Vodafone It Management Strategies

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Vodafone It Management Strategies

  1. 1. Running Head: IT Management Strategies in Vodafone Group IT Management Strategies in Vodafone Group Toru Sekiguchi April 4th, 2010 i
  2. 2. Table of ContentsTitle Page………………………………………………………………………………page iTable of Contents……………………………………………………………………...page iiAbstract…………………………………………………………………………….......page iiiI. Introduction………………………………………………………………………..page 1II. Building a learning organization and a professional intellect…………………..page 2III. Taking advantage of Customer Relationship Management tools……………....page 3IV. Building competitive advantages……………………………………...……….....page 4 4.1 Top Line Improvements………………………………………...……………....page 4 4.1.1 Agility to adapt the advanced technologies……………........…………….page 4 4.1.2 Optimizing entire value chains and redefining industry …….……………page 6 4.1.3 Group Technology…………………………………………….…………..page 7 4.2 Bottom Line Improvements……………………………………………………..page 8V. Using IT initiatives to transform the operator…………………………………...page 9 5.1 One Vodafone …………………………………………………………………..page 9 5.2 Network Sharing with Orange…………………………………………………..page10 5.3 IT Outsourcing to IBM and EDS………………………………………………..page 10 5.4 Centralized Supply Chain Management………………………………………...page 11 5.5 Data Center Consolidation……………………………………………………....page 12VI. Conclusions…………………………………………………………………………page 14VII. Bibliography…………………….……………………………………………...page 15 ii
  3. 3. Abstract Mobile operators are gaining the first mover advantage that enables them successfully toimprove top line and build customer loyalty when they create innovative and differentiatedproducts and services and launch them quicker than other competitors. In a fierce competitivemobile telecommunications market, gaining and maintaining cost and operational efficiencyrelatively has a great impact on bottom line improvements. These operators can capitalize on ITcapabilities to gain and maintain competitive advantages and improve both top line and bottomline to achieve their strategies and objectives. Vodafone Group is the world‟s largest mobile operator to provide a total of 333 millionsubscribers with its products and services globally. The Group has a better understanding of thestrategic values of IT as a source of competitive advantages to continuously improve both topline and bottom line in order to achieve its organizational strategies. To improve top line, Vodafone Group has continuously developed and launched newdifferentiated products and services beyond traditional voice and simple data services to improvecustomer experience and build customer loyalty while adapting the advanced technologies fasterthan its competitors, optimizing entire value chains and redefining industry, and focusing on theGroup Technology activities. To improve bottom line, Vodafone Group has implemented itsstrategic initiative, „One Vodafone‟ program, which transforms 16 operating companies into aunited operation to achieve streamlined cost effective and efficient organization. VodafoneGroup has embedded IT sharing, outsourcing, and centralization and consolidation strategies inorder to achieve the objectives of One Vodafone program. Radio access network are shared withOrange, IT application development and maintenance are outsourced to IBM and EDS, andsupply chain management function and data centers are centralized and consolidated. Vodafone Group has developed group-wide strategy that is associated with its betterunderstanding of the importance of the customer experience to its business success. The Groupstandardized on Siebel CRM platforms globally to gain a 360 degree view of customers, andmeasure and manage customer satisfaction, customer loyalty, revenue assurance, revenue growthand profitability. Vodafone Group have been committed to helping all employees reach their fullpotential through ongoing training and development while Vodafone Group has embraceddiverse workforce and created a leaner and agile structure with clear accountabilities. VodafoneGroup capitalizes on IT capabilities to enable all employees to have access to a LearningAcademy to deliver the one-stop shop for all learning and development solutions. IT definitely plays a decisive role in Vodafone Group as a critical enabler to gain andmaintain competitive advantages and to perform its business operations more efficiently andeffectively. Understanding the values of IT is essential for people in Vodafone Group in order tosuccessfully achieve organizational strategies and objectives. iii
  4. 4. I. Introduction The mobile telecommunications industry is one of the fastest growing sectors around theglobe. Mobile operators are still able to gain the first mover advantage that enables themsuccessfully to improve top line and build customer loyalty when they create innovative anddifferentiated products and services and launch them quicker than other competitors. In a fiercecompetitive mobile telecommunications market, gaining and maintaining cost and operationalefficiency relatively has a great impact on bottom line improvements. These operators cancapitalize on IT capabilities to gain and maintain competitive advantages and improve both topline and bottom line in order to achieve their strategies and objectives. Vodafone Group Plc, which was established in 1982, is the world‟s largest mobile operatorthat manages ultra large-scale mobile networks in 25 countries and has a presence throughpartnerships in another 39 countries. “Based on the registered customers of mobiletelecommunications ventures in which it had ownership interests at that date, the Group had 333million customers” (Vodafone, 2010). Vodafone Group is one of the most influential companiesin mobile telecommunications industry and now attempting to move into the fixed voice andbroadband markets. The operator has a better understanding of the strategic values ofinformation technology (IT) as a source of competitive advantages and has capitalized on ITcapabilities to expand its marketplace more globally, and create and launch innovative anddifferentiated products and services like Vodafone 360 and Cloud Services more rapidly thanother mobile operators in order to improve top line. Vodafone Group strategically shares with oroutsources some business activities to third partied, and centralize and consolidate otheractivities, which each group company had previously managed in each country, to VodafoneGroup, in order to significantly gain and maintain cost and operational efficiency in order toimprove bottom line. IT definitely plays a decisive role in Vodafone Group. The objective of this paper is toanalyze the IT management strategies, tools, initiatives and transitional planning in VodafoneGroup to ensure that the operator capitalizes on IT capabilities effectively and efficiently toachieve their organizational strategies and objectives. 1
  5. 5. II. Building a learning organization and a professional intellect Vodafone Group has embraced diverse workforce and offers equal opportunities for allaspects of employment and advancement, regardless of race, nationality, sex, age, marital status,disability, religious or political belief, to understand expectations of its diverse customers aroundthe globe and have required skills and competences to create and launch the innovative anddifferentiated products and services that Vodafone Group meets its customers‟ requirements. Vodafone Group created a leaner and agile structure with clear accountabilities in 2009 toaccommodate rapid growth. Three regions, including Europe, Africa and Central Europe, andAsia Pacific and Middle East, were created and each regional CEO was appointed. Along withthe group-wide organizational restructuring efforts, several centralization initiatives have beenaccelerated, including supply chain, product development, IT and network programs, andterminal procurement. As the result, approximately 1,900 jobs were eliminated but the overallnumber of employees grew 9% because of rapid growth in emerging markers and businessacquisitions. Although organizational structure has been continuously improved in response to marketenvironmental changes, Vodafone Group has been committed to helping all employees reachtheir full potential through ongoing training and development. “In the 2009 financial year,Vodafone provided an aggregate of 230,000 days of training, an average of three days peremployee”, and “this training program was extended to all employees via an online interactivecourse that has been translated into 11 languages and rolled out to 18 countries” (Vodafone, 2009,p.18). Vodafone Group capitalizes on IT capabilities to support its one-stop shop for all learningand development solutions that enable all employees to have access to a self-servicedevelopment portal and Learning Academy on its intranet to develop required skills andcompetences. The self-service portal is fully integrated for reporting and analysis purposes.Online „Source a Course‟ application incorporates a wide range of training options acrossmultiple categories that all employees are able to individually select, and also provides them withopportunities to source a course if their specific training requirements are not on the system. 2
  6. 6. III. Taking advantage of Customer Relationship Management tools Vodafone Group has developed the group-wide strategy that is associated with its betterunderstanding of the importance of the customer experience to its business success. Deliveringvalue-added products and services that can meet individual customer needs and widen the scopeof its relationship with its customers are essential to reshape its competitive environment. Vodafone Group has standardized on Siebel CRM platforms across three geographies tocollect, analyze and share customer information across multi-channels, including customerservice agents, sales and marketing teams, to gain a 360 degree view of customers, and measureand manage customer satisfaction, customer loyalty, revenue assurance, revenue growth andprofitability. Employees in Vodafone Group have access to a centralized repository for customerinformation in the systems. Siebel CRM systems have helped Vodafone Group optimize up-selling and cross-selling opportunities to grow revenues more quickly, predictably and profitably,and also significantly reduce the time to create and execute precisely targeted customer retentionand acquisition while improving its ability to measure marketing return on investment. Thesystems also encourage Vodafone Group to improve productivity of customer care organizationsby automating previous complicated workflow and reducing the time it takes to respond toanswers, and Vodafone Group has gained significant cost savings. The customer experience is assessed by Vodafone Group through customer surveys, repairsand returns, mystery shops and written complaints but its challenges in existing Siebel CRMsystems is to completely implement revenue assurance, churn and win-back functions from theviewpoint of a customer-centric dimension. Revenue Assurance (RA) is a vital requirement in any telecommunications operators toreduce and prevent revenue leakage that is identified as a uncontrolled costs derived from“network provisioning, CDR and mediation errors, billing and interconnect inconsistencies, lossof data and corrupted files, fragmented support systems, incoherent databases, and manual or illdefined business processes” (TeleManagement Forum, 2009, p. 5). Donaldson and O‟Toole(2007) argued that “Telco may be losing 1-30% of revenues owing to leakage”, and “a failure totake into account the CRM dimension of RA is very costly for the firm” (p.144). RA is typicallyembraced in the concept of Customer Relationship Management (CRM) but the billingdepartment in Vodafone Group has been responsible for RA activities and a customer-centricdimension to RA is missing in the CRM systems. Churn management is also another vitalrequirement in any operators in line with each operator‟s specific customer retention strategies,and promotions and campaigns. The difficulty in implementing churn management is that keyperformance indicators of predictive churn are little available in a relationship context and as apart of the CRM systems. Finally, win-back is “the effort an organization expands to win back(or recapture) customer‟s goodwill once it has been lost due to service failure” (Donaldson andO‟Toole, 2007, p.146). Vodafone Group has not implemented it from the standpoint of acustomer-centric dimension yet. 3
  7. 7. IV. Building competitive advantages4.1 Top Line Improvements Vodafone Group has definitely had better understanding of the strategic values of IT to gainand maintain competitive advantages from the viewpoint of both top line and bottom lineimprovements. To improve top line, general telecommunication operators consider IT as sourcesof innovative and differentiated products and services that they create and launch globally in atimely manner. Vodafone Group has not used the cheaper price than other competitors to attractnew customers and retain existing customers to become the largest or the second largest mobileoperator in the most markets the Group has ever entered but it has focused on creating andlaunching new value-added services that entice new customers. Arun Sarin, the former CEO ofVodafone Group stated (Hitt, Ireland and Hoskisson, 2008, p. 340). We have rededicated ourselves to delighting our customers because we believe this is the foundation for our continued success. We recognize that every customer interaction provides another opportunity to win loyalty and that‟s why we continue to raise standards on the quality of customer case in our call centers and our stores and the quality of our networks. Key to delighting our customers is our ability to deliver superior voice and data services according to differing customer needs. The choice of right IT at right time is necessary to drive current and future returns andintellectual capital that articulate and structure all the stakeholders‟ values, and VodafoneGroup‟s three key strategic IT initiatives have been sources of competitive advantages toimprove top line.4.1.1 Agility to adapt the advanced technologiesTelecommunication operators‟ agility to adapt the advanced technologies has a great impact oninnovative and differentiated products and services, including the converged services of networkdata, services data and customer data available to improve customer experience in response tothe changing customer needs and market environment. Saxtoft (2008) argued that “competitiveadvantages in the future convergent communications industry will be based on the organizationalability of communications service providers to utilize the specific mix of network data, servicesdata and customer data available to each of the players in the market” (p.71). Vodafone‟s ability to adapt new IT continuously ensures that their customers are able to“stay connected to the people and the information that are central to their lives – via voice, text,instant messaging, e-mail, music, communities, news, and applications both social and workrelated – whenever, wherever” (Read, 2009, p.12). Vodafone Group thus created Vodafone 360,Vodafone Vorteil, and Cloud Computing services and the Group in turn can greatly improvecustomer experience, and eventually gain and maintain its competitive advantages. Along withincreasing bandwidth demands and a data dominated traffic mix, the ability to optimize itsnetwork capacity according to the differentiated products and services has been essential inimproving quality of services for these services. 4
  8. 8. Vodafone launched „Vodafone 360‟, a suite of new Internet services for the mobile and PCthat gather all of customer‟s friends, communities, entertainment and personal favorites.Vodafone 360 encompass a universal contacts address book „Vodafone People‟ thatautomatically synchronize all contacts from a customer phone, Facebook, Windows LiveMessenger, and Google Talk, and an online content and data management tool. Vodafone 360brought together many existing Vodafone mobile Internet initiatives under a common andintuitive service umbrella. Vodafone 360 represents the new service standard to take everythingback in Vodafone and superimpose proprietary ownership over all service aspects whiledispelling the notion that mobile operators are unable to response to the full force of theinnovation that Apple iPhone brought to market. This is the first time a mobile operator hascreated an experience which can compete against the iPhone standard of excellence and superioruser interface. Vodafone is now attempting to move into the fixed voice and broadband markets and haseither acquired fixed Internet Service Providers in some countries or formed partnerships in theother countries where acquisitions are not feasible or not cost efficient. “The previously puremobile operator is now following a total communications strategy which includes mobile(cellular), broadband (fixed) and wireless; it has been offering combined services, with fixed,mobile and broadband services under a single bill” (Mavrakis and Saddi, 2009, p. 42). VodafoneGermany launched a new multi-service discount service, „Vodafone Vorteil‟, for customers whopurchase a bundle of fixed and mobile services in 2009. The service offered discounts atmaximum EUR 20 a month for various combination of service in Germany in response to marketenvironmental changes that loyalty discounts are coming to the fore as a key competitiveadvantage in the recent economic recession in Germany. Vodafone Vorteil customers alsobenefit from a 24 hour, door-to-door mobile phone replacement service and free 24-by-7customer support hotline, and a 25% new handset discount. Cloud Computing has become popular in the telecommunications industry all over the world.It is “a large-scale distributed computing paradigm that is driven by economies of scale, in whicha pool of abstracted, virtualized, dynamically-scalable, managed computing power, storage,platforms, and services are delivered on demand to external customers over the Internet”, and“has become the hottest technology in IT” (Jaatun, 2009, p. 559). Vodafone Group announced astrategic partnership with Decho Corporation to deliver a series of „Could Services‟ for bothenterprise and consumer markets. The first service to emerge across the Vodafone Groupfootprint is the „Vodafone PC Backup‟ service that enables customers to save personal data fromthe PC to a remotely hosted site. They are able to view and share the data from their accountthrough the web browser of their PC while reducing the need to transfer the data from one deviceto others. None of Vodafone‟s key Tier 1 competitors has launched free PC backup and onlinestorage aggressively with consumer mobile broadband services and Vodafone Group is relativelystaking leadership in consumer Cloud Service provision. Emma (2009) argued that “AVodafone-branded PC backup service promises powerful value-added differentiation for theoperator‟s mobile and fixed broadband portfolio across its key European markers by year-end”(p.1). Vodafone Group can continuously maintain its competitive advantages while launching aseries of Cloud Services faster than other competitors, in addition to existing PC backup andonline storage services. 5
  9. 9. 4.1.2 Optimizing entire value chains and redefining industry Optimizing entire value chains beyond Vodafone Group and its traditional suppliers, andredefining industry are identified as sources of competitive advantages to create and launchinnovative and differentiated products and services. The telecommunications industry isconfronted with unprecedented challenges in breaking down traditional industry boundaries andredefining industry in response to changing market environment while the Internet companiessuch as Google, eBay and Yahoo have demonstrated business models that enable third parties todevelop new services by combining existing services to increase the value of the traditional andoriginal services. Service providers are no longer limited to the traditional voice and simple dataservices but are comprised of content, application, and other service providers. To competeagainst these new service providers, an effective service delivery framework is essential, todeliver and maintain differentiated services beyond traditional boundaries, achieve time tomarket, and conclude business agreements among all stakeholders. Vodafone Group started implementing Service Delivery Platform (SDP) in 2002 that is “aninfrastructure for service delivery to be provided for technically enabling business to engage inbusiness transaction” (Filipe and Cordeiro, 2009, p. 21) to effectively deliver „Vodafone Live‟service in a timely manner. Its multimedia portal was marketed extensively in the traditionalmedia. SDP supported application development consistency and a multi-lateral settlementsmodel to enable all stakeholders to add values to deliver the services to get paid. “Vodafone Liveused a home-built SDP to launch its offering back in 2002, a product that provides an integratedservice across handsets, networks, content and services”, and also includes “video content, musicdownloads and games” (Greene and Hayes, 2007, p.8). Subsequently, Service DeliveryFramework (SDF), indeed different from SDP, was defined by TeleManagement Forum (TMForum). “SDF weaves together various Service Delivery Platforms (SDPs, IMS, IPTV, etc)offered by equipment vendors and their allied software vendors to allow uniform management ofservices, easy to align with each Service Provider business model” (TM Forum, 2008, p. 20). Vodafone was the first mobile operator in the UK to offer a portable laptop with built –inbroadband in the business sector in 2005. In 2008, the launch of the Dell mobile laptop withintegrated mobile broadband moved portable computing into the consumer market. Vodafone‟sstrategy differs from the other mobile operators in the UK and the operator ensures that theembedded route meets end users‟ aspirations in both business and consumer market. “Vodafonehas a deal with Dell whereby the vendor offers customers buying netbooks and notebooks via itswebsite the option to include a 3G HSPA mobile broadband module in their devices, and to becontacted by Vodafone to receive a SIM card and the mobile broadband service” (Roberts,Mavrakis and Jesty, 2009, p. 270). Betavine and the Joint Innovation Lab (JIL) are two API initiatives in Vodafone Group.Betavine is a research and development project to create values around Vodafone‟s network.Subsequently, Vodafone Group started the JIL initiative with its partners to use open APIs andwidgets to address the commercial environment. Web 2.0 technologies were considered as thefundamental enabler to broaden service choice for Vodafone‟s customers and Vodafone Groupdecided to create a service innovation website „Betavine‟ in 2007. Betavine provided Web 2.0tools and resources so that developers can use to create innovative mobile services and get 6
  10. 10. feedback from the Betavine developer community. Its main objective was “to stimulate thenumber of applications available for all mobile phones by providing an operator and technologyagnostic development environment”, and “Betavine has clocked up more than 180 applicationsdeveloped using the site across a range of categories, including games, utilities, mobile health,and recipes” (Mendyk, 2009, p.29). More than 1,000 registered users are collaborating onsoftware development, and Betavine has enables Vodafone Group to learn much more from itsservice incubation platform, both about Web 2.0 technology and its development models, andabout the types of mobile application that people want to create and which applications areessential in the current market environment. Vodafone‟s product groups are “hoping that throughthe Betavine initiative, they will gain access to „killer‟ applications that can be turned into mass-market products” (Mendyk, 2009, p. 29). Subsequently, Vodafone Group has made acommitment to provide a group wide network API that encourages developers to accessVodafone‟s customers. Vodafone enables “developers to use its direct billing capabilities topermit customers to pay for services through Vodafone accounts rather than credit cardpayment” (Mottishaw, 2009, p.52) because a simple payment model has a great impact oncustomers‟ choice of services. In 2008, Vodafone, China Mobile, Softbank and Verizon Wireless announced the JILinitiative to have common APIs and development environment. Vodafone Group launched the„App Store‟ that encapsulated widgets from JIL that run in any devices and use the operator‟sbilling mechanisms to charge users directly. The combined customer base of JIL membersexposes applications to a potential 1 billion end users, by far the largest addressable market forany application stores in the market today. JIL is working closely with several industry standardsbodies, including GSMA, OMTP and W3C, to encourage developers to use network enablers toenrich their applications. JIL has launched a web site to provide the developers with servicedevelopment kit (SDK) and device API information to develop applications for specific handsets.4.1.3 Group Technology Vodafone Group‟s has driven the Group Technology initiatives that have managed andcontrolled group-wide projects to orchestrate the move toward significant coordination andidentify and disseminate best practices to focus on expansion of service capacity whilereplicating business models across a number of countries and maintaining cost efficiency.Vodafone Group created two central functions, "Group Marketing (to drive revenue growth), andGroup Technology and Business Integration (to drive cost and scale benefits”, and “thy purposeof Group Technology will be to lead the implementation of standardized architecture forbusiness process, information technology and network systems” (Hitt, Ireland and Hoskisson,2008, p.345). The initiatives have supported the third generation (3G) network rollout, theenhancement and expansion of Vodafone Live service to Germany, Ireland, Italy, theNetherlands, Portugal, Spain, Sweden and then UK, and the development of Vodafone Group‟sbusiness offering on a global basis. Vodafone Group has benefited from the effective and efficient Group Technology initiative.First, Vodafone Group is given more strategic option for marketing and sales of its products andservices. Second, the time-to-market becomes shorter by consolidating its development resourcesand sharing the solutions. Finally, cost reduction arises from avoiding multiple development 7
  11. 11. resources and environments and from consolidating demand according to the collaborative ITsolutions fro building IT platforms. Buchta, Eul and Croonenberg (2009) argued that “Acorrespondingly worldwide uniform IT architecture with worldwide uniform business process isthe prerequisite, for example, for developing the advantages of a global customer managementfrom uniform coordination and universal organizations – with the lowest possible level ofcountry-specific individuality” (p. 73).4.2. Bottom Line Improvements On the other hands, Vodafone Group has capitalized on IT capabilities to implement itsstrategic initiative, „One Vodafone‟ program, which transforms 16 operating companies into aunited operation to achieve streamlined cost effective and efficient group. Vodafone Group hasembedded IT sharing, outsourcing, and centralization and consolidation strategies in order toachieve the objectives of the program. Radio access network are shared with the other mobileoperator, Orange, IT application development and maintenance are outsourced to IT outsourcingvendors, IBM and EDS, and supply chain management function and European data centers arecentralized and consolidated to Vodafone Group. One Vodafone program is analyzed in depth inChapter V. 8
  12. 12. V. Using IT initiatives to transform the operator5.1. One Vodafone The „One Vodafone‟ program was focused on key initiatives to integrate business activitiesto leverage economies of scale and scope of Vodafone group to transform the Group into astreamlined, cost-effective and efficient organization while standardizing designs and processes,reducing duplication, centralizing and consolidating certain functions and sharing best practicesacross operating companies. The program was targeted at achieving £2.5 billion of annual pre-tax operating free cash flow improvements in Vodafone Group‟s controlled mobile business bythe end of March 2008. Alan Harper, Group Strategy and New Business Director, explained that “all our marketingefforts, branding and product development are centralized”, “technology is standardized”,“network design (switching, radio) are coordinated”, and “knowledge is shared via the HQ, HR,strategy, and marketing departments” (Hitt, Ireland, and Hoskisson, 2008, p. 342). The programwas not just an integration of a few functions and countries but a strategic transformation thatVodafone Group transformed 16 core independent national operating companies which haddiverse people and markets into a united operation “with a high degree of similarity with regardto product, brand, position, advertising strategy, personality, packaging, and look and feel”(McLoughlin and Aaker, 2010, p. 251) in order to achieve significant economies of scale andscope. It was definitely supposed to be one of the most difficult challenges for Vodafone Groupbut the transformation strategy has already resulted in “significant cost savings as well asinnovative market strategies, more competitive and differentiated pricing, and leading productand service offering” (Booz Allen, 2006). Vodafone Group predominantly embedded IT sharing, outsourcing, and centralization andconsolidation strategies to achieve the objectives of One Vodafone program that transformmultiple operating companies around the globe in Vodafone Group into a streamlined, cost-effective and efficient organization. Vodafone Group adopted NetCo and ServCo business modelin the One Vodafone program. “ServCo is mandated to provide services over thetelecommunications network on the same terms as other service providers while NetCo is taskedwith managing the telecommunications network backbone” (Orbicom, 2007, p. 211). Network,IT application development and maintenance, and supply chain and data centers were consideredas NetCo that Vodafone Group needed to pursue scalability globally to achieve the lowest unitcost. Sales, marketing and customer management were relatively considered as ServCo thatVodafone Group needed to achieve customer focus locally to improve customer experience andbuild customer loyalty. As a consequence, Vodafone identified key imperatives in One Vodafone program. Radioaccess network are shared with Orange globally, and IT application development andmaintenance are outsourced to IBM and EDS, and supply chain management function andEuropean data centers are centralized and consolidated to Vodafone Group. On the other hand,sales, marketing and customer management are relatively operated and managed by each localoperating company. 9
  13. 13. 5.2. Network Sharing with Orange There are a number of different levels of network sharing deals and the most fundamentalscopes involve the use of common sites and towers around the globe. Complete network sharingdeals are also popular in some countries and these involve the building of a single network tolease its capacity between two or more licensed mobile operators. Some of network sharing dealsinvolve radio access network that two or more mobile operators jointly deploy and own accessnetwork. In the UK, India and some other countries, network sharing deals have been activelyencouraged by the government, and independent infrastructure companies have been establishedby two or more operators. Vodafone and Orange have established their network joint venture in the UK to deploy andown their combined radio network. Their initial scope was limited to 3G network and Vodafoneand Orange planed to expand the scope to their 2G network infrastructure as well. Theirobjective to establish the network sharing joint venture was to gain cost and operationalefficiency to deploy new 3G mobile internet access service. The radio access network includes“mast, antenna, sites, site support cabinet and power supply as well as antennae, combiners andtransmission links, Nodes B (3G), BTS (2G) and the radio network controllers which are linkedto the core network”, and they are expected to expand their existing network sharing deals toincludes “the costs of engineering, maintenance, and technology, in a move which is expected tosave Vodafone (and Orange presumably) around US$1.45 billion a year” (Cellular-news, 2009).During fiscal year 2009, Vodafone Group announced a number of significant sharing deals inGermany, Spain, Ireland, UK and India.5.3. IT Outsourcing to IBM and EDS Outsourcing refers to the use of external organizations to perform some business activitiesthat were previously accomplished in-house and outsourcing is becoming more acceptable andwidespread in the telecommunications industry. Telecommunications operators re-evaluate theircore business and create added values in a fierce competitive market. The two different activitiesare identified as non-core business activities that some mobile operators have mainly transferredto outsourcing vendors: (1) IT services including IT infrastructure, desktop and servers, BSS(Business Support Systems), software development and implementation, and deployment of newIT services, and (2) network operations and management including network planning, siteacquisition and civil works, installation, network integration, network optimization and upgrade,fault management, performance management, configuration management, OSS (OperationsSupport Systems) administration, field maintenance, and hardware and software support. First, One Vodafone program stipulated that the IT services for all Vodafone services ineach country be centralized. Vodafone Group selected IBM and EDS as key IT outsourcingpartners in 2006 although Vodafone Group had managed more than 2,500 suppliers and 3,800external contractors before. Vodafone signed a seven-year contract to outsource “IT serviceapplication and development, including BCC (Billing and Customer Care) and CRM (CustomerRelationship Management), to IBM for Vodafone‟s operations in Spain, the Czech Republic,Australia, New Zealand, Portugal, Ireland and Greece” (Jesty, 2008, p.46), and it did at the sametime a similar deal with EDS in UK and other three countries including a total of 5,000 full time 10
  14. 14. employees transferred. The two deals were identified to reduce unit costs by 25 to 30 percentwithin three to five years and these deals demonstrated Vodafone Group‟s commitment tooutsourcing non-core business and focusing on their core business. Subsequently, a widerranging IT transformation program was initiated in 2008 to gain more cost savings and identifynew opportunities. Second, whether a telecommunication operator‟s network infrastructure is a critical asset ornot has been continuously argued in the telecommunications industry. Some operators hasconsidered their network as core to their business and been reluctant to outsource theirresponsibilities associated with their network infrastructure to third parties, but other operatorsare relatively beginning to recognize that network and its operations are no longer differentiatedcore business activities and they are outsourcing all or some of network operationsresponsibilities as a commoditized activities to third parties in order to focus on core businessactivities to gain and maintain competitive advantages. Saxtoft (2008) argued that “the technicalnetwork operations activity is becoming „commoditized‟ and that in the future healthy marginsand future growth are found mainly in the areas of service delivery and contents creation” (p. 41).Vodafone India, Italy, Germany, Spain, Portugal, Turkey, Australia and other operatingcompanies in Vodafone Group have outsourced all or some of network operationsresponsibilities to Ericsson, Nokia Siemens Network, and Motorola. The end-to-end managedservices are often tied into supply contracts. According to Jesty (2008): Vodafone Australia signed a US$230 million, seven-year managed services agreement under which Nokia took on responsibility for managing Vodafone Australia’s ongoing network operations covering HSDPA, 3G, GSM and core networks infrastructure including detailed design, engineering, optimization operations as well as network management, fieldwork, and maintenance service for the networks (p.130).5.4. Centralized Supply Chain Management A supply chain is a series of activities in which materials move through from initialsuppliers to the final customers. In Vodafone Group, handsets, network equipment, marketingand IT services account for the majority of Vodafone‟s operational expenditures. CentralizedGroup‟s Global Supply Chain Management (GSCM) team has been driving „One SCM‟ toleverage its scale to significantly reduce operational expenditures. One SCM delivers valuesthrough robust integration across all Vodafone‟s operating companies to centralize and managemost of the Group‟s relationships with their suppliers. A consistent supplier performancemanagement process has been implemented across the Vodafone Group‟s mobile operations andkey suppliers are evaluated in the six areas “covering aspects of financial stability, technologicaland commercial criteria, delivery and quality management requirements and corporateresponsibility” (Vodafone, 2006, p.15). GSCM has identified the best practices across Vodafone Group‟s mobile operations aroundthe globe in order to harmonize business processes that contribute to further reduction ofprocurement costs and time-to-market. A business-to-business electronic commerce strategy hasbeen implemented to further increase transparency and control. GSCM is a major contributor tocost reduction through a unified approach using global price books, global framework 11
  15. 15. agreements, a standardized approach to e-auctions, the introduction of low cost regional sourcing,and achieving best in class pricing for IT storage and servers. Its e-auction model has improvedthe total cost of ownership and maintained strong partnership with leading partners in thetelecommunications industry. The e-auction in Vodafone Turkey helped achieve 42% of pricereduction to deploy new network. As part of the introduction of low cost regional sourcing,Vodafone Group established China Sourcing Center in March 2007 to have access to andaccelerated development of low cost suppliers in order to build direct relationships with bestsuppliers around the world, and sourced a total of £200 million from China in fiscal year 2007and 2008. In 2007, a global demand management application has been implemented as part of OneVodafone program and developed to provide significantly improved coordination of VodafoneGroup‟s global purchase of handsets to reduce its inventory and obsolescence risks, and improveits ability and effectiveness to encourage Vodafone Group to respond to rapid marketenvironmental changes. Saxtoft (2008) argued that “the ongoing consolidation of independenttelecommunications operators in Pan-European or global groups (Orange, Vodafone, Telefonica,etc.) has considerably increased the negotiation power with equipment vendors” (p.41).Vodafone Group can also leverage the power to coordinate pressure on mobile phone vendors todevelop Vodafone specific features and succeed in forcing them to produce and offer exclusivelydesigned and branded mobile devices to Vodafone Group. Vodafone has also used itsunparalleled clout in the negotiation with network equipment vendors such as Ericsson, NokiaSiemens Networks, Motorola, and Nortel to squeeze their gross margins even though theydevelop new differentiated technologies. The Vodafone Procurement Company S.a.r.l. was founded and GSCM was centralized inLuxembourg in 2008 in order to deliver further synergies across Vodafone Group through theexecution of global material strategies based on local market expertise. Vodafone Groupoverachieved on its target of 8% saving of £3.3 billion external network spend through severalGSCM initiatives in 2008. As the results, GSCM consecutively won major industry awards. In2007, Vodafone Group won “the European Leaders in Procurement Award for CorporateResponsibility and the European Supply Chain Excellence Award in Sourcing and Procurement”(Vodafone, 2008, p.18). “SCM won the „Team of the Year‟ award and was short listed for the„Corporate Responsibility and Environment‟ award in the 2008 European Supply ChainExcellence Awards” (Vodafone, 2009, p.17).5.5. Data Center Consolidation Vodafone Group delivered commitments on data center consolidation and optimization tomeet 25 to 30% savings within 3 to 5 years and £100 million of savings within 2 years whileconsolidating from European-wide12 data centers to 2 central hubs. Data centers fromVodafone‟s northern European companies have been centralized in Germany, while data centersfrom its southern European companies have relatively been centralized in Italy in 2006.Vodafone Group has maintained cost efficiency from its scale in purchasing IT equipment, andoperational efficiency in consolidating hardware, software, maintenance and system integrationsuppliers that provide high quality IT infrastructure, services and solutions and in reducingduplication. 12
  16. 16. Although the data centre environment continues to be a major focus area for cost savings,Vodafone Group has been building on the success of the consolidation and optimization programby driving savings initiatives on server virtualization to increase utilization of 10,000 servers,storage optimization to reduce online storage growth from more than 50% to less than 10%annually, and alignment of architecture and service levels in order to deliver optimal service atoptimal cost. Application simplification is another area that is identified as the benefits ofreducing the number and complexity of applications to improve time to market for new productsand services and gain cost reduction. Significant savings, which have been made on Vodafone‟sexisting IT operations, have been reinvested in new products and services. 13
  17. 17. VI. Conclusions IT is everywhere, regardless of industry, size or country in business and a critical enabler fororganizations to perform their business operations more efficiently and effectively. VodafoneGroup is the world‟s largest mobile operator to manage ultra large-scale mobile networksglobally to provide a total of 333 million subscribers with its products and services. The operatorhas a better understanding of the strategic values of IT as a source of competitive advantages tocontinuously improve both top line and bottom line in order to achieve its organizationalstrategies and objectives. To improve top line, Vodafone Group has continuously developed and launched newdifferentiated products and services beyond traditional voice and simple data services to improvecustomer experience and build customer loyalty while adapting the advanced technologies fasterthan its competitors, optimizing entire value chains beyond Vodafone Group and its traditionalsuppliers and redefining industry, and focusing on the Group Technology activities to identifyand disseminate best practices globally. To improve bottom line, Vodafone Group hasimplemented its strategic initiative, „One Vodafone‟ program, which transforms 16 operatingcompanies into a united operation to achieve streamlined cost effective and efficient organization.Vodafone Group has embedded IT sharing, outsourcing, and centralization and consolidationstrategies in order to achieve the objectives of One Vodafone program. Radio access network areshared with the other mobile operator, Orange, IT application development and maintenance areoutsourced to IT outsourcing vendors, IBM and EDS, and supply chain management functionand European data centers are centralized and consolidated to Vodafone Group. Vodafone Group has developed group-wide strategy that is associated with its betterunderstanding of the importance of the customer experience to its business success. The Groupstandardized on Siebel CRM platforms globally to collect, analyze and share customerinformation across multi-channels, including customer service agents, sales and marketing teamsto gain a 360 degree view of customers, and measure and manage customer satisfaction,customer loyalty, revenue assurance, revenue growth and profitability. Vodafone Group havebeen committed to helping all employees reach their full potential through ongoing training anddevelopment while Vodafone Group has embraced diverse workforce and offers equalopportunities for all aspects of employment and advancement and created a leaner and agilestructure with clear accountabilities. Vodafone Group capitalizes on IT capabilities to enable allemployees to have access to a Learning Academy to deliver the one-stop shop for all learningand development solutions. IT definitely plays a decisive role in Vodafone Group as a critical enabler to gain andmaintain competitive advantages and to perform its business operations more efficiently andeffectively. Understanding the values of IT is essential for people in Vodafone Group in order tosuccessfully achieve organizational strategies and objectives. 14
  18. 18. VII. BibliographyBooz Allen Hamilton Inc. (2006). One Vodafone. Retrieved Mar-30, 2010 from http://www.boozallen.com/about/article/8088889?utm_source=boozallen-site&utm_medium=rssfeed&utm_campaign=rssfeed&utm_content=rssfeed&gko=4f5d9Buchta, D., Eul, M., & Croonenberg, H. S. (2009). Strategic IT-Management: Increase Value,Control Performance, Reduce Costs. Wiesbaden, Germany: Gabler Verlag.Cellular News. (2009). Orange and Vodafone to Expand Network Sharing Partnership. RetrievedMar-31, 2010 from http://www.cellular-news.com/story/35351.phpDonaldson, B., & O‟Toole, T. (2007). Strategic market relationships: from strategy toimplementation. Hoboken, NJ: John Wiley and Sons.Filipe, J., &Cordeiro, J. (2009). Enterprise Information Systems: 10th International Conference,ICEIS 2008, Barcelona, Spain, Jun 12-16, 2008, Revised Selected Papers. Berlin, Germany:Springer.Greene, W., & Hayers, T. (2007). Service Delivery Frameworks: The Service Provider‟s Mashup.Allen, TX: LTC International.Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2008). Strategic management: competitivenessand globalization. Florence, KY: Cengage Learning.Jaatun, M. G. (2009). Cloud Computing: First International Conference, ClouldCom 2009,Beijing, China, December 1-4, 2009, Proceedings. Berlin, Germany: Springer.Jesty, R. (2008). Managed Services: New Strategies for Outsourcing, Network, Sharing, Hostingand Consultancy (2nd ed.). London, UK: Informa UK.Mavrakis, D., & Saddi, M. K. (2009). Mobile Network APIs: Enabling Web services, operatorapp stores and developer communities. London, UK: Informa UK.McLoughlin, D., & Aaker, D. A. (2010). Strategic Market Management: Global Perspectives.Hoboken, NJ: John Wiley and Sons.Mendyk, D. (2009). Accelerating Telco Services Through SaaS/PaaS Strategies for SDPs in theCloud. New York, NY: Light Reading.Mottishaw, P. (2009). Service Delivery Platforms: Market Review August 2009. Sugar Grove,IL: OSS Observer LLC.Orbicom. (2007). Digital Review of Asia Pacific 2007/2008. Ottawa, ON: IDRC. 15
  19. 19. Read, T. J. (2009). The IT Value Network: From IT Investment to Stakeholder Value. Hoboken,NJ: John Wiley and Sons.Roberts, M., Mavrakis, D., & Jesty, R. (2009). Future Mobile Broadband: HSPA & EV-DO toLTE networks, Devices & Services (3rd ed.). London, UK: Informa UK.Saxtoft, C. (2008). Convergence: User Expectations, Communications Enablers and BusinessOpportunities. Hoboken, NJ: John Wiley and Sons.TeleManagement Forum. (2008). Service Delivery Framework: Phase III Charter. Morristown,NJ: TeleManagement Forum.TeleManagement Forum. (2009). Revenue Assurance Guide Book: Release 2.0 GB941 TMForum Approved Version 2.4. Morristown, NJ: TeleManagement Forum.Vodafone. (2006). Vodafone Group Plc: Annual Report For the year ended 31 March 2006.Bershire, UK: Vodafone Group Plc.Vodafone. (2008). Vodafone Group Plc: Annual Report For the year ended 31 March 2008.Bershire, UK: Vodafone Group Plc.Vodafone. (2009). Vodafone Group Plc: Annual Report For the year ended 31 March 2009.Bershire, UK: Vodafone Group Plc.Vodafone. (2010). About Vodafone. Retrieved Mar-29, 2010 fromhttp://www.vodafone.com/start/about_vodafone/who_we_are.html 16

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