IBM set to land $1.6 billion India telecom deal

IBM loves outsourcing in India. The company is on the verge of signing a rumored $1.6 billion outsourcing agreement with India’s 4^th largest wireless telecommunications vendor Hutchison Essar – marking the second such deal Big Blue has inked with Indian telcos this month and the third in as many years. If the Hutchinson deal comes through, the contract will be the largest-ever outsourcing deal to be signed by an Indian operator. It will also be the biggest win in India for Big Blue, which saw 37% growth in revenues here last year, according to an Economic Times today. Hutchison, which has 25 million cell phone subscribers, is looking to outsource its IT infrastructure and possibly its data management to cut costs, the newspaper reported. Hutchison, which is in the process of selling a majority stake in itself to Vodafone Group PLC, expects to save $20 million annually by letting IBM handle the company’s IT. Neither company has commented on the deal which could be weeks away from fruition sources say. Meanwhile IBM this month announced a 10-year business transformation order, valued between $600 million and $800 million, from Idea to integrate and transform Idea’s business processes and IT infrastructure. In 2004, IBM had inked a similar $750 million revenue-sharing deal, spread over 10 years, with another Indian mobile firm Bharti Airtel Ltd to manage its core IT infrastructure. IBM’s deal with Bharti is now estimated to have gone up to more than $1.5 billion. In March 2004, Bharti became the first Indian telco to outsource IT operations when it entered into a $750-million pact with IBM. That seven-year deal is now valued at over $1.5 billion. Its value is expected to go up as Bharti’s user base grows and the same is true of the Idea deal. Currently, Bharti has over 35 million mobile users while Idea has over 13.6 million. India has become IBM’s home away from home. While last year’s 37% growth was lower than the 55% reported by IBM for 2005, that was because the revenue base in 2004 was smaller, Shanker Annaswamy, IBM’s regional general manager for India and South Asia, told reporters recently. Revenue from India has grown faster in the last two years than in Brazil, Russia and China, Annaswamy said. The key markets in India were financial services, small and medium businesses, pharmaceuticals, telecommunications, automotive, and government. Besides being a large market for IBM, which has won a number of key outsourcing contracts from Indian customers, IBM also has a large global services delivery operation in India. The company had 53,000 staff on its rolls as of January 1, up from 38,500 a year earlier. And telecom contracts aren’t the only deals IBM is taking on. DLF Ltd, India’s largest real estate development firm this week awarded IBM India a 10 year, $29 million contract, to transform and manage DLF’s IT Infrastructure. With this deal IBM will undertake security and disaster recovery planning, deploy a complete organization security framework and check Security readiness for ISO 27000. IBM will be responsible for Helpdesk and Deskside support to DLF users across India and be responsible for all IT Infrastructure operations. IBM’s chairman and CEO Samuel Palmisano said last year that the company will be investing $6 billion in India over the next three years. The new investment will go primarily for staff costs, new service facilities and on education programs, the company said.