IBM signs $800m deal with India’s Idea Cellular
posted in Outsourcing News and Top Outsourcing deals |Source:www.indusbusinessjournal.com
ARMONK, N.Y. — It appears that IBM’s decade-long increase of staff and investment in India is beginning to pay off.
The U.S. computer service and technology giant recently bagged a 10-year contract worth $800 million from Idea Cellular Ltd., a division of the Aditya Birla industrial conglomerate and India’s fifth-largest wireless communications provider, to supply it with hardware and software applications and customer and billing support.
The deal comes on the heels of a March 14 announcement by IBM officials that the Armonk-based company will invest $6 billion in India by 2009. It is based on a risk-reward revenue-sharing model and covers all of Idea’s existing operations and potential new additions, according to officials at both companies.
Among the responsibilities Idea will hand over to IBM are billing, revenue assurance, credit collection, subscriber management, and fraud prevention. IBM will also take on the management and support of Idea’s IT infrastructure. IBM will execute its end of the deal through its Bangalore-based subsidiary, IBM India Ltd.
“Our partnership with IBM will bring value to our customers, employees and shareholders,” Sanjeev Aga, Idea Cellular Ltd. managing director, said. “We will harness IBM’s power to support Idea’s explosive growth with robust, best-in-class solutions that address scalability, complexity, innovation and cost control, to provide Idea with the most advanced business processes globally.”
As part of its contract with Idea, IBM India will gain more than 200 workers currently employed by the Pune-based wireless provider.
Founded in 1992, IBM India is the Bangalore-based subsidiary of parent company IBM.
The company, which has facilities in the major Indian cities of Bangalore, Delhi, Kolkata, Chennai, Pune, Gurgaon and Hyderabad, markets IBM products and services to businesses across the subcontinent — IBM’s fastest-growing and most critical market.
IBM India’s products include computer servers, disk- and tape-based storage devices and workstations, as well as software for managing communications, databases, networks and enterprise applications. The company also offers business and technical consulting, training and support, financing and outsourced services.
IBM India’s business units are spread across a variety of sectors, including financial services, telecommunications, automotive, pharmaceuticals, government and small-to-medium-sized businesses.
“IBM will bring its deep global expertise in business transformation and innovation to enable Idea to meet its customer value, business growth and productivity objectives,” Shanker Annaswamy, managing director of IBM India Ltd., said. “This win reinforces IBM’s position as a leading partner to global telecommunications companies.”
The IBM India-Ideal Cellular deal represents a departure from the trend in which major Western tech companies have turned to Indian outsourcing firms to handle software development, customer support and various other services.
Indian government and business officials say the country’s rapidly expanding economy has ramped up demand for skilled workers. As a result, some Indian corporations have begun to farm out technology-related aspects of their businesses to foreign companies with operations in India.
Such is the case with IBM India, which has more than doubled its staff on the subcontinent to 53,000 in recent years, spent greater than $2 billion in the country since 2004 and seen its revenues soar (the company registered a 37 percent increase in sales revenue during 2006).
Ironically, IBM’s success has come at the expense of low-cost Indian outsourcing firms such as Infosys Technologies Ltd., Tata Consultancy Services Ltd., and Wipro Technologies, which just a few years ago were considered major threats to American IT firms — notably, IBM, Accenture Ltd. and Electronic Data Systems Corp.
“IBM is clearly leading in the dynamically growing Indian market for IT services — a segment largely ignored by other players,” Nipun Mehrotra, the director of IBM India’s Global Technology Services division, said. “Customers want the international know-how and best practices to compete in the global arena, hence there is a preference for a company like IBM, which has the breath of technological innovation, industry expertise, skills and financial strength to provide a higher level of customer advantage.
“IBM leads the technology curve and thus, defines the technology roadmap,” Mehrotra added. “Hence, clients are more comfortable dealing with IBM, as IBM is the only one who can give a clear direction on where technology is heading.”
IBM India isn’t just growing; it’s also receiving considerably more marketing attention from its parent, which has issued several high-profile India-specific announcements since the March 21 Ideal Cellular announcement.
Eight days later, the company revealed that it had won a 10-year, $29 million contract to overhaul the IT infrastructure at DLF Ltd., a prominent Indian real-estate development firm.
