Vodafone’s deal with Accenture for managed security services marks a distinct strategy from peer operators
29 July 2020 | Research
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Vodafone announced on 21 July 2020 that it will partner with Accenture to offer managed security services for businesses that range in size from small firms to national corporates. The deal with Accenture allows Vodafone to offer services quickly, backed by a credible partner that has a presence in the key countries that Vodafone is targeting.
However, this deal also highlights the limits of Vodafone Business’s ambition, as well as the differences in strategy between it and other large operators.1 In high-growth areas such as cloud services and cyber security, it is relying on outsourcing services to partners, rather than owning capabilities, unlike most of its competitors.
Vodafone’s alternatives to a partnership, such as acquiring a security services firm or building a team organically, are not straightforward because it has a large base of business customers across different countries. These alternatives would take time to develop and to become credible.
The agreement will help Vodafone to meet the rising demand for managed security
Vodafone, with Accenture’s support, will offer small and medium-sized businesses the types of security services that are usually reserved for larger corporates. We have identified a similar need in past research and have also seen increasing interest in managed services since the beginning of the COVID-19 pandemic (see slide 14 of our Business survey 2020 report).
The Vodafone/Accenture agreement covers cyber assessment, security monitoring, incident management and response, as well as professional services related to risk assessment and testing. Vodafone will continue to own the customer relationship.
The strategy, in terms of services, is similar to what we proposed for operators in our recent report. Vodafone’s approach to delivery of these services though is different.
While operators are building capabilities in-house (both organically and/or through acquisitions) Vodafone has chosen partnership. This strategy gives it speed to market in the countries that it has targeted – initially Italy and Spain, with Germany and the UK to follow – and it allows it to offer all services at once, rather than incrementally, as other operators are doing. Figure 1 compares Vodafone’s approach with the approaches of other large operators with a significant business presence.
Figure 1: Comparison of operator approaches to security for mid-sized companies
|Security product strategy||Focus on network-related products (firewalls and DDoS protection)||Wide set of products; some consulting services||Wide set of products; some consulting services|
|Example operators||BT; KPN||AT&T; Orange||Vodafone|
|Acquisitions2||Some small, local acquisitions (for example, KPN and Qsight)||Large acquisitions, often outside of footprint (such as Orange and SecureLink)||None|
|Target market||Existing connectivity customers||All medium-sized organisations||Existing connectivity customers|
|Potential revenue uplift over the connectivity business||A successful strategy could increase revenue by around 10%. The approach also helps to defend revenue from other products (such as SD-WAN).||Potentially as much as 25%. For example, Orange’s security revenue was equal to about 13% of its connectivity revenue in 2019 and is growing rapidly.3||<5% (net value to Vodafone assuming most spend flows through to Accenture). Should help to defend connectivity revenue.|
Source: Analysys Mason
The Accenture partnership limits the opportunity for Vodafone, and comes with some risk
The agreement with Accenture has disadvantages for Vodafone. Vodafone’s share of revenue will be lower than if it provided services itself. Its understanding of the security market will remain limited, potentially restricting its future options. The blurring boundaries between security and connectivity (for example, in a combined firewall/SD-WAN) will mean that the split of responsibilities between Vodafone, Accenture and their security vendors will need to be precisely defined. Customers will not want to be in a situation where neither Vodafone nor Accenture is taking ownership of a problem.
The selection of Accenture also carries risk. The delivery of services depends on Symantec’s Cyber Security Services business, which has passed through three owners since August 2019 and has only been part of Accenture since 1 May 2020. Vodafone is reliant on the integration of this team by Accenture going smoothly. Other parts of Accenture’s business are also facing uncertainty due to the COVID-19 pandemic, with reports of redundancies in its UK operation.4 Accenture will need to make sure that these changes do not impact its ability to deliver security services.
The agreement could also appear to go against Vodafone’s ambition to become a ‘technology communications’ company, as outlined at its February 2020 analyst event. At that event, CEO Nick Read said “We made a mistake in 2006, 2008. We outsourced a lot of our IT development…We needed to bring a lot of this back in house.” Managed security services are not IT development but outsourcing cyber-security services to Accenture does not look like a business taking more control of technology.
This latest deal will also need to work alongside Vodafone’s widely publicised contract with IBM for cloud services, as well as smaller partnerships, such as Vodafone Italy’s agreement with Microsoft for the provision of a range of products and services to businesses in the country.5 Vodafone will need to be sure that the boundaries are clear if all parties (Vodafone, its customers and its various partners) are to remain satisfied.
Vodafone’s focus is on connectivity and IoT
Overall, the deal means that Vodafone can offer a wide range of managed security services to customers across different geographies far more quickly than would otherwise be possible. Accenture also lends Vodafone credibility that an internally developed option would take years to build. However, it does also reinforce the impression that Vodafone Business is narrowing its focus for revenue growth on connectivity and IoT and eschewing other growth areas such as security and cloud services.
1 This topic is discussed in more detail in our recently published report Security and the mid-market: how telecoms operators can launch a proposition.
2 See the ‘Operators’ tab of Analysys Mason’s Cyber-security-related M&A tracker for details of operator acquisitions of security capabilities since the beginning of 2018.
3 Orange’s organic security revenue grew by 24% year-on-year in 2019, compared to –1% for fixed voice and data (that is, connectivity) revenue.
4 The Guardian (1 July 2020). Accenture to cut up to 900 UK jobs as pandemic hits demand. Available at: https://www.theguardian.com/accenture/2020/jul/01/accenture-to-cut-up-to-900-uk-jobs-as-pandemic-hits-demand.
5 Microsoft (1 April 2020). Vodafone Business e Microsoft Italia siglano una partnership triennale per la trasformazione digitale delle aziende italiane. Available at: https://news.microsoft.com/it-it/2020/04/21/vodafone-business-e-microsoft-italia-siglano-una-partnership-triennale-per-la-trasformazione-digitale-delle-aziende-italiane/.