Vodafone India in talks to renew Rs 6,600-crore outsourcing contract

NEW DELHI: Vodafone India has started talks with software major IBM for renewal of a $1 billion (Rs 6,600 crore) outsourcing contract that is set to expire in June 2016, while also sounding out Wipro, Tata Consultancy Services, Infosys and Tech Mahindra, two people familiar with the matter said.

"It hasn’t given out the request for proposals to these vendors as of now," one of the people told ET. "But they will in coming months gauge their capabilities and decide whether any of them can provide best value for money and could deliver endto-end services, besides taking Vodafone IT to the next level."

Vodafone outsources services such as management of application development and the IT network. IBM, while trying to retain the contract, is also trying to sell its data analytics solutions to Vodafone as part of the order, the second person said.




Vodafone declined to comment, while IT vendors did not respond to emailed queries. The mobile phone operator is currently in the process of selecting a chief information officer after Anthony Thomas quit to join GE India as CIO.

At this stage, Vodafone isn’t inclined to chop up its outsourcing contract in the way rival Bharti Airtel did and would still prefer a single vendor, the first person said. "It may prefer to renew the entire deal with IBM, but it is evaluating all options," the person said.

A year ago, Bharti Airtel, India’s top telco, renewed part of its outsourcing deal with IBM for five years and carved out other portions to IT companies including Wipro and Tech Mahindra, while retaining some of the work in-house.

Strategic outsourcing deals are increasingly being replaced by cloud or managed-services delivery methods. "Bharti Airtel is leveraging these newer delivery models to better manage cost and time spent on servicing existing infrastructure and applications. Telcos globally are exploring, so should Vodafone," said Sanchit Vir Gogia, chief analyst & CEO at Greyhound Research.

For IBM, the Airtel contract was a landmark deal in terms of size and was also the first IT outsourcing order from India’s telecom sector.

The renewal deal with Airtel was estimated at $750 million-$850 million for five years, as per Greyhound Research, which predicts the contract may touch $1 billion over the next five years with incremental focus on analytics and Big Data.

Apart from Vodafone, IBM will be trying to renew an outsourcing deal worth $800 million-$900 million with Idea Cellular, India’s third-ranked telco, which comes up for renewal in 2019-20.