Sunday, March 11, 2012
Developing Solutions IT services - developing solutions
International Business Machines Corporation, the world's largest tech services company, has renegotiated its outsourcing contract with Vodafone Essar and signed an extended deal estimated at around $1 billion to manage IT systems for the country's third-biggest phone firm till 2017. In 2007, Vodafone had signed an over $400-million, 5-year outsourcing contract with International Business Machines Corporation. The contract was to expire next year. According to at least three people, one of whom was part of the negotiations, both the companies agreed to restructure the contract last month estimated at $800 million-1 billion. When contacted by ET, a Vodafone Essar spokesman confirmed that the contract with International Business Machines Corporation had been renewed but declined to share the exact value of the deal. "The deal could have come up for renewal late this year if this agreement was not reached - it completely ruled out any opportunity for rival bidders," said one of the executives familiar with the contract. He requested anonymity. According to research firm Gartner, India's IT services market will reach $9.5 billion this year, an 18% rise over 2010 revenues of $7.6 billion. The country's domestic IT services Industry ranks third in Asia Pacific and is forecast to grow to $15 billion by the end of 2014. Over the past 19 years, IBM has been slowly and quietly moving to control India's lucrative domestic IT business in the backyard of the country's top technology companies, which started by writing software codes for helping overseas customers manage the millennium bug during the '90s.
The challenge for International Business Machines Corporation, however, is to increase profitability of these engagements, especially the ones signed with phone companies, which are squeezing costs to cope with falling per-user revenues. Big Blue, a nickname International Business Machines Corporation acquired from its blue-painted mainframe computers of the '60s, now controls over half of the outsourcing business with revenues of around $1.5 billion, in a market that is home to the world's fastest-growing tech firms. Most of this business is from India's domestic market, where International Business Machines Corporation takes over computer hardware, software and IT services functions of customers such as Bharti Airtel. Some of International Business Machines Corporation India revenues also come from developing solutions for government customers such as Indian Railways, which sought the company's help to develop a crew management system last year. With 120,000 employees, which is around one-fourth of its global workforce, International Business Machines Corporation is now one of the top five technology companies in the country in terms of overall revenues, behind TCS, Infosys, Wipro, Cognizant and HCL. However, none of the rivals derives more than 15% of its business from Indian customers.