Bharti Airtel and IBM on Wednesday announced a new agreement to manage Airtel’s infrastructure and application services in India over the next five years. Analysts estimate the order to be between $500 million and $600 million.
The agreement extends the pioneering 10-year outsourcing relationship that the two have had and which ended on March 31. But unlike earlier, when Airtel literally outsourced its entire IT, the company is now talking of building in-house capabilities in certain areas.
Under the contract signed in 2004, IBM took over the management of Airtel’s IT infrastructure and worked to transform its processes and integrate channels. The contract is said to have grown to $2 billion as Airtel expanded into other regions, including Africa.
Sources in both companies said there wasn’t any significant change in the size of the new contract. “IBM has been running that portion of Airtel’s business for years, and they know it so well and the business is so big that there was no way Airtel could risk moving a large portion suddenly to somebody else,” sources close to Airtel said.
There were reports earlier that India’s leading mobile operator might move significant portions of the contract to companies like TCS and Tech Mahindra. However, it looks like at least 80% of Airtel’s total IT outsourcing is still with IBM, and the rest is shared by companies including Tech Mahindra, Infosys, Wipro and Cisco.
Sources in IBM said the company’s analytics capabilities in particular and the fact that IBM helped Bharti extend into Sri Lanka, Bangladesh and Africa had contributed to IBM retaining most of the contract.