Vodafone Idea is nearing the end of its multi-year IT outsourcing deals, which will bring in new players to take over parts of the previous agreement with US tech giant IBM. Sources closer to the discussions told Moneycontrol that the new contacts would be finalised within the next 10 days.
According to sources, the renegotiated deal will decrease Vodafone Idea's dependence on IBM. The telecom company has chosen to involve more vendors to decrease the overall operating costs and to work with specialised firms in specific areas, rather than renewing the entire agreement with IBM alone.
“The deal is almost done and will be finalised within 10 days. Most components will be outsourced again, except for certain managed services handled by Tata Communications Transformation Services (TCTS). All transport and mobility are insourced in terms of network operations, ” a source told Moneycontrol.
TCTS was mainly responsible for operating and maintaining the telecom operator's fibre assets. Tata Communications' unit terminated the contract after Vodafone Idea failed to clear dues of Rs 221.19 crore, which increased from Rs 171.5 crore in March last year.
The previous five-year tech outsourcing contract with IBM, valued at $800 million, expired in April 2024. However, sources indicate that the renewed contract with IBM will be significantly lower in value due to addition of vendors.
“There will be a big discount on the deal size for Vodafone Idea compared to the previous deal with IBM. Vodafone Idea had broken up the RFP (request for proposal) to add new vendors. The telco will have more vendors under the new arrangement than a previous arrangement with just IBM,” the second person said.
The person added that the goal of bringing in new vendors is to engage specialised providers in specific areas who can deliver better results at lower costs.
The people cited above said these moves are slated to unlock cost and operational efficiencies and boost Vi's productivity. Queries to IBM and Vi remained unanswered till press time.
The upcoming IT outsourcing deal is critical for Vodafone Idea as it aims to enhance its IT infrastructure to support its expanding 4G network and prepare for the planned 5G rollout in the top 100 cities within its 17 priority markets.
The tech outsourcing deal's renewal comes weeks after the telcos concluded a mega $3.6-billion deal with Nokia, Ericsson, and Samsung to secure 4G and 5G network equipment over three years.
The network and soon-to-be finalised IT outsourcing deals are part of the company’s three-year capex plan of $6.6 billion, which is directed towards expanding the 4G population coverage from 1.03 billion to 1.2 billion, launching 5G in critical markets and expanding capacity in line with data growth.
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