The engagement of Bharti Airtel with IBM
started in 2004, with both the companies
sealing a 10-year outsourcing contract worth $750 million. This was also the first IT outsourcing deal for the domestic telecom sector. Despite being an outsourcing contract, it was based on revenue-sharing between the two parties, which led to an increase in the value of the deal to around $2 billion, with the addition of subscribers.
In 2014, this contract was renewed, but it had much less scope. While the tenure of the contract had been reduced to five years from the earlier 10, the deal size was also reduced to 55-60 per cent of what it was.
As the same contract has come up for renewal again, its size is likely to be reduced further, as Airtel has decided to work with multiple partners, apart from insourcing a part of the work.
An Airtel spokesperson said the company was working with multiple partners as part of its digital transformation drive. “We work with a variety of partners. IBM
continues to be one of them,” the spokesperson said. An email sent to IBM remained unanswered. Telecom continues to be the largest vertical for IBM in India, with clients such as Bharti Airtel and Vodafone.
The company had earlier said that despite the disruption seen in the telecom industry, all players were now building up a huge war chest.
“The interesting fact is that this telecom disruption is not capital-constraining. Instead, all telcos are creating war chests. The Vodafone-Idea merger is in that direction. Airtel has a clear focus with consolidation of assets for building up a capital base, which will enable them to invest for the next three years,” Karan Bajwa, managing director at IBM India, had told Business Standard in an earlier interview.
Bajwa had also said that areas like security and Internet of Things were big focus areas for IBM. “We will bring in cognitive technologies for network diagnostics and management as data explosion takes shape. We are going to move the pie,” Bajwa had said.
The slowdown in the telecom segment is reflecting on IBM’s India revenue. In 2017-18, the Armonk (NY)-headquartered company witnessed a 14 per cent decline in its consolidated revenue in India to Rs 27,924 crore, according to its filing with the Registrar of Companies.
Its net profit for the year fell 54 per cent to Rs 2,783 crore, against Rs 6,163 crore reported a year earlier.
TECH A BIG CALL
Bharti Airtel-IBM information technology outsourcing agreement initially struck in 2004
This was the first information technology outsourcing deal for the domestic telecom industry
The contract was again renewed in 2014 with IBM for a five-year period
Contract size likely to see significant reduction when it goes for renewal this year
Telecom is the largest vertical for IBM in India