Losing sight of domestic business...

Yeah, flat world indeed… Here. IBM eating straight off Indian IT vendors’ plate, snatching it right from under their nose.

Vodafone Essar has signed an IT outsourcing agreement with IBM India. Deal size is rumored to be about $600 M. Under the five-year agreement, IBM India will assume responsibility for the management of all Vodafone Essar's IT operations with the exception of network service platforms. IBM India will also manage internal IT services for Vodafone Essar like data centre operations and the help desk while supporting key areas like security and change programs.

I wonder why Indian IT vendors like Infosys, TCS, Wipro and Satyam didn’t get this business. In these bad times for the $$, revenues in any other currency should be most welcome - it acts as a zero cost natural hedge against the falling dollar and protects margins to some degree. Still haunted by that margin fixation…? Or is it that Vodafone India has lost its western flavor after acquiring Hutch Essar…?

While Indian IT vendors are crowing about falling $$, global IT majors like IBM are cornering larger share of India’s growing domestic IT budgets. Smart, isn’t it…? Deals like this act as a natural hedge against the fast decaying dollar and ups the ante against India’s IT majors that still keep gazing westward.

But with one difference. They also do this. The thoroughbred that IBM is, it also plans to increase its investments in its two software laboratories in Pune and Bangalore as part of its $1.5 billion security initiative in 2008, announced on November 1. Fuelled by recent security business acquisitions (including Internet Security Systems — now IBM-ISS), and more than 18 months in development, the IBM security initiative is the largest-ever undertaken in the IT industry. In comparison, the R&D spends of India’s IT vendors are mostly on project specific training for setting up labs etc., before client visits (masked as R&D). Now you know why that looks like a rounding error to me…:)

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[Update : Industry estimates peg the turnovers of MNCs like Dell, Intel, Microsoft and IBM at well over the half-billion dollar mark. Firms, like Cisco, are said to have crossed the billion-dollar mark in domestic sales in 2006-07, and for a player like HP India, it is estimated in excess of $2.5 billion. ]

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