Sam Coleman

Putting its money where its mouth is: Verizon goes all in with a USD 10 bln cost cutting commitment using virtualisation

In Blog post by Sam Coleman

As everyone in both the telecom and security industries know, virtualisation is a Holy Grail for both performance and cost savings. Verizon bets on the latter to give it a multi-billion payback.

John Stratton, EVP & president of global operations for Verizon, knew that the room was filled with anxious investors, wanting to know how the telecom was planning to stay competitive in one of the most contested spaces in business. The telecom business, squeezed by price competition, pushed to deliver its services faster and with better QoS, is looking for the data revolution of 5G to buoy its market, all the while demanding bold moves and initiatives to deliver the business. Stratton didn’t disappoint as he delivered his key message: the future of the telco is a virtualised one and it will deliver in both customer experience and a massive savings. USD 10 bln to be precise. “We have a really, really strong technology team that has been engaged in finding ways to leverage the investments we make there, with an orientation towards virtualization of the network,” Stratton recited, as reported by Fierce Telecom. This was a further detailing of the goal by Verizon CEO Lowell McAdam who declared boldly in September that: “(CFO Matt Ellis) and I have decided that we see a real opportunity to take hard dollar cash out of the business and have set a target of taking $10 billion of cost, hard cash, out of the business over the next four years. Our goal is we’d be able to fund our dividend through cash savings in 2022.”

The twin announcements sent a shockwave through the telecom industry as one of the world’s biggest MNOs makes a clear commitment to the benefits of NFV, edge computing and new services like SD-WAN. “We’re implanting a very rigorous process around zero-base budgeting,” he added. “$10 billion in cash out of the business—opex and capex over the next four years—is a target we believe we can deliver,” said McAdam, with other telcos look more and more at NFV to keep up in a rapidly changing market.