IBM in talks with new telecom firms for tech contracts

IBM in talks with new telecom firms for tech contracts
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First Published: Tue, Apr 15 2008. 12 38 AM IST
Updated: Tue, Apr 15 2008. 12 38 AM IST
New Delhi: The world’s biggest computer services company, International Business Machines Corp., or IBM, is currently talking with new mobile telephony aspirants such as Datacom Solutions Pvt. Ltd for outsourcing of their technology needs, which will include application development and management of computers and servers, as these new entrants seek to focus on rolling out their communication networks fast and compete effectively with incumbent operators such as Bharti Airtel Ltd.
“These companies are not looking at maintaining large, in-house IT teams because it’s not their core business,” said Vivek Gupta, director for communications sector, IBM India. “We’ve had an initial round of discussions with all of them.”
In an interview with Mint last month, Ravi Sharma, chief executive of Datacom Solutions, the telecom subsidiary of consumer goods maker Videocon Industries Ltd, said his firm would be open to total IT outsourcing in order to gain better efficiency and focus on the core business of delivering phone services. IBM’s Gupta said most of these outsourcing contracts would ideally span 5-10 years in a way that IBM’s revenues grows as a phone firm adds more customers.
“An outsourcing contract with a phone firm rolling out a pan-India network could easily be valued around $750 million (Rs2,993 crore) over a period of five to seven years,” said an analyst at a research firm who did not wish to be identified.
The telecom aspirants Mint spoke with said apart from IBM, other vendors such as Hewlett-Packard Co. and Wipro Ltd were also holding discussions for these outsourcing contracts.
Around four summers ago, IBM signed an outsourcing contract with Bharti Airtel, now the country’s biggest mobile phone services firm. The decade-long contract, then worth $750 million, has today expanded to around $2 billion as the phone firm has grown its customers more than 10-fold to more than 50 million. IBM signed a similar engagement, valued up to $800 million, with Idea Cellular Ltd and Vodafone Essar Ltd last year.
“We are supporting and serving over 125 million mobile subscribers in India,” said Gupta. “We will bring experience from the demonstrated models, and also be open to newer models of delivering IT through pay-as-per-you-use mode.” IBM’s infrastructure and people costs are driven down as it shares the work of multiple Indian clients among a near-60,000-strong workforce, spread over 25 centres in Bangalore, Chennai, Gurgaon, Kolkata, Pune, Hyderabad and Mumbai. In order to lower their capital expenditure on buying new servers and software licences, some new firms are also assessing if IT solutions could be delivered through pay-as-per-you-use model.
“While we are open to the idea, our only concern is about whether a vendor will be able to ensure confidentiality of data,” said a senior executive of another phone firm with a licence that’s waiting for the allocation of radio frequencies.
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First Published: Tue, Apr 15 2008. 12 38 AM IST