IBM extends outsourcing deal with Vodafone Essar

By Freddie Pierce
The rich got richer this week, as IBM renegotiated its outsourcing contract with Vodafone Essar and signed a longer deal worth an estimated $1 billion...

The rich got richer this week, as IBM renegotiated its outsourcing contract with Vodafone Essar and signed a longer deal worth an estimated $1 billion this week to manage IT systems for the third-largest phone company in India through 2017.

As the world’s largest tech services company, IBM had a $400 million contract in place in 2007. That was a five-year outsourcing contract, however, and was set to expire next year. The new contract locks in both sides and provides long-term stability for both parties.

According to the Economic Times, three sources said that the companies agreed to restructure their contract last month, with the total value of the contract falling between $800 million and $1 billion.

A Vodafone Essar spokesman confirmed the renewal with IBM to the Economic Times but wouldn’t share the value of the deal.

By moving quickly, IBM was able to stay one step ahead of its competition in the IT sector, never allowing a rival to steal away its coveted contract with Vodafone Essar.

“The deal could have come up for renewal late this year if this agreement was not reached – it completely ruled out any opportunity for rival bidders,” one executive familiar with the contract told the Economic Times.

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IBM has been active in India’s IT business for almost 20 years, and started by helping companies write software codes during the millennium bug in the 90s. With its 120,000 employees in India, IBM is now a top-five technology company in the nation in terms of overall revenues, ranking behind TCS, Infosys, Wipro and Cognizant.

India’s IT services market is expected to grow to $9.5 billion this year according to Gartner, an 18 percent rise from 2010 revenues of $7.6 billion. That 2010 figure is expected to double to $15 billion by the end of 2014.

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