Strategic CIO // IT Strategy
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4/8/2011
11:20 AM
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IBM Wins 'Strategic' PepsiCo India Deal

F&A services pact with soft drink maker is the latest example of how the subcontinent is becoming more than just an offshore center for Big Blue.

IBM said it won a five-year deal to provide a range of finance and administration service to PepsiCo's Indian subsidiary. The pact is the latest sign that Big Blue's effort to establish a major presence in one of the world's hottest tech markets is leading to more than just offshoring wins.

Under its deal with PepsiCo India, IBM will provide the soft drink maker with a range of F&A services, including support for payment, revenue, and reporting processes. IBM will also help PepsiCo India centralize its finance operations by establishing a single, shared-services organization to serve multiple offices and plants across the country. Financial terms were not disclosed.

"India is one of the most important markets for PepsiCo," said PepsiCo India CFO Kimsuka Narasimhan, in a statement.

"It is large and complex and the core objective of the finance function will be to partner with the business in strategic decision making and provide thought leadership without the additional distraction of managing routine transaction processing. We have chosen IBM to run our transaction and accounting processes. IBM will bring their tools and expertise and help PepsiCo enhance its governance while providing solutions through superior analytics and productivity opportunities," said Narasimhan.

IBM said the deal marks the first time a major Indian company has handed off F&A functions to a third-party. "This is a highly strategic project for both IBM in India and PepsiCo India and represents a great example of innovation being led by India," said Darren Oberst, VP for IBM Global Process Services, India, in a statement.

"This engagement looks at India-to-India outsourcing as a vehicle for enhancing process quality, process standardization, business model agility, and creating a scalable platform for growth in one of PepsiCo's fastest growing markets," said Oberst.

The PepsiCo deal shows how IBM's huge offshoring presence in India—it has more than 60,000 employees in the country, most of whom are devoted to providing remote tech services to Western customers—has provided it with a beachhead from which to pursue domestic deals in an IT market that Gartner estimates grew 14% last year, to $67 billion. In recent months, IBM has also won deals from Bharti Airtel, India's largest mobile operator, as well as from Delhi International Airport and domestic airline Jet Airways.

Beyond outsourcing, sectors that play to IBM's strengths include business intelligence. Gartner predicts that the market for BI software and services in India will grow at 16% in 2011.

IBM's Global Services unit could use the boost. Big Blue's total services revenue grew just 2% in the fourth quarter. Sales were strong in Asia-Pacific, including India, and the Americas, but growth was hampered by slumping markets in Europe and the Middle East.

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