Reliance Comm to save Rs 900 cr from outsourcing

The move by Reliance Communications to outsource its IT requirements would result in an upfront cost savings of around $200 million (Rs 900 crore), with the company seeking a guarantee to this effect from the vendors.

The Anil Ambani group company was expecting cost savings to accrue from outsourcing of its wireless, enterprise and international businesses, for which it invited tenders from global majors.

According to sources close to the development, Reliance Communications has sought an assurance of $200-million savings from the three short-listed global vendors, IBM, EDS and T-Systems. With one of the companies having already guaranteed this, Reliance Communications is awaiting responses from the other two. The name of the vendor could not be ascertained.

When contacted, a Reliance Communications spokesperson neither commented on the cost savings nor provided specifics of the contract. He, however, said, "We continuously evaluate opportunities to further enhance value for our stakeholders."

A high-level internal committee of Reliance Communications had decided to outsource its IT requirements to a service provider.

The 10-year contract, estimated to be around $1.5 billion, was slated to be one of the largest in the Indian telecom outsourcing sector.

The move to outsource wireless, enterprise and international businesses was expected to reduce the company's projected IT spends "significantly", apart from enabling it to remain light on assets. Industry analysts opined that the company would save 20 per cent by outsourcing and thus be able to concentrate on its core competencies.

An industry source opined that such contracts have lately entailed a guaranteed cost savings element. This was the case with the recently concluded deal between Tech Mahindra and British Telecom, with the later agreeing to pay an upfront amount at the time of signing the contract.

Reliance Communications' mobile business has a subscriber base of around 30 million and has been adding a million subscribers every month for the last 10 months.