Individual

Individual Assignment

INTRODUCTION

This paper introduced the deal or contract that held between the two giant multinationals Vodafone and IBM (International Business Machines Corporation). A general overview is been given about the deal that took place in 2007 and it cost to be around $600 billion. After the general overview been discussed, the focus was on Vodafone- IT source dealing. The both perspective i.e. client and supplier was also been discussed. To conclude at the end, recommendations concerning the outsourcing deal were also presented. We can learn various different interesting things from the Vodafone and IBM deal. First, when Vodafone decided to sign a contract with IBM it realized that the market was not ready for it. The problem was that it demanded for a huge investment which was to be expected around $600 million which is very high.

Any vendor initially should always make sure that they have enough profit margins that could satisfy the demanded investment as it might bring difficulties and various challenges for the small vendors who have small liquidity. Second, Vodafone was not as much flexible as it is now after signing the deal, it started to adapt to the dynamic changes taking place in the environment. For this it was required to gain much flexibly as per the changes. Third, Vodafone being a well reputed company had gained a larger market share by entering into this contract and also gain competitive advantage over its competitors. It had helped the company to attain a good margin of customers and helped to increase the company’s profit margin as well. Outsourcing has also helped the company to well manage its resources, expertise and enhance the IT services of the company along with cost optimization. This deal had finally helped both the companies to not only enhance their relations but also to establish and provide well improved services to the customers.

OUTSOURCING PROJECT OVERVIEW

The deal is between two giant companies IBM and Vodafone. Vodafone is a British multinational telecommunications company which is headquartered in London. It provides telecommunications and IT services to over 150 countries. On the other hand, IBM is an American multinational technology company which is headquartered in New York, USA. It operates in over 170 countries. Vodafone, the country’s second largest operator in the mobile industry has made a new contract of worth million-dollar with IBM (International Business Machines Corporation) to handle or manage effectively and efficiently the latter’s IT services support for the IT infrastructure and applications (Sodhi and Tang, 2013). The contract signed between these two multinational companies is for years and is also an extension of eight-year relationship between the two companies.

The deal focuses to deliver the most prominent, excellent and best of experiences to the customers overall. The partnership or contract between these two companies will help them to enhance the customer experience. The deal also will help to build up a more flexible, cost-optimized and scalable IT infrastructure (Mudambi and Venzin, 2010).  As per the deal between these two multinationals Vodafone India is looking ahead to launch a new hybrid cloud platform. For this IBM had handed support and assistance to Vodafone’s IT environment transition into the hybrid cloud of IBM. IBM had allowed Vodafone to integrate its existing IT data and resources with private cloud environments.

This in return will help to enhance or improve the speed of Vodafone along with bringing improvement in its IT operations as well as the network. This deal had been an effective step in supporting the vision of Vodafone i.e. delivering various different client experiences (Singh, 2015). The deal further focuses on managing the IT systems of Vodafone unit in India until 2017. In 2007, Vodafone Essar had agreed an IT outsourcing deal with IBM of a period of 5 years. This deal is piping out the various rivals of Vodafone including Wipro, Infosys and Tata Consultancy Services. IBM as per the contract will help Vodafone to consolidate its data centers across the country. The initial contract made in 2007 focuses on laying out the applications services along with the traditional infrastructure. But the new deal shifted the focus to cloud, automation and analytics (Kumar, 2012). This will help the company in digital transformation of operations and also improving the experiences of customers.

The deal made in 2007 costs nearly around $600 million which was signed out for five years but later on extended to 3 more years. This additional contract had raised the value upto $1 billion by 2023. Another thing that added up was that IBM was focusing on strengthening its digital portfolio. IBM had also signed various other contracts like with Bharti Airtel of worth $1.5 billion for handling its information technology needs. IBM also had signed contract with Idea Cellular for about $800 million (Satyanarayanan et al., 2015). For instance, half a billion dollar revenue is coming for IBM from these three telecommunication companies in India annually for their core IT services. Vodafone Essar is India’s second largest telecom company. Under this deal, IBM India has taken up the full responsibility of managing the entire Vodafone Essar’s IT operations. It handles the management of the IT services which included handling as well as the developing of the major applications i.e. financial systems, billing etc.

This deal had also combined the internal IT services which include security and transition programs, data centre operations and IT help desk. The Essar is looking ahead to exercise full control strategically over its IT requirements. The deal also has another direction that the revenue or earnings of IBM will be in link with the commercial performance of Vodafone Essar. This deal had made IBM one of the biggest partners in telecom industry. The major objective behind this deal that happened between these two giants was to enhance the efficiency of the network and also the IT operations across the cloud models. This deal had showed the confidence Vodafone keeps in doing or carrying out its operations with IBM.  Today Vodafone has almost around 22 telecom circles which serves approx 197 million of the customers (Schneiderman, 2010).

This deal will benefit the customers in order that they will get the best improved and effective experiences; they will have cost optimization along with enhanced and well improved IT infrastructure. The overall network of operations will also be improved to an extent providing derived satisfaction to the customers. The IBM hybrid had also to an extent helped the Vodafone to integrate and combine the already available IT resources and data assets. This will in return help to provide faster and enhanced delivery of reliable data intelligence along with efficient decision-making (Stone, 2015). The customers have now got the opportunity to get fast and quick access to the IT network and data and have become more loyal towards the company. This deal has also helped the company to obtain a greater market share and gain a competitive edge over it remaining competitors including Bharti Airtel, Idea cellular, etc.

VODAFONE – IT OUTSOURCING DEAL

With a new agreement made between these two giant multinationals i.e. Vodafone and IBM, Vodafone declared that it will be offering an international service that will help the business enterprises to provide assistance to the movement of VMware-based workloads. This new service will in return help the customers to get quick, instant and globally accessed data. Vodafone working with IBM is helping its clients to handle and reduce one of the most pressing IT challenge i.e. shifting the already established VMware workloads from on environment premises to the cloud. It didn’t even incur the risks that were associated along with cost. The risks were in the form of re-architecting applications, re-tooling operations as well as the re-designing the policies in context of security (Gebauer et al., 2010).

There were many problems like the business enterprises were looking forward for instant and cost effective ways to shift the VMware workloads across the geographic boundaries along with on-premises and the cloud environments. This demand was been tackled by IBM Cloud capability as it extends the global footprint with Vodafone and created a new hybrid cloud for the business enterprises. This newly developed service helped the customers of Vodafone to reduce latency. On the other hand, it also helped to locate the applications closer to the users and handle the data within a highly secured global network. This helped to manage/ handle and scale the workloads by utilizing the processes and APIs. This also helps to gain more flexibility to respond to the ever increasing changes as the needs arise.

The enterprises also got the opportunity to access the combined possibilities i.e. connectivity of Vodafone and the capabilities of IoT. The deal also showed that these both have partnered on a new solution called as (MAO) i.e. Mobile Asset Optimization. This solution helped to optimize the operational performance of the assts to drive efficiency (Beerepoot and Keijser, 2015). This will help to track the stock of inventory of the assets at a given location that in return help to improve the maintenance as well as the budgeting of the assets. This MAO also helps to reduce the inventory levels, risk avoidance and predictability of the assets. These all things provide benefits to the business enterprise. This partnership between both companies helped to resolve various complex problems around the world in regard of asset management and the challenges of logistics.

The deal not only benefits the customers to gain a better experience, cost optimization and enhanced IT infrastructure but also help the company to gain a larger market with loyal customers, greater market share along with enhanced services and competitive edge over its competitors. This deal will not only help to reduce the costs for the company but also help the company to improve and enhance their services (Puspokusumo, 2012). This deal will help to tackle or handle the crucial challenge which is creating an effect on the IT departments that utilizes the VMware services.

This deal however helped the company to gain credibility in the market. The deal also helped the company to access the opportunity of having different skilled people or employee in the company. It also helped the company to gain more innovative or creative solutions to deal with the problems that would otherwise be not possible for the company. This deal was praised by all the top level executives and the entire company as well. It also helped to enhance the relationships among the customers, suppliers, clients, middle managers, vendors, etc. This also helped in executing successful outsourcing relationship among the two giant companies i.e. IBM and Vodafone.

CLIENT PERSPECTIVE

Before entering into the outsourcing deal in 2007, Vodafone had already attained some experience with other parties by getting small projects. But the deal it made with IBM in 2007 was one of the most attractive and important deal it signed in 2007. This deal was found out to be of approximately $600 million which is a big amount to be invested by Vodafone. Vodafone is a very big multinational company which provides telecommunications and IT services to its customers. It has a large customer base throughout the world serving millions of customers. The customers are really well satisfied with the services been provided by Vodafone.

The organization had the capabilities which are required to serve the customers at a global platform (Oshri et al., 2015). Vodafone had undergone many contracts in the past which had helped it to become more powerful and an effective company. The organization is also present at various different global locations which provide various services along with providing the advantage of developing outsourcing relationships. The companies going for outsourcing are not only having the advantage of getting a larger market but also it helps them to get a competitive edge over their competitors in the market. The company had decided to undergo a contract in 2007 with IBM.

Sourcing model helps the company to decide, identify, select and receive for the workers and the related services. Taking in review the multi-sourcing model deal in context of the location of the company and its IT services been provided, the outsourced services combined the low value added services along with the medium valued IT activities. The biggest advantage or strength Vodafone was having is the reputation and the image it holds in the market along with in the eyes of the customers and other stakeholders. Vodafone is a multinational company which has its reach throughout the globe and is serving millions of customers along its side. It has a huge market reach as well as market coverage which further helps it to outperform its competitors in the market. It generates million dollars of revenue every year which also help it to gain a competitive advantage.  Its people focus strategy also helps the company to gather or attain the most effective undertakings along with the most prominent outsourcing deals.

In terms of the core-capabilities, Vodafone was strong and effective in the following aspects:

  • Having an effective and well functioned IT platform which offers prominent IT services and handle the issues accordingly. Having effective IT leadership also helps the company to align its strategies and the business related requirements.
  • It has a huge or massive subscriber base which is been retained by them efficiently.
  • The services provided by Vodafone are been liked by its customers at large. The company is able to get premium from its customers and able to maintain the positive margins.
  • The business systems of the company are quite effective and the business processes are enabled by the advanced technology.

The major weaknesses of Vodafone is that it has various competitors in the market i.e. Bharti Airtel, idea cellular, etc. This had created an impact on the market share of the company and the company has to create new strategies to acquire market share. The customers are getting attracted towards the new companies. The company has also been losing its market share in USA to AT & T.

The risks in that could arise in this deal was that it could end up in losing flexibility in providing differentiated products but this too lasted out for few years as there was a tough competition in the market which had affected the market size and share of the company.

The decision to go for having a deal or contract with IBM was effective as it had helped to provide the customers with more flexible solutions and it gave them a better and effective experience in the context of IT services which they didn’t enjoyed or experienced before. A better IT infrastructure and cost optimization was been also an advantage the company had provided to its customers as it helped it to offer prominent services (Sass, 2010). The company also creates many new attractive opportunities for its employees in context of employment. The company is always seen to identify the needs of its customers and build an effective strategy on how to pursue these needs and provide them with the required and deserved resources or services.

SUPPLIER PERSPECTIVE

Vodafone is a British multinational company which is in London. It offers IT services along with telecommunication services. It has its business or presence in around 150 countries. The company has obtained a large market share globally and has a competitive edge over its various competitors. It was very effective for the IBM to enter into a contract with Vodafone (MacKerron et al., 2015). One of the factors which influenced this deal was the size of the company and how prestigious it is. It helped the company to become a big player in the outsourcing field by entering into a contract of around worth $600 million.

Vodafone has led up to the expectations of the contract and had achieved its objective at the same time. It had attained flexibility, cost optimization as well as scalable and well effective IT infrastructure. Considering the another company IBM, which is also a big multinational company and having its global reach helped in providing more effective IT services to the customers (Patil and Wongsurawat, 2015). This partnership was hence found out to be more productive and effective one. The management of cost was also one big reason which drove this decision.  One of the biggest risks for the company was to make sure that the huge investment it is making will give the maximum return or worth to the company. The fixed costs were also expected to be recovered only if the contract was assuring long term relationship.

RECOMMENDATIONS

By entering into a contract with one of the biggest multinational IBM, Vodafone had provided improved IT services to its customers. It is recommended from the above report that Vodafone should try to reduce the potential risks which occurs out of establishment of this contract. It is also recommended to the company to look effectively and handle the challenges of keeping the other suppliers as well as handling or managing the crucial integration issues. In order to remain competitive and safeguard its position, Vodafone should always try to outperform its competitors, and develop those strategies that fit best with the goals, vision and objectives of the company. The company should also try to maintain strong and effective cultural fit along with maintaining top to top commitment. Right work should be undertaken with the right partners in regard or concern of enlarging the business or expansion of client network.  The win-win approach is important to be maintained or developed if one is thinking in terms of long term collaborations.

At this stage the relationship could be enhanced by:

  • Enhancing the mutual understanding between both the companies and their business values.
  • Trying to find out creative or innovative ways or ideas.
  • Planning regular meetings to resolve the issues presented.
  • Fostering the relations and also healthy competition among other vendors.
  • Making sure that there is an adoption of proper as well as effective risk management practices by the company.

REFERENCES

Beerepoot, N., and Keijser, C. (2015) ‘The service outsourcing sector as driver of development: the expectations of Ghana’s ICT for Accelerated Development programme’, Tijdschrift voor economische en sociale geografie, 106(5): 556-569.

Gebauer, H., Fischer, T., and Fleisch, E. (2010) ‘Exploring the interrelationship among patterns of service strategy changes and organizational design element’, Journal of service Management, 21(1): 103-129.

Kumar, T. P. (2012) ‘Collaborative Strategy-The Way Forward in Alliances and Joint Ventures: A Concept Note’, IUP Journal of Business Strategy, 9(2): 31.

MacKerron, G., Kumar, M., Benedikt, A., and Kumar, V. (2015) ‘Performance management of suppliers in outsourcing project: case analysis from the financial services industry’, Production Planning & Control, 26(2): 150-165.

Mudambi, R., and Venzin, M. (2010) ‘The strategic nexus of offshoring and outsourcing decisions’, Journal of Management Studies, 47(8): 1510-1533.

Oshri, I., Kotlarsky, J., and Gerbasi, A. (2015) ‘Strategic innovation through outsourcing: the role of relational and contractual governance’, The Journal of Strategic Information Systems, 24(3): 203-216.

Park, Y., King, R., Nathan, S., Most, W., and Andrade, H. (2012) ‘Evaluation of a high‐volume, low‐latency market data processing system implemented with IBM middleware’, Software: Practice and Experience, 42(1): 37-56.

Patil, S., and Wongsurawat, W. (2015) ‘Information technology (IT) outsourcing by business process outsourcing/information technology enabled services (BPO/ITES) firms in India: A strategic gamble’, Journal of Enterprise Information Management, 28(1): 60-76.

Puspokusumo, R. A. W. (2012) ‘Why Chinese Mobile Phones Sells Their Products in Indonesia’, Binus Business Review, 3(1): 325-334.

Sass, M. (2010) ‘Foreign direct investments and relocations in business services-what are the locational factors? The case of Hungary1’, Cuadernos de Relaciones Laborales, 28(1): 45.

Satyanarayanan, M., Schuster, R., Ebling, M., Fettweis, G., Flinck, H., Joshi, K., and Sabnani, K. (2015) ‘An open ecosystem for mobile-cloud convergence’, IEEE Communications Magazine, 53(3): 63-70.

Schneiderman, R. (2010) ‘Smart grid represents a potentially huge market for the electronics industry [special reports]’, IEEE Signal Processing Magazine, 27(5): 8-15.

Singh, P. N. (2015) ‘Lenovo acquires IBM’s x86 low-end server business’, Industrija, 43(3): 191-219.

Sodhi, M. S., and Tang, C. S. (2013) ‘Strategies and tactics of Chinese contract manufacturers and western OEMs (2001–2011)’, International Journal of Production Economics, 146(1): 14-24.

Stone, M. (2015) ‘The evolution of the telecommunications industry—What can we learn from it?’, Journal of Direct, Data and Digital Marketing Practice, 16(3): 157-165.

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