12 managed multi- cloud services and a mobile application development service, along with the joint sales and marketing support required to drive engagement across the portfolio. The services are designed to meet clients at any stage of the cloud journey. Clients just getting started in the cloud will benefit from cloud readiness, security and discovery assessments, whereas services like managed security and managed Azure and AWS are aimed at customers in later stages of cloud adoption and deployment.

Findings from 451 Research’s VotE Cloud, Hosting and Managed Services Workloads and Key Projects survey indicate that managed services associated with cloud adoption, including design and implementation, will become increasingly important capabilities for service providers to offer their clients, particularly as hybrid and multi-cloud environments bring forward more complexity.

Earnings from the venture sit in Vodafone’s cloud and security group, which accounts for an estimated few hundred million dollars in revenue. For its fiscal year ending March 2018, revenue in the cloud and security business at Vodafone grew by 24%. Revenue in Q1 grew over 20%, and Vodafone expects the venture – which launched in Vodafone financial quarter Q1 – to drive continued momentum as it closes more deals and adds new capabilities.

Strategy

Rather than pursue the fruitless and potentially impossible exercise of building out its own hyperscale cloud offering, Vodafone Business sought a partner that could offer cloud services to complement

its telco and connectivity offerings and drive new revenue streams. Vodafone will pay $550m to IBM over eight years, gaining access to IBM’s cloud portfolio and hybrid cloud expertise. The vendors have budgeted joint investment funds for the co-creation of new digital offerings, leveraging IBM’s Garage methodology, a client-centric, business-outcomes-oriented approach.

The partners have an opportunity to deepen engagement with target customers beyond managed cloud services by preparing them for the business impact of 5G and emerging technologies such as AI, blockchain, augmented/virtual reality and robotics. High-level advisory discussions combined with services that act as building blocks toward a future defined by these technologies, tailored to the specific verticals, will be key to its success. The partners will rely on sales enablement, a digital solutions team, and joint marketing to deliver this experience to customers.

National Express, a public transport company headquartered in Birmingham, UK, is the first joint customer of the venture. An existing Vodafone connectivity customer, National Express turned to IBM- Vodafone to improve security and risk management by moving its legacy IT environment to IBM Cloud and taking a hybrid cloud approach. In the future, the venture will enable National Express to connect transportation fleets using IoT and 5G. Autonomous driving, edge computing and analytics are other areas where IBM-Vodafone see potential to add value and improve passenger experience.

Products

The services now available through the venture fall into four buckets: Advise, Move, Build and Manage. The offerings are aligned to the cloud adoption and operational lifecycle, which keeps the venture engaged with the enterprise as it proceeds along the cloud journey, into and including the execution and management phase. Day 0 Advise services include application discovery and assessment, cloud security strategy and and cloud readiness assessment.

The Move portfolio includes cloud migration and application modernization services, while Build covers cloud environment design and configuration, and cloud-ready/cloud-native application development. Manage includes managed services for Azure and AWS, cloud managed security infrastructure, vulnerability management services, event management and incident response, as well as security training. The IT-oriented services are currently available to Vodafone Global Enterprise customers, and in the UK, Ireland, and Germany markets.

The broader focus of the venture involved the co-creation (and eventual productization) of business- process-oriented digital services, such as role-based application services developed jointly by IBM and Apple under a preexisting partnership. Additional services for DevOps, hybrid cloud management, software-defined networking and edge computing are in the works. IBM and Vodafone Business also expect joint customers to benefit from the hybrid cloud capabilities added via the $34bn Red Hat acquisition, which closed in July 2019.

Competition

As noted in previous reports, Vodafone Business competitors in Europe include Telefonica, Orange, BT- EE, O2, Interoute, Deutsche Telekom and Telecom Italia. Cloud providers include CenturyLink, Ensono, DXC, Accenture, Capgemini and Rackspace. While 5G has not been rolled out, telecommunications companies in other markets, like Verizon and AT&T in the US, are bullish on the technology, and are presenting their strategies to customers now.

SWOT

STRENGTHS

Launching a headquarters in London with dedicated staff and a commitment to growing its managed services portfolio shows prospective customers that they can rely on IBM and Vodafone Business in their long-term planning. Although it’s still early for 5G and edge computing, having conversations with clients now will give them the opportunity to factor it into their budgets.

WEAKNESSES

While IBM and Vodafone Business have done some preliminary work to identify potential overlap between existing customers and prospects of the individual companies, and those who may be better served by the venture, there is a lack of clarity to the market around competition between the venture and IBM proper, which could pose a marketing challenge.

OPPORTUNITIES

As IBM brings forward hybrid cloud and container capabilities it acquired via Red Hat, IBM and Vodafone Business will be able to deepen engagement with clients in target verticals and add new revenue streams.

THREATS

With a portfolio that touches on a range of technologies and business offerings, the competition could get stiffer as more service providers add managed cloud capabilities that mirror what the venture is bringing to market.

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This report was originally published by 451 Research, a global research and advisory firm who generate the data-driven insight that empowers technology and service providers, IT leaders and financial professionals to capitalize on their market opportunity.

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