Vodafone eyeing massive outsourcing deal?

Vodafone is considering outsourcing part of its IT operations in an effort to trim costs and calm shareholders.

A massive deal could already be on the table and is slated to cut costs by £300m with IBM in the frame as Vodafone's outsourcer of choice, the Sunday Times reports.

Some industry watchers believe an audacious outsourcing move could be one way for Vodafone head Arun Sarin to restore confidence in his leadership.

The paper, citing industry sources, suggests the deal will cover billing, CRM and software development, as well as the possible transfer of staff from Vodafone to IBM.

A Vodafone spokesman said no decisions had been taken on such a deal but added the company was reviewing how to improve operational efficiency, with outsourcing potentially among the review's recommendations.

Vodafone has been facing criticism from its shareholders following a string of variable quarterly results and calls for the operator to sell its 45 per cent stake in the number two US operator Verizon Wireless.

As a result, Arun Sarin has been under pressure to step down as the company's CEO and some industry watchers believe an audacious outsourcing move could be one way for the Vodafone head to restore confidence in his leadership.

However, Vodafone's CIO Paul Wybrow, admitted in a recent interview with silicon.com that because of the operator's size, it can often be cheaper to do things in-house rather than outsourcing them.

Wybrow said: "With outsourcing, given the scale of Vodafone, even just across Europe we can gain [a lot of the scale] efficiencies internally and reap benefits from the supplier side... There shouldn't be a mantra for outsourcing. It's more about coming up with a strategy to get from A to B."

Eirwen Nichols, principal analyst at Ovum, said any move towards outsourcing would be typical of the operator's 'One Vodafone' strategy and of a recent change of heart among telcos.

He said: "Most telcos are looking at [outsourcing] now. Two to three years ago, they wanted to do it all in-house. Telco IT is becoming more mature... I think if it happens, you might see it start in the UK. If it's successful other subsidiaries might come on board and that's where the real economies of scale are."