Ovum_Spring in its step in Asia

Vodafone: Targeting Global Leadership

Carrier has a spring in its step in Asia-Pacific

Publication Date: 18 Nov 2014 | Product code: TE0005-000664

Adrian Ho


Ovum view

SummaryAn exclusive group of global telecoms service providers has traditionally dominated the MNC ICT

market. This inner circle of providers includes AT&T, Verizon Business, Orange Business Services, BT

Global Services, and T-Systems. In the Asia-Pacific region, these players (excluding T-Systems) also

lead the way, with the vast majority of MNCs engaging with them for their regional ICT needs. Many

other providers have aspired to join this club, with players such as NTT Comms and Tata

Communications making plays (with varying degrees of success) over the past few years.

Ovum view Vodafone Group Enterprise aims to become a truly global service provider in the near future.

This bold proclamation follows the telco’s recent relinquishment of its 45% stake in Verizon

Wireless for $130bn, which gave it a massive war chest to build its capabilities.

In September 2013 Vodafone officially announced Project Spring, a £7bn organic investment

across the organization intended to drive clear differentiation across its consumer and

enterprise lines of businesses. It includes a £500m investment in Asia-Pacific and Africa to

scale up network and enterprise capabilities in those regions. Vodafone Group Enterprise

comprises four lines of business: Vodafone Global Enterprise, Vodafone Machine-to-Machine

(M2M), Vodafone Carrier Services, and Vodafone Cloud & Hosting.

The investment currently being undertaken will expand, enhance, and extend network and

capabilities across the entire Vodafone organisation, with an anticipated impact on all

enterprise customers across the board. Vodafone supports the total communications needs of

Asia- and Africa-based MNCs that are looking to go global, as well as the communications

needs of almost 1,000 global MNCs in this region.

Market status

Leadership in communication servicesLeadership in the Asia-Pacific market will come with a hefty price tag. The global service providers

have all committed to bolstering their capabilities in the region over the next few years to support

investment and expansion by their existing customers. In addition, the growing set of expanding

Asia-Pacific MNCs has made the region a fertile ground for new customer acquisitions.

Ovum believes that Vodafone’s many unique assets in Asia-Pacific could help it differentiate itself in

the marketplace. Its focus on communications services rather than offering the entire ICT stack of

capabilities is refreshing. Enhancing core capabilities can pay dividends as MNCs continue to demand

state-of-the-art resilient network services and newer technologies layered on top of the networks.

However, it is wrong to assume that telcos that venture toward the ICT sphere have failed or are

doomed to failure. Several have made considerable progress in this area; some have legacy IT

system integrator (SI) arms, and others have built those capabilities in-house. Orange Business

Services, SingTel, T-Systems, and PCCW have all made the leap from pure service providers to

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successful ICT service providers. Despite the strong resistance to a shift toward ICT, there are several

reasons to be optimistic about Vodafone’s chances in the Asia-Pacific region.

Mobile at birth broadens appealVodafone’s acquisition of Cable and Wireless (C&W) Worldwide gave it global fixed network assets

and a set of blue chip customers, including some leading global financial institutions. C&W was known

for its network services capabilities, support, and customer service. However, before the acquisition it

was experiencing severe headwinds and financial difficulties. Its core strategy in Asia-Pacific was for

years defensive rather than offensive.

Ovum views the integration of C&W into Vodafone as a resounding success for several reasons. Its

mobile heritage has allowed Vodafone to have a much broader conversation with its existing customer

base as well as new prospects. Its financial situation has brightened considerably, allowing it to go on

the offensive and build new capabilities and resources in Asia-Pacific. The telco’s existing MNC

customers are experiencing a surge in employee mobility as they expand across the region.

Vodafone’s mobile heritage gives it credibility; when this heritage is coupled with the carrier’s

extensive fixed-line assets it means that Vodafone can now seriously address some of the major

challenges that these MNCs face.

Vodafone has not only stemmed the bleeding of the former C&W but also managed to extend the

relationships of some of its flagship customers and acquire new customers in the region. This would

have been unimaginable a few years ago. Vodafone is today recognized as one of the serious

challengers in the MNC ICT market in the Asia-Pacific region.

Market dynamics

Vodafone’s cloud game plan is taking shapeVodafone rolled out its cloud strategy at a recent analyst event in London. The Asia-Pacific region will

have to wait until FY2015/16 to see much progress; Singapore and Hong Kong are expected to have

cloud datacenters. At the moment Vodafone is white-labelling CenturyLink (formerly Savvis) cloud

services to its enterprise customers in the region.

Like many of its telecoms peers, Vodafone has recognized that it does not have the global scale to

build a successful public cloud practice. It is late to the game, and a public cloud strategy would

require massive capex. Vodafone is betting its future on two fronts: hybrid cloud to support its MNC

customers in moving workloads to a cloud environment, and dedicated private cloud. It also intends to

work with all the major public cloud providers – Amazon Web Services (AWS), Azure, SoftLayer, and

Google – and to help its customers orchestrate workloads between various clouds.

Other elements of Vodafone’s strategy also look promising, including its intention to work with SI

partners on a variety of fronts, which will help it to achieve scale. One of the main reasons most telcos

have failed in their cloud journey has been their inability to master a sales channel beyond direct.

Vodafone also has very tentative plans for PaaS and DevOps, which are critical elements of building a

cloud practice. The carrier also plans to build a marketplace in the near future.



These strategies require refinement, but although these are still early days for Vodafone in cloud it is

making progress in an environment where most telcos have been forced to retreat rather than march

forward.

Cobra adds a new dimension to Vodafone’s M2MM2M has attracted plenty of attention from all the global service providers and integrators in

Asia-Pacific. Vodafone’s mobile assets in the region have allowed it to have both a global and

localized strategy, with a string of successes in Australia, New Zealand, South Korea, and India.

Vodafone’s M2M game plan is to carefully move up the value chain by providing solutions for its

customers in select industries. The company’s acquisition of Cobra is squarely part of that plan.

Cobra Telematics’ portfolio includes stolen vehicle recovery, enhanced connected cars solutions, and

usage-based insurance products that calculate risk profiles. Cobra provides hardware development

and production, application software development, and application service delivery. There is a

tremendous growth opportunity in this area, and the Cobra acquisition gives Vodafone a broader

solution set to sell.

Ovum expects the M2M industry to become increasingly bespoke and customized, with application

development and integration accounting for the largest portion of the overall addressable market. Both

capabilities will be indispensable to any M2M player in the long run, especially in more complex

engagements. Building an ecosystem of solution developers or incubation hubs in the Asia-Pacific

region would be ideal because a local strategy would require a highly localized solution. Vodafone will

also need to partner with integrators or cautiously recruit these capabilities. This may mean moving

beyond its natural comfort zone, but failing to do so could represent a missed opportunity.

Vodafone as a leader in managed mobilityVodafone is a leader in managed mobility in the Asia-Pacific region based on the number of devices

under its management and its strength in telecoms expense management. MNCs in the region are

increasingly keen to outsource their mobility management, and industry leaders are under pressure to

continue to innovate and break new ground.

The challenge for Vodafone is to engage better with those of its MNC customers that have mobile-first

strategies; these are organizations that are increasingly mobilizing business processes to enhance

productivity and drive revenue growth. Here SIs have led the charge by building bespoke solutions for

enterprises. These solutions include both mobilizing enterprise applications and developing new

applications to resolve specific business process challenges. If Vodafone decides that it wants a

larger role it will need to improve in numerous ways, bringing on its industry expertise and developing

a deeper understanding of business processes.

Market outlook

Being a global leaderThe shortage of growth in network services has pushed many global and regional service providers

toward an ICT journey, yet many telcos remain uneasy discussing and articulating ICT. Vodafone has

always been pragmatic and has always aimed to be a global leader in total communication services.



However, that pragmatism should not make it lose sight of some market realities. The network

services market continues to suffer from intense competition and price erosion; Asia-Pacific has not

been immune, despite the surge in network traffic into and within the region. Although Vodafone has

successfully built a formidable communication story in the region, certain areas could bear further

investment.

China strategy needs strengtheningThe sheer size of the market and the emergence of Chinese MNCs mean it is impossible for any

provider to be a true global player without a strong presence in China. Success in China usually

requires a delicate balancing act because the closed market means trading conditions in the country

remain unfavorable. Nevertheless, some global and regional service providers have found success in

the China through a disciplined, long-term strategy.

An increasing number of Chinese MNCs are expanding beyond their home market and globally and

the Chinese telcos do not yet have the existing network to grow with them. Many are also expanding

directly into Africa, which is, coincidently, a focus region for Vodafone. Non-Chinese MNCs are also

expanding deeper into the country and are looking for providers to support this expansion. Global

providers have also carefully chosen non-network services routes to build relationships in China by

strengthening their contact centers, M2M, enterprise mobility, and even integration capabilities in the

country to engage directly with enterprises there.

There are many routes of entry into China, both direct and indirect, and it will be challenging.

Vodafone’s current network-to-network interface arrangements with Chinese players allow it to service

its global customers in China. However, Ovum believes that it should strengthen its strategy to

engage more deeply with Chinese MNCs that are expanding rapidly out of China.

M2M and enterprise mobility services feature different competitorsThe M2M and enterprise mobility markets are extremely fragmented and have very diverse

ecosystems. Although Vodafone would be classified as a leader from a service provider viewpoint, SIs

offer a much broader set of capabilities and solutions. Some of the solutions that SIs offer strike at the

very heart of MNC challenges, going beyond communications right into business processes. Ovum

believes that mobile and M2M supremacy will be won in these areas, and SIs have an advantage in

terms of capabilities, solutions, and credibility.

Although Vodafone may choose to step back from any engagements beyond mobile communications

and mobility management, the holistic approach of some integrators (touching upon workspace and

business processes) will be more appealing to MNC customers. Vodafone must choose between

either building these capabilities in-house or partnering selectively with SIs to build a complete

portfolio of enterprise mobility services.

In the M2M space, Vodafone is moving in the right direction by broadening its offering, moving up the

value chain, and developing more connected products. Key products already in development include

Mobile Asset Tracking, Cargo Monitoring, and Rugged Routers, and the acquisition of Cobra adds

another dimension. This is, however, a very fast-moving market, and localization of solutions will

become critical as more players set up innovation and incubation hubs in the region.



The right game plan for cloudVodafone has the right building blocks for a successful cloud strategy, but it is not taking a very

different approach from other service providers. Many service providers believed that the path to

cloud success will be an easy one given the interest among their customers. The reality could not be

more different.

Many telcos felt the early challenges of offering cloud services were insurmountable and so retreated.

Being in the second wave can be an advantage, because providers can learn from past mistakes.

Vodafone has spoken about building relationships with SIs and leveraging partner ecosystems; it must

do so immediately, because scale is vital in this industry. A flourishing DevOps and developer

ecosystem is fundamental to any successful cloud strategy, as AWS, Google, Azure, and SoftLayer

have demonstrated. PaaS and DevOps are outside most telcos’ comfort zones, however, and so

hiring the right people is essential.

Cloud brokerage and orchestration will be a driving force in many cloud conversations, especially

given the expected popularity of hybrid environments. Vodafone needs to make this both seamless

and painless.

Appendix

Further reading 2015 Trends to Watch: Enterprise Mobility, IT0021-000031 (November 2015)

AuthorAdrian Ho, Principal Analyst, Enterprise

[email protected]

Ovum ConsultingWe hope that this analysis will help you make informed and imaginative business decisions. If you

have further requirements, Ovum’s consulting team may be able to help you. For more information

about Ovum’s consulting capabilities, please contact us directly at [email protected].

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Ovum_Spring in its step in Asia