IBM, Vodafone Essar extend outsourcing deal by $1 billion

IBM, the world's largest technology services company, has signed an extended deal estimated at up to $1 billion to manage Vodafone Essar Ltd's (VEL) IT systems until 2017, The Economic Times reported on Thursday.
   
In 2007, VEL had signed an over $400-million, 5-year outsourcing contract with IBM. The contract was to expire next year. According to at least three people, one of whom was part of the negotiations, both the companies agreed to restructure the contract last month estimated at $800 million-1 billion.
   
A Vodafone Essar spokesman confirmed that the contract with IBM had been renewed but declined to share the exact value of the deal.
   
"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," the newspaper quoted a source as saying.
   
India's IT services market will reach $9.5 billion this year, an 18-per cent rise over 2010 revenues of $7.6 billion. The country's domestic IT services market ranks third in Asia-Pacific and is forecast to grow to $15 billion by the end of 2014, according to a study by global research firm Gartner.
   
Big Blue, a nickname IBM acquired from its blue-painted mainframe computers of the '60s, now controls over half of the outsourcing business with revenues of around $1.5 billion, in a market that is home to the world's fastest-growing tech firms.
   
Most of this business is from India's domestic market, where IBM takes over computer hardware, software and services functions of customers such as Bharti Airtel.

Some of IBM's India revenues also come from developing solutions for government customers such as Indian Railways, which sought the company's help to develop a crew management system last year.