IBM set to land £800m outsourcing deal with Indian mobile operator

IBM is on the verge of signing a rumoured £800m outsourcing agreement with Indian mobile phone giant Hutchison Essar that is set to be the largest ever signed by an Indian operator.

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IBM is on the verge of signing a rumoured £800m outsourcing agreement with Indian mobile phone giant Hutchison Essar that is set to be the largest ever signed by an Indian operator.

If the deal is finalised, it will be the biggest ever win in India for IBM, which saw 37% growth in revenues in the country last year. It is the second outsourcing deal Big Blue has signed with Indian telecoms firms this month and the third in as many years.

Hutchison, which has 25m mobile phone subscribers, is looking to outsource its IT infrastructure and possibly its data management to cut costs. It expects to save £10m a year through the outsourcing deal.

The Indian mobile operator is also in the middle of a deal that will see Vodafone buy a majority stake in the firm.

Neither IBM nor Hutchinson has commented on the deal, which sources say could be weeks away from fruition.

IBM this month announced a 10-year business transformation order, valued between £300m and £400m, from Indian mobile firm Idea to integrate and transform its business processes and IT infrastructure.

In 2004, IBM inked a similar £375m revenue-sharing deal, spread over 10 years, with Bharti Airtel, another Indian mobile firm, to manage its core IT infrastructure. IBM's deal with Bharti is estimated to have increased in value to more than £750m.

India has become IBM's home away from home in financial terms. Last year's 37% growth was lower than the 55% reported by the computer giant for 2005, but this was because the revenue base in 2004 was smaller, Shanker Annaswamy, IBM's regional general manager for India and South Asia, said recently.

IBM’s revenue from India has grown faster in the past two years than its revenue in Brazil, Russia and China, Annaswamy said. The key markets in India were financial services, SMEs, pharmaceutical firms, the telecoms and car industries and government.

IBM also has a large global services delivery operation in India. The company had 53,000 employees in the country in January this year, compared with 38,500 a year earlier.

The company’s chief executive Samuel Palmisano said last year that the company would invest £3bn in India over the next three years. The new investment would go primarily towards staff costs, new service facilities and education programmes.

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