Vodafone Idea (Vi) is set to renew a multi-year technology outsourcing pact with US tech giant, IBM, for an estimated value of about $1 billion (about Rs 8,330 crore), people familiar with the matter said.
The potential deal is crucial for Vi in its efforts to strengthen IT infrastructure ahead of the planned roll out of 5G services in the country's top 100 cities across its 17 priority markets. Launching 5G services will allow the cash-strapped telco to intensify its competition with bigger - and profitable - rivals Reliance Jio and Bharti Airtel in key markets and arrest customer losses.
"Vi's new, re-negotiated deal with IBM is likely to be finalised soon as the earlier five-year tech outsourcing contract is valid till April 2024," a person familiar with the discussions told ET.
Renewal of the tech outsourcing deal comes even as Vi's board meets Saturday to consider raising Rs 20,000 crore via a preferential share issue. Earlier this week, Vi's shareholders approved a proposal to raise this capital through equity and equity-linked instruments.
Under the terms of the renewed agreement, IBM is likely to manage, maintain and operate Vi's IT infrastructure and offer tech solutions around cloud computing, customer experience besides undertaking modernisation and intelligent automation of the telco's data centres using AI.
These moves are slated to unlock cost as well as operational efficiencies and boost productivity levels at Vi, said the people cited above.
Portions of the renewed technology outsourcing deal will be based on 'as a service' or 'pay-as-you-go model'. 'As a service', typically, is a subscription-based business model in which software and other IT services are delivered by the IT vendor to telco customers via the internet. This is distinct from the traditional client-server model, where an organisation's own computer hardware and software resources are used to provide these services.
Email queries to IBM and Vi remained unanswered till press time on Friday.
Industry experts say it makes business sense for the Vi-IBM tech outsourcing partnership to continue as the US tech giant can lend the necessary backbone and springboard to Vi for growth and expansion, given the telco's plans to raise cash and roll out 5G services in priority markets.
"Over the past five years, Vi and IBM have had a fruitful relationship. This relationship is interesting as Vi also has had an active interest in offering IT and network services to enterprise clients, areas where IBM can bring value. Any deal of this nature, though, will have substantial elements of cloud computing and other as-a-service components to offer business and billing flexibility," said Sanchit Vir Gogia, chief analyst & CEO, Greyhound Research.
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