IBM to manage Bharti's IT services for $750 mn

10-year contract largest IT services order in India.

Bharti Tele-Ventures signed a $750 million outsourcing deal with IBM yesterday, under which the US giant will manage its information technology infrastructure and applications. The 10-year contract is the largest IT services order in India and among the biggest in Southeast Asia.

As part of the deal, 200 Bharti employees will shift to IBM, the world's largest computer company, and Bharti will become the preferred supplier of telecommunications services to IBM India. This is expected to generate around $100 million in revenues for Bharti.
 
The third part of the agreement envisages Bharti and IBM jointly developing and marketing IT products and services for the Indian market.

Sunil Mittal, chairman and managing director, Bharti Group, said: "The decision to outsource our IT operations is not to underestimate the Indian software companies. Instead of giving work to multiple vendors, we have gone for a single IT service provider."

Bharti had signed a similar deal with Ericsson last month to outsource its network upgradation and management across 16 circles for $350 million. After today's announcement, Bharti will be able to focus on its core strength of marketing telecom services.

The first-of-its-kind outsourcing deal in the world envisages a revenue sharing arrangement between IBM and Bharti. The percentage of revenue shared will keep decreasing as Bharti's revenue increases. The deal includes IT applications like billing, customer relationship management and data warehousing. IBM will consolidate Bharti Tele-Ventures' data centres, IT help desks, and enhance its disaster recovery capabilities.

The deal is expected to bring down Bharti's IT spend from the current 5 per cent of its total revenue. "Bharti spends about Rs 200 crore on IT services every year. After this deal, the per minute cost for the company will drop. But this is not just about cost saving, it's about scalability and sustainability," Mittal said.