In Short:
Vodafone Idea is finalizing new IT outsourcing deals, moving away from its long-term agreement with IBM. The new contracts, expected to be complete in 10 days, will involve multiple vendors to cut costs and enhance efficiency. Alongside this, Vodafone Idea has secured a $3.6 billion deal for 4G and 5G network equipment, as part of a $6.6 billion expansion plan.
Vodafone Idea’s IT Outsourcing Transformation
Vodafone Idea (Vi) is reportedly approaching the conclusion of its extensive multi-year IT outsourcing agreements, allowing for new entities to assume portions of its previous partnership with the American technology firm IBM. According to a report by Moneycontrol, the new contracts are anticipated to be finalised within the next 10 days, marking a significant reduction in Vodafone Idea’s reliance on IBM.
Diversifying Vendors to Improve Efficiency
Rather than renewing its entire arrangement with IBM, the telecom giant plans to engage multiple vendors to achieve operational cost reductions and enhance efficiency. The restructured deal will involve specialist firms focusing on specific tasks, while Tata Communications Transformation Services (TCTS) will provide limited managed services, despite having previously terminated its agreement with Vodafone Idea due to unpaid dues amounting to Rs 221.19 crore.
According to sources, “The deal is nearly finalised and will be completed within 10 days. Most components are expected to be outsourced again, except for certain managed services handled by TCTS. All transport and mobility operations are being insourced regarding network management.” TCTS was primarily accountable for the operations and maintenance of Vodafone Idea’s fiber assets before ceasing its contract.
Cost Reductions and Enhanced Operations
The previous five-year IT outsourcing contract with IBM, estimated at USD 800 million, expired in April 2024. Reports suggest that the renewed contract with IBM is likely to be of lesser value due to the integration of new vendors.
A second source stated, “There will be significant discounts on the deal size for Vodafone Idea in comparison to the prior agreement with IBM. By breaking up the RFP (request for proposal), Vodafone Idea aims to incorporate new vendors, increasing overall vendor participation compared to the previous exclusive agreement with IBM.”
Engaging new vendors is aimed at attracting specialised providers who can deliver superior outcomes at reduced costs, thus unlocking potential cost savings and operational efficiencies that are expected to elevate Vodafone Idea’s productivity.
4G and 5G Expansion Initiatives
This IT outsourcing deal marks a pivotal moment for Vodafone Idea, coinciding with its recent USD 3.6 billion arrangement with Nokia, Ericsson, and Samsung to secure essential 4G and 5G network equipment over the next three years. As the telco strives to improve its IT infrastructure, this deal is integral to supporting its 4G network expansion and preparing for the impending rollout of 5G services in the top 100 cities across its 17 priority markets.
The network enhancements, alongside the forthcoming IT outsourcing agreements, form part of Vodafone Idea’s ambitious three-year capital expenditure plan of USD 6.6 billion. This initiative aims to extend 4G coverage from 1.03 billion to 1.5 billion and initiate 5G deployment in targeted regions while augmenting network capacity.
