With just two months under his belt, Verizon’s new CEO Hans Vestberg is already making some bold bets with the telecom operator’s workforce. Late last month the company offered severance packages to approximately 44,000 workers as part of an effort to cut about $10 billion in costs while at the same time upgrade its network to 5G, which it said promises more efficiency.
But within The Wall Street Journal article on the layoffs was the news that Verizon had also signed a $700 million agreement with India-based Infosys to outsource much of its IT operations. The deal is structured so that Verizon employees that currently handle those jobs become Infosys employees. Verizon wouldn’t say exactly how many of its IT team is impacted by the outsourcing deal but the The Wall Street Journal indicated it was somewhere around 2,500 employees both in the U.S. and overseas.
In a statement to SDxCentral, a Verizon spokeswoman wouldn’t say which IT jobs are impacted but instead touted that the company gets to basically keep the same team members as it has now. “We’ve recently reached an agreement to transition select functions within Verizon’s global information technology (IT) organization to Infosys. All impacted employees will receive comparable, competitive offers, and are expected to transition to Infosys in the fourth quarter 2018 to continue performing functions that will now be IT Managed Services for Verizon. We have an extremely talented team at Verizon and are fortunate to continue to work with them in this new capacity.”
But GlobalData analyst John Byrne paints a darker picture, noting that Infosys has a reputation for ultimately hiring Indian workers to replace the existing employees. “The transferring employees are unlikely to do well in their new positions,” Byrne said. “Plus, they need to give up a lot of benefits that they had at Verizon, so I think Verizon knows that a lot of them will probably just leave ‘voluntarily.’”
Roger Entner, analyst and founder of Recon Analytics, was also skeptical about the deal. “In the short term it doesn’t change the skill sets [of the former Verizon employees]. But it will be interesting to see how Infosys is going to cut costs,” Entner said.
Infosys declined to comment on specifics of the Verizon deal, including what types of IT jobs will be transferred from Verizon to Infosys. However, the company’s website highlights new capabilities like artificial intelligence-powered business applications such as order management and contract analysis.
According to a Deloitte Global Outsourcing survey conducted this year, many organizations are using outsourcing to handle their cloud and automation functions. In fact, the Deloitte survey found that 84 percent of companies surveyed said that they have already initiated discussions, conducted pilots, or implemented at least one of these functions. Most of the respondents to Deloitte’s survey said they believe that outsourcing can give them a competitive advantage because it will make them more agile and efficient.
Douglas Plotkin, managing director of Deloitte Consulting, said that it’s “reasonably likely” that some of Verizon’s IT functions that are transitioning to Infosys are using new technologies. He added that almost all of the recent outsourcing deals include some type of replatforming of apps into cloud architectures. He also added that Infosys can partner with an Amazon Web Services (AWS), Microsoft Azure, or Google Cloud Platform (GCP) for public cloud purposes and operate a type of hybrid cloud model.
Harken Back to Sprint?
If Verizon’s decision to outsource its IT team sounds vaguely familiar it might be because Sprint made a major outsourcing move back in 2009 when it inked a $5 billion deal with Ericsson.
The deal, which was for seven years, involved 6,000 Sprint employees who became Ericsson employees. Ericsson took over the day-to-day responsibilities for provisioning and maintaining all of Sprint’s wireless and wireline networks, which at the time included a complicated mix of Sprint’s cellular network and Nextel’s iDEN network. Sprint acquired Nextel in 2004 for $35 billion.
Sprint’s network employees weren’t in favor of the switch and many left. However, Ericsson continued to operate Sprint’s networks until September 2016, when the agreement was up for renewal. At that time Sprint dramatically reduced Ericsson’s involvement.
But Entner said Verizon’s outsourcing deal is different than Sprint’s outsourcing move because Verizon is keeping all of its IT management in-house and the Sprint deal was more extensive. Nevertheless, he notes that the change is a big one for Verizon. “It’s is quite remarkable that Verizon, which prides itself on its network, is outsourcing part of it.”
Verizon’s headquarters in Basking Ridge, New Jersey.