Vodafone Idea opts for split IT deal with IBM, Kyndryl at a discounted rate to cut costs

Vodafone Idea has chosen to involve more vendors to reduce overall operating costs.

Vodafone Idea has awarded IBM and Kyndryl a multi-year, bifurcated IT outsourcing deal after renegotiating the terms, chief technology officer Jagbir Singh has told Moneycontrol. Singh didn’t share the deal size but sources put its combined value between $500 million and $600 million.

The new agreement comes at a significantly lower value than the previous $800 million deal with IBM, which ended in April 2024.  The move is an effort by the cash-strapped telecom to cuts costs.

“Instead of providing the contract to one vendor, we have gone with whoever is the expert in the space,” Singh said.

The latest deal significantly reduces reliance on IBM, as the US tech giant will now handle only key areas such as application development and management, he said.

Kyndryl, which, too, is US-based, has been awarded key processes related to managed infrastructure, including maintaining servers, storage, and firewalls. Vodafone Idea has also awarded contracts to other smaller vendors to ensure vendor diversity.

Cutting costs, going in-house

The telecom company has chosen to involve more vendors to reduce overall operating costs and work with specialised firms in specific areas rather than renewing the entire agreement with IBM alone, he said.

The goal of bringing in new vendors is to engage specialised providers who can deliver better results at lower costs— a strategy it has also employed to secure the best deals for its 4G and 5G network contracts.

The moves are slated to unlock cost and operational efficiencies and boost Vi's productivity, Singh said.

This cost reduction aligns with Vodafone Idea’s ongoing financial challenges as it seeks government support to manage its AGR and spectrum dues.

“For the infrastructure part, like maintaining servers, storage, and firewalls, we have given that part to Kyndrl and the applications part to IBM,” Singh said.

“Separately, we have awarded the testing part to another vendor. Instead of providing the contract to one vendor, we have gone with whoever is the expert in the space.”

The telecom operator has brought digital development and network-managed services in-house to leverage talent and save capex and opex.

To further cut operating expenditure (OPEX), the company has taken many processes in house.

“We have given a lot of house-on-in-house expertise to the company. So, all are my responsibilities, whether IT, network, or digital. For digital, most of the development is in-house. Besides, managed services for the network are being taken care of in-house,” Singh said.

The Vodafone Idea's in-house network and IT team is also focused on automation.

The firm is also training its employees on cloud, IP/MPLS, AI tools, and machine learning. “While we haven't increased the manpower or laid off employees, we have increased the scope of the manpower employed by doing automation…we are saving money on the network integration part by doing it ourselves,” Singh said.

The IT outsourcing deals are critical for Vodafone Idea, which aims to enhance its infrastructure to support its expanding 4G network and prepare for the planned 5G rollout in the top 100 cities within its 17 priority markets.

The tech outsourcing deal's renewal follows a mega $3.6-billion deal with Nokia, Ericsson and Samsung to secure 4G and 5G network equipment over three years.

The network and IT outsourcing deals are part of the company’s three-year capex plan of $6.6 billion, which is directed towards expanding the 4G population coverage from 1.03 billion to 1.2 billion, launching 5G in critical markets and expanding capacity in line with data growth.