Vodacom CIO plans for digital and financial service revenue growth

Like its parent company, Vodafone, Vodacom aims to increase the share of its revenues from new digital services, supported by its Tech 2025 digital transformation strategy. But even though Vodafone and Vodacom share the same goal, their starting points are very different, as Willie Stegmann, CIO of Vodacom Group, explains.

Stegmann, who reports to the CTO of Vodacom, Dejan Kastelic, and forms part of Vodafone’s Group CIO team, led by Scott Petty, helped shape Tech 2025. An ambitious strategy that places IT at the center of business transformation, Tech 2025 sets out to make it 50% faster to launch new products and services, easier to create new platforms in-house, and simpler for partners and developers to access common APIs through a single, global catalog, all while allowing the Group to accumulate more intellectual property.

Several factors mean that Vodacom, which is 60.5% owned by Vodafone Group Plc, follows behind Vodafone’s IT transformation, says Stegmann. Yet when it comes to the growing revenues beyond traditional mobile services, Vodacom - which operates in South Africa, Tanzania, The Democratic Republic of the Congo, Mozambique, Lesotho, Kenya, Ethiopia and Egypt (pending conclusion of its acquisition of Vodafone Egypt) - enjoys some distinct advantages.

New digital and financial services already account for a growing percentage of Vodacom Group’s service revenue, having reached 17.7% of service revenue at the end March 2021. And by the end of the 2024 financial year, Vodacom aims for new digital and financial services to account for more than 25% of group services revenues.

Today financial services represent the bulk of Vodafone’s non-mobile revenues, explains Stegmann, even though business services such as IoT and fixed are also growing. During the last quarter of 2021, Vodacom’s financial services revenue grew 12.5% to more than R2 billion thanks in part to the success of M-Pesa and Safaricom: The M-Pesa platform, which includes Safaricom, registered a 16.1% increase in transaction values to exceed R430 billion (US$28.2 billion) per month.

But M-Pesa and Safaricom aren’t the whole story.

Building a Super App

In October 2021 Vodacom launched its ‘Super App’ called VodaPay in South Africa, which already has a sophisticated banking and financial services market and therefore little need for M-Pesa.

Customers can use the VodaPay platform to shop for a wide range of goods and services, as well as send, receive, spend and manage money. By the end of 2021, it had notched up 1.4 million downloads and 1.0 million registered users, according to Vodacom’s financial results for the quarter ending 31 December 2021.

“If we can start selling ecommerce products and not just mobile products, it's a huge opportunity. So that's where the Super App comes in, and we've seen with M-Pesa that it's entirely possible,” says Stegmann.

In addition to drawing on its experience with M-Pesa to develop VodaPay, including its support for merchants, Vodacom looked at how communications service providers (CSPs) in India, China and Indonesia had developed service platforms.

“This platform model gives us the ability to know more about our customers and to present very different non-telco products and services to them,” says Stegmann.

Today, VodaPay is a B2C app, but Vodacom has its sights set on creating a B2B digital marketplace.

“We opted to start with B2C because we believe it's the quickest way to get volume on the platform and scale, but I would say the next phase is that we will leverage it for B2B,” says Stegmann.

Group synergy

An important part of Stegmann’s role as Group CIO is to encourage synergy between CIOs across the Vodacom Group, whether it’s a question of deploying the same systems or developing a common approach to analyzing and using data.

“We've got 130 million customers and in markets like South Africa we've got more than 2,000 data points on our customers at any given time,” says Stegmann. “That allows us to sell very intelligently to our customers.

“We want to build a data ocean that will contain all the data elements that we require to run our machine learning, our predictive models and our recommendation models for a given customer, so that it's very personalized but the technology is standardized,” explains Stegmann.

In the longer-term data could be pooled across borders, depending on regulatory approval.

“At this stage we are keeping it separate for every country, but in future you may want to start connecting some of the data points as customers move across the different countries. So, this data ocean will grow and grow and grow. And we think it's one of our key assets as an organization.

Vodacom will also use the Vodafone Technology as a Service platform (TaaS). “It’s an orchestration service layer that will allow us to be nimble. It decouples our channels from our systems of record, which are typically older and quite complex,” says Stegmann.

TM Forum’s Open APIs are also important to creating a more standardized environment.

“We have identified 64 APIs that will be TMF compliant. We see that architecture and that services layer as critical for us in terms of our technology ambitions” says Stegmann.

Managing complexity

Nonetheless, aspects of the Tech 2025 strategy pose greater challenges to Vodacom than to Vodafone, starting with the ambition of having 50% of all employees within Vodafone Technology working in software engineering.

Local skills shortages mean that an insourcing figure of “50% is very aggressive,” for Vodacom, says Stegmann, and Vodacom is likely to be more reliant on insourcing for longer. However, he adds that “we are excited about the opportunities to leverage the skills base in Egypt as well as Safaricom”.

Stegmann’s team also has to support extensive 2G, 3G, 4G and now 5G networks, and millions of feature phones alongside smartphones, as well as channels such as USSD.

“The underlying transaction is exactly the same; the back end is exactly the same. It's just the channel and the device that is very different. And I think this is unique to Africa,” explains Stegmann.

“It's costly and complex and it means as a technology team, we have to be super nimble to offer solutions across all of these channels from the very simple and basic feature phone to the most sophisticated feature phones.”

And whereas Vodafone controls its European operations, Vodacom has to consult with other shareholders on standardizing CRM and billing systems, for example, or creating new channels and data warehouses.

“These are independent operations, so you don't dictate and instruct, you move from A to B to C in the next six months,” explains Stegmann. “So, it's really that balance of pulling those teams and CIOs closer and driving a group transformation agenda but being mindful of the fact that those markets are sovereign in their own right,” he says.

“I can't put a decree out and say, from January we all go to that CRM system, but what we've done is to select the domains where we can move quicker.

“For all of our digital channels, which includes our web and app, and also things like USSD, we are very clear that we want one architecture, one app that ideally is hosted in either a private or public cloud. And although the app serves the specific needs of the country, including language, the underlying customer journeys are standardized.”

For example, “we launched a lite version of Vodafone MVA app that is meant for a KaiOS. We built it once in the cloud with one vendor and the customer journey experience is exactly the same across all markets.”

Such efforts help the Tech 2025 strategy garner broad support, says Stegmann.

“It's not hard for me to go into the markets to reposition IT as a longer-term strategy, which over time will let us be less reliant on our mobile revenues, which was a key feature of the old telco company.”