IBM snares first total outsourcing contract in the media space

With the global economic slowdown breathing down its neck, IBM on Tuesday announced its biggest step so far into the Indian media and entertainment industry.
Two-year-old top-tier cable operator Digicable has outsourced its entire IT operations to IBM in what is billed as the first full-scale IT outsourcing deal in the Indian media and entertainment industry.

The deal, with an “initial outlay” of $83 million (Rs 380 crore) will see the US firm takeover and manage cable feed provider’s IT backbone, including billing, provisioning, authentication, content management etc. Cable feed operators or MSOs are in the business of accumulating TV channel feeds from different satellites, packaging them and then retransmitting them to smaller cable operators through trunk cables.

IBM, which has so far counted only telecom operators among its full IT outsourcing clients, said it expects more such deals to come through as the Indian cable industry tries desperately to fend off an invasion by the direct-to-home service providers. For example, Digicable, headed by industry veteran Jagjit Singh Kohli, has around 8 million subscribers despite being one of the largest multi-system operators in the country. In comparison, the largest DTH operator, Dish TV already has close to 7 million subscribers.

“We are talking with other such players as well,” said K S Raghunandan, director for solutions and business development at IBM South Asia.

Raghunandan said IBM, which manages the IT backbone of a large part of India’s communication networks, had set up a specialised media-oriented outsourcing unit in India two years ago. It won a series a of contract since the beginning of the year, including from DTH operators Sun Direct and Tata Sky, the Hindu group and Star group, but were all short of total IT outsourcing.

According to Kohli of Digicable, the MSO will emerge as the most advanced by the end of the year as it launches a series of value-added services based on IBM’s support. The list includes high definition TV, internet on TV, video on demand etc. “DTH has certainly made a big impact [on our business] and we will be meeting the challenge with these new services,” he said.

He also said that the firm will increase the number of channels to 500 in two months in the Mumbai market. Kohli also said the company is likely to shift its service to the recently approved Headend-in-the-Sky architecture. Under the new format, it will replace its 96 head-ends or feed-collection centres with a single, satellite-based aggregator which will pump all the channels directly to the local cable operator. This will make it possible for the company to expand service to small cable operators across the country, instead of being confined to the surroundings of its 96 on-the-ground
aggregation centres. The centres will however remain as nodes for supporting its value-added services which cannot be supplied through satellites.