IBM looks to get back in the game with Rs 550-crore deal

International Business Machines (IBM) has signed a deal worth Rs 550 crore with microfinance firm Janalakshmi Financial Services, according to people familiar with the discussions. IBM's consulting division, along with its Institute of Business Value, is leading the engagement, a person familiar with the transaction said.The deal involves application development, maintenance and infrastructure management for Janalakshmi Finance. "We're making an announcement in a couple of days," said Ramesh Ramanathan, chairman of Janalakshmi Financial. IBM India is expected to make an announcement on July 15. The company has not responded to an email query sent last week.Janalakshmi is promoted by former investment banker Ramanathan. The firm has in the past worked with Wipro and recently outsourced its back-office work to the Indian unit of Accenture.IBM rode high on the wave of information technology spending by the telecom sector in India in early 2000s, signing deals with the top three telecom companies in India, but is now looking at other businesses to ink large deals as the telecom market matures and smaller vendors compete more effectively for contracts.Over the past year, the Big Blue has been embroiled in a series of fraud allegations, which led to the renegotiation of its contract with India's top telecom company Bharti-Airtel this April.

While IBM still manages the IT infrastructure and services at the top three telcos in India, analysts have questioned if IBM would be able to retain its contract with Vodafone and Idea Cellular once they come up for renewal in 2017 and 2019, respectively In spite of the problems, IBM commanded 12.1% of the information technology services market in India in the second half of 2013, according to research firm IDC.However, last year IBM India's profit after tax fell nearly a fifth to Rs 12,182 million. The company's overall revenue has also been on the decline in the past few years as it struggles to turnaround its business. "Obviously looking at the size and scale of IBM, it's not going to be a onenight turnaround story. It'll take some time, and may be take the right kind of in right kind of investment," said Manish Bahl, vice president, India, at Forrester Research.With the Janalakshmi Financial contract, IBM could be looking to draw on its past experiences in the field of microfinance. In 2007, it partnered with Washington DCbased Grameen Foundation, founded by Alex Counts, who worked with microfinance pioneer Nobel Peace laureate Muhammad Yunus.IBM worked with the foundation on an open source microfinance banking applications software called Mifos, which can be deployed as a cloud service or as standalone software.Forrester's Bahl said though there is margin pressure on IBM in India, "with the new budget, more optimism in the market, there are going to be more opportunities, for IBM as well for other vendors."The need to grow has led the Big Blue to look at restructuring its business through job-cuts and sale of several businesses worldwide.In India, it is trying to promote its supercomputer Watson, and said it would open a new cloud services data centre in the country.