Indian IT companies have taken big chunks of a large technology outsourcing contract that has been sliced up by Bharti AirtelBSE -1.17 % into four parts, leaving IBM with only a portion of a deal it completely owned for a decade.
WiproBSE 0.03 % is a big beneficiary from the renegotiation of what used to be regarded as the defining technology outsourcing contract in India – at nearly $300 million a year over 10 years, it represented a bold choice by Bharti Airtel to entirely outsource its IT needs, and for IBM it was its most lucrative deal in India.
A Mumbai-based company is close to winning one of the carved-out portions while Bharti Airtel is yet to take a decision about a part dealing with its wireline operations, according to several people familiar with the negotiations.
In a joint statement on Wednesday, IBM and Airtel said they have signed a new pact, this time for five years, with Big Blue selected to manage the IT infrastructure and applications for Airtel’s operations in India.
Sources said that the new deal is worth $500-550 million ( 3,000-3,300 crore) a year for IBM. Moreover, while under the previous contract IBM would get a share of annual Bharti Airtel revenue, the new one is based on usage.
“Wipro has won the network maintenance part of the contract,” a highly-placed source with direct knowledge of the matter told ET. The source declined to give the size of the deal that Wipro had won and ET could not independently ascertain the size of the deal. Wipro declined to comment.
The Airtel-IBM contract has acquired a high profile for several reasons. Besides the nature of the deal and its size, it is a marquee one for the US company – it was a forerunner to the two other ‘strategic outsourcing’ contracts from Idea CellularBSE 0.52 % and Vodafone. Analysts are of the view that IBM will have a lot of convincing to do when the deals with Idea and Vodafone come up for renewal in 2017 and 2019, respectively. Such was the importance of the Airtel contract for IBM that its CEO Virginia Rometty visited India to persuade Sunil Bharti Mittal. The previous 10-year deal lapsed on March 31.
A source told ET that the fundamental difference between the last time and the current deal was that the telecom giant would retain significant control over the operations. “Airtel wants to chart out the strategy and the direction based on the company’s overall goals and targets, it wants to rely on its IT partners only for execution,” the person said.
Airtel declined to comment on whether Indian IT firms had won parts of the contract.