RealTime IT News

Outsourcing Comes to India

Employees at an Indian telecommunications conglomerate are getting a taste of something thousands of U.S. employees have become all too familar with--their jobs are being outsourced to another company.

In this case, however, the IT operations at Bharti Tele-Ventures Ltd. aren't immediately being sent overseas. Rather, they're being turned over to IBM India in a deal which could be worth up to $750 million dollars over 10 years.

"This is one of the largest deals in the history of IT outsourcing in the India market," Dean Douglas, vice president for telecommunications at IBM Global Services, told internetnews.com.

As part of the deal, 200 Bharti employees will shift over to IBM.

Long-term, it's not clear whether their jobs will remain inside India or whether they're subject to being sent overseas. "At this point in time, we can't say what numbers or how many might be moving where in the future," Douglas said. "By working with IBM, Bharti has the opportunity to tap into IBM's Network Innovation Lab in La Gaude, France."

IBM uses the French facility to develop next-generation telecommunications services.

"We have a number of Network Innovation Labs throughout the world that Bharti can take advantage of," he added.

Bharti, a private telecommunications provider with some 6.81 million customers in India, will outsource most of its IT functions. IBM will manage all of Bharti's internal and customer applications, CRM, and infrastructure functions including data centers and help desks.

The pact between Bharti and IBM is being positioned as more than just a simple IT outsourcing move. The companies are calling it a "business transformation agreement," which includes provisions for the two companies to jointly develop and marketing IT and telecom services and solutions in India. The deal also names Bharti as the preferred telecommunications supplier for IBM India.

Bharti will make payments to IBM India according to a complex formula that takes into account the percentage of revenues generated by Bharti as well as pre-defined service-level agreements. Payments over the first five years are expected to range from $200 million to $250 million, topping out at between $700 million to $750 million after a decade.

Outsourcing IT Infrastructure in the telecom sector is a burgeoning trend which has raised alarms among both workers and politicians in recent months. Indeed, Gartner Inc. today released a study predicting that six years from now, one quarter of traditional U.S. IT jobs will move offshore to countries such as China and India.

In a recent deal, Hewlett-Packard was awarded a five year contract to manage IT infrastructure for the Finnish cell phone giant Nokia . The work will be performed at various HP sites around the world.

However, not all deals to date involve overseas job shift. For example, Sprint in February awarded a five-year call center contract to IBM, which Big Blue will perform out of Fort Worth, Texas.

The deal between IBM and Bharti has been signed and work will commence immediately.