$1b managed services deals shake up India

Kris Szaniawski/Informa Telecoms and Media
19 Feb 2013
00:00

Last week Indian operator Reliance Communications announced a $1 billion eight-year managed services deal with Ericsson, transferring network operations and management to Ericsson in northern and western states of India.

This follows hot on the heels of a parallel $1 billion eight-year managed services contract announced in January with Alcatel-Lucent, transferring network operations and management to the vendor in southern and eastern states of India.

Reliance will be a considerably leaner company as a result of these two massive deals, given that 4,000 employees will be transferred to Alcatel-Lucent and a further 5,000 to Ericsson.

There are several notable aspects to these outsourcing deals:

1. The size of the contracts

Indian managed services deals are often large-scale – as deals with Bharti Airtel and others have shown in the past – but these two are big by any standard, not quite Sprint Nextel territory but near enough. To get a sense of perspective one needs only compare these two Reliance deals with another Ericsson managed services announcement also made this week, this time with Vimpelcom. In a quiet week this pan-Russian network operations and maintenance deal would have attracted plenty of attention in its own right but by comparison with the Indian deals only involves the transfer of 400 Vimpelcom employees. Given their size the two Reliance deals will help Ericsson and Alcatel-Lucent to retain critical mass in what is a highly competitive managed services market. There is currently everything to play for in the Indian market because cancelled licences and re-auctions will inevitably impact existing network supplier and services relationships.

2. The multivendor factor

This is the first time Reliance has outsourced operations to several suppliers rather than just one. The operator previously had a managed services relationship with just Alcatel-Lucent. Outsourcing to multiple vendors is not unheard of in large markets spanning a number of regions, but in this instance it is as much an indication of an increasingly mature managed services environment where an operator is willing to play off managed services providers against each other to see who can deliver the best network and cost optimization and quality of service.

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