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Vodafone outsourcing deal: And the winner is...
... more than one company

By Jo Best

Published: Thursday 05 October 2006

Vodafone has revealed the double act that has landed its outsourcing deal.

The mobile operator has chosen EDS and IBM as its two preferred suppliers in a deal that will see the pair look after Vodafone's application development and maintenance services.

The twosome were picked as preferred suppliers above nine other hopefuls on factors "including technical capability, outsourcing expertise, cost and cultural fit to ensure the future success of the partnership", according to Vodafone. The mobile company said it will remain the boss of its IT strategically.

The contract will be signed in the "coming weeks", according to a spokesman for the operator.

While no figure has been put on the deal, Vodafone has said it expects to save 25 to 30 per cent as a result of the decision to outsource its maintenance services and application development. It spent £560m on both last year.

The decision to outsource important parts of its IT is part of the mobile company's One Vodafone strategy - a pledge by CEO Arun Sarin to streamline the business and one that will see a cleaver taken to the number of suppliers on Vodafone's books.

The decision to split an outsourcing deal between two suppliers is a strategy not often seen in the private sector. According to Vodafone's spokesman, the deal will be divided geographically. "It was thought two was the optimum number," he noted.

Jon Collins, principal analyst at research company Macehiter Ward-Dutton, said use of two suppliers can prove a boon to outsourcing deals. "Neither side can get too complacent," he told silicon.com. "Some have strengths in one area or another, it can be useful to pick and choose."

However, Collins believes there could be potential pitfalls in Vodafone's decision. "It's got to be handled carefully - it's their core business. It's not like outsourcing HR or site maintenance, this is something that could affect customers."