Vodafone has talked for years about the pros and cons of taking a group-wide approach to procurement and IT, as opposed to having each national operating company to make its own choices. While it sets overarching strategies, such as the Project Ocean data center virtualization program, attempts to centralize purchasing and operations have generally had limited effect. But group CEO Nick Read aims to change that, as the company looks to save operating costs in future.
The telco says it will kick off a major rethink of its IT systems, data centers and service platforms from this year, replacing country-specific systems with tools and products that can be used or sold across its entire European footprint. “These are significant changes we are doing on the operating model of the business,” said Read. “What we are doing is driving greater standardization across network and IT and digital.”
Read told analysts that he wants to look more like a cloud giant, whose customers have the same services and technologies wherever they are located. It will also make it easier to work with such companies. “We’ll use standardized platforms and have an integrated organization to make it easier for third party strategic partners like Microsoft and Amazon to connect with our platform and go across our footprint seamlessly and at speed,” he said.
The operator will replace country-based product development teams with global, or initially Europe-wide, centers of excellence to increase efficiencies and return on capital. CFO Margherita Della Valle said: “We will get more growth by investing once and deploying many times.”
There are already some implications for executives. Scott Petty, Vodafone UK’s CTO, will become digital and services director at group level, while Alberto Ripepi, the deputy group CTO, will have group responsibility for all network-related activities. Both will report directly to group CTO Johan Wibergh.
“Today we are an organization with CTOs in each of the markets and then we have group functions,” said Read. “We are vertically integrating those functions – networks and IT digital – for the whole European group, so they act as one organization driving a standardized roadmap.”
There will presumably be job reductions and reorganizations below these senior levels, and Read hinted at this when he boasted of “significant synergies”. Overall, this will help deliver Vodafone’s previously announced opex reduction target of €1bn [$1.2bn] over three years”.
However, he stressed that the aim was partly to free up money from opex savings for investment in new areas, and that new jobs could be created in IT, since Vodafone plans a significant degree of ‘insourcing’ functions that were previously entrusted to external partners. “We’re going to insource IT development engineering capability,” he added. “We are really going to scale that to develop our own IP [intellectual property] to make our differentiation stronger.”
Of course, major reorganizations are beset with challenges and many telcos have stumbled when trying to generate the efficiencies of a centralized approach, but if large operators are to emulate the webscalers’ service delivery and scale, as they often aim to do, they will need to get such changes right this time around.