IBM Lands Major Outsourcing Deal

Bharti Airtel Ltd. (Mumbai: BHARTIARTL) is to outsource the management of its Service Provider Information Technology (SPIT) systems in Africa to IBM Corp. (NYSE: IBM) in a 10-year deal that highlights the increasingly critical role that managed services are playing in modern telecom services strategies. (See IBM Lands Bharti Deal and The SPIT Manifesto.)

Bharti Airtel has successfully, and profitably, built its domestic business to become the leading mobile operator in India, where IBM has been one of its key outsourcing partners since 2004. At the end of July, Bharti Airtel had 139.2 million mobile customers in India. (See Indian Mobile Sub Base Crosses 650M, Tariff Squeeze Hits Bharti's Profits , Bharti Needs More Data Drive, and IBM to Manage SDP for Bharti .)

Now, having acquired Zain's assets in 16 African markets earlier this year, Bharti is looking to repeat its domestic success in Africa by aiming to run highly efficient business, operational, and service support systems that not only help to keep opex low, but also help make service creation, delivery, and management as quick and easy as possible. (See Bharti Secures $10.7B African Acquisition, Bharti Takes Its Smarts to Africa, and Bharti Shows Off New Physique.)

The deal with IBM, which is expected to be finalized before the end of 2010, will involve the consolidation of 16 IT environments "into an integrated IT system and will oversee the management of all of the applications, data center operations, servers, storage and desktop services."

IBM is set to provide billing, CRM, and content/applications management capabilities, build new internal enterprise resource management systems, and develop new security capabilities. It's unclear whether the IT giant will be responsible for making the tea and procuring snacks.

The potential value of the deal wasn't revealed, but Sunil Bharti Mittal, chairman and group CEO of Bharti Enterprises, Airtel's parent company, told a press conference in Nairobi today that the value of the deal would be revealed when a final deal is signed in the coming months, reports Reuters.

However, IDC analyst Elisabeth Rainge estimates the deal could be worth as much as $1.5 billion to IBM. "The 2004 Bharti deal for India alone was announced as $750 million, and is now worth up to $2.5 billion based on extensions," notes Rainge in an email to Light Reading.

She believes the potential magnitude of the new long-term deal means IBM would have had few challengers for the contract. "The value, or, more properly, the potential value of this deal, is key. I'm not sure who else could handle this sort of deal," notes the analyst.

Clearly, IBM's existing relationship with Bharti Airtel has played a major role in helping it to win a deal that solidifies its position as a major outsourcing partner to the world's telecom operators. Many major telecom vendors, including Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), Huawei Technologies Co. Ltd. , and Nokia Networks , have built significant and growing professional services businesses that involve the integration, deployment and day-to-day management of networks and supporting IT systems.

Bharti Airtel hopes that IBM's technology and professional services will help it build its African subscriber base to beyond 100 million by 2012 from the 42 million it had at the end of June.

— Ray Le Maistre, International Managing Editor, Light Reading