Some time back I had written a post on another blog on how IBM has become the Defacto Outsourcer for the Indian Telecom Industry
IBM the defacto IT Outsourcer for the Indian Telecom Industry
First it was Bharti , than recently there was the IDEA Cellular deal, well now looks like HUTCH is also going down the same path, Hutchison Essar is now looking at outsourcing its IT operations to technology giant IBM. The deal could be valued between $1.4 billion and $1.6 billion, sources close to the development told ET.
If it comes through, the contract will be the largest-ever outsourcing deal to be signed by an Indian operator. It will also be the biggest win in India for Big Blue, which saw 37% growth in revenues here last year. Sources said the contract has been discussed with Vodafone CEO Arun Sarin. The company had picked up a 67% stake in Mumbai-based Hutch last month. “Mr Sarin is in favor of outsourcing as it will allow the company to focus on its core business,” sources added.
Recently I came across an post at Steve Hamm's (Bangalore Tiger's Author) blog based on his discussion with the Jai Menon, Bharti's director of IT and innovation. (Excerpts)
- in mid-2002. When he arrived, Menon urged the top executives to outsource all of the company's traditional information technology. He said Bharti should concentrate on creating and marketing new telecom services
- what came next certainly was. For the first time ever by any telecom company, Bharti opted to hand network operations over to a third party. In this case it was two parties, Nokia and Ericsson, who split the country.
- Rather than paying for services based on hours worked or some other standard method, Menon chose to pay his service providers based on his company's revenue growth. That way, as Bharti grew and demands on its service providers expanded, their compensation would increase in lock step.
- When Bharti signed its deal with IBM, it was expected to result in payments to IBM of more than $750 million over a period of 10 years. But now Menon thinks the total will exceed $1 billion.
Forrester also wrote a report on how IBM is delivery Business Transformation results in the APAC region, some interesting highlights from the report
- IBM is finally delivering on its promise of business transformation outsourcing with many clients in the Asia Pacific region. This is enabling clients to align outsourcing contracts with their business goals and to reward IBM based on these outcomes.
- The concept was that organizations would outsource functions to IBM and that IBM would not only perform these functions but also would apply best practices to transform them. However, apart from a key customer in India (Bharti I guess)that embraced this concept, for the past few years it seemed to be more of a marketing message than reality.
- Recent data collected by Forrester indicates that 28% of outsourcing customers in Europe and North America believe that their IT services and outsourcing providers are unable to respond rapidly to changing business needs, so this shift is a timely one.
- IBM has displayed a willingness to move beyond the standard IT measurement factors in order to win business and potentially grow its total opportunity in the Asia Pacific region. However, a willingness to take this approach is a far cry from actually executing such a contract. Clients that want to do transformational outsourcing will first need to spend significant amounts of time ensuring that their company’s business goals are clear and agreed upon internally (which, given the conflicting goals of many internal business units, is not as simple as one might think).