IBM’s Big Deal in India
posted in Outsourcing News and Top Outsourcing deals, Nearshore Outsourcing |Source: www.businessweek.com
The computer giant’s five-year contract with Vodafone Essar will expand its already huge presence in the country. Will local shops fight back?
On Dec. 10, IBM (IBM) bagged a five-year contract from India’s third-largest wireless operator, Vodafone (VOD) Essar. The deal includes maintaining billing, data centers, and financial systems for Vodafone in India. Vodafone became India’s third largest cellular operator when it acquired Hutchison Whampoa’s 67% stake in Hutchison Essar in February, 2007.
Vodafone is an existing IBM client across the world—especially in the Czech Republic, Spain, Italy, Greece, New Zealand, and Australia—and Vodafone uses IBM for all its customer-related IT requirements.
But for IBM, this contract is a big, big deal. Vodafone is IBM’s third large telecom hookup in India. In March, it won a 10-year, $800 million contract to integrate and transform business processes and IT infrastructure for Idea Cellular, India’s fifth-largest cellular operator. In 2004, IBM won a 10-year IT outsourcing deal from Bharti Airtel, India’s largest telecom player. The contract was then valued at about $750 million and has grown to about $1.2 billion.
Hiring more workers
IBM’s rise in India has been breathtaking. Since 2004 the company has ramped up its business, with research labs and global delivery centers. In 2007, IBM won deals for application and business transformation services and infrastructure management in India’s rapidly growing sectors such as telecom, real estate (DLF), aviation (Delhi International Airport), health care (Apollo Hospitals), and a microfinance technology service provider. It has 73,000 employees in the country and plans to invest $6 billion over the next three years to set up infrastructure, hire more employees, and boost education and training.
This year alone, IBM’s India revenues will be up 30%, to $1 billion. “India is the fastest-growing market for IBM, and we want to maintain our lead,” says Shankar Annaswamy, managing director for IBM India and South Asia.
All of IBM’s telecom deals have been won over established Indian players such as Tata Consultancy Services (TCS), Infosys (INFY), Wipro (WIT), Satyam and HCL. Dabur, one of India’s large sellers of health-care and ayurvedic products, outsourced its IT infrastructure to Accenture (ACN) in a 10-year contract. Accenture will also consult on the company’s business plans and build and run IT systems for supply chain and sales.
Looking for Outside Expertise
The reason Indian companies are choosing non-Indian service suppliers is simple: In the new growth sectors, particularly telecom and retail, Indian players lack expertise. “It’s all about the skill sets that global players have,” says Ravi Trivedy, executive director of KPMG Advisory Services. Another wrinkle: Some industries, such as cellular, are actually more advanced in India than in the West. Indian telcos say local tech companies are ill-equipped to handle their sophisticated, rapidly transforming IT application, maintenance, and development needs.
