Vodafone rings in outsourcing changes

Vodafone has called on technology services specialists EDS and IBM to take over the reins of its application development and maintenance in a move designed to reduce some of its annual 560 million cost base.

The contracts, which are expected to help the company shave up to 30 per cent from its overheads, will be finalised in the coming weeks, according to the mobile phone giant.

Once the ink is dry on the deal, both EDS and IBM will look after some of Vodafone's core IT systems, including compiling code to manage the company's customer relationship management (CRM) and billing components.

The two parties will also be tasked with reducing the number of application development and maintenance suppliers currently employed by Vodafone.

"The outsourcing of this application development and maintenance work complements a series of other projects designed to reduce group overheads including the regional consolidation of data centres and the centralisation of network supply chain management," said Arun Sarin, Vodafone's chief executive.

"This initiative is a good example of how Vodafone is finding new ways to deliver greater cost efficiencies across the business," he said.

"Vodafone may well go down the road of outsourcing both network and IT, to concentrate on product development and sales and marketing," said Eirwen Nichols, principal analyst at Ovum.

"This is the model adopted by Hutchinson in the UK and another relative newcomer, Bharti Airtel in India. Vodafone would be the first mature mobile operator to go down this path."

Vodafone said that it considered 11 vendors in total over an eight-month period, ultimately whittling it down to the chosen two. Its selection criteria included outsourcing expertise, cost, cultural fit and technical expertise.