Vodafone India has begun an exercise to extend its outsourcing contract with IBM to cover Idea Cellular as well, besides kicking off work to streamline and standardise all its own IT processes ahead of the proposed $23-billion merger between the phone companies.
According to an English daily, the move is aimed at making things easier for the proposed union and also means Idea’s existing IBM contract– which runs until 2020–won’t get renewed separately, people familiar with the matter said. The proposed Vodafone-Idea merger is set to shrink the revenue pie for all IT vendors involved, but will likely impact IBM the most as it has contracts with both.
The streamlining of IT processes between both the telcos will take another two quarters to complete, another person said. Vodafone India renewed its outsourcing deal – pegged at around $800 million – with IBM for five years last August. Idea had initially signed a 10-year contract with IBM in 2007, but in 2012 extended it until 2020 in a deal worth $800-900 million. The reworked contract may be 40-50 percent lower than the previous combined deal value.
IBM gets about $800 million-$ 1billion from the telecom vertical, which is the largest contributor toward its $3 billion-plus yearly revenue in India. The reworked deal may be structured similar to Bharti Airtel’s IT outsourcing deal that was renewed in 2014 and is said to be worth over $500 million.
In the newly structured IT outsourcing agreement, analytics, business intelligence and applications are most likely to be drawn from the existing Vodafone contract, given Idea’s existing pact is largely focused on IT infrastructure.
Ashish Kumar, who was vicepresident of cloud at IBM Asia Pacific until earlier this year is said to be the executive who started the telecom journey for IBM in India and was the architect of the initial outsourcing deals with Bharti Airtel and Vodafone India.
Kumar, along with Nipun Mehrotra, IBM’s chief digital officer, Karan Bajwa, managing director at IBM India, and IT services veteran Vikas Arora, who recently joined IBM as cloud business leader, are all working on big strategic outsourcing deals, including the Vodafone and Idea contracts.
According to Greyhound Research analysis, IBM’s erstwhile large and long-term outsourcing deals are quickly getting broken into multiple smaller–and shorter-term–managed services deals with components of cloud delivery.
