16 | Tech Mahindra: Vertical Monogamy

Tech Mahindras association with British Telecom (BT) remained
a classic Catch 22 situation. On one hand, the five-year, $1bn agreement to
support BTs planned growth of managed services to business customers globally
(arguably the largest ever outsourcing deal by any Indian IT service provider),
called for uncorking the bubbly. On the other, BT was proving to be Tech
Mahindras Achilles heel. The dependence that had come down to 67% in Q4
again shot upand led to losses due to payment of Rs 525 crore that had to be
made for the upfront cost savings promised initially to secure the contract.

This debate over the extent of BTs association assumed
greater importance because Tech Mahindra had steadfastly remained an IT service
provider with sole focus on telecom. That it still re-entered the DQ Top20 club
could only be testimony to its emergence as an end-to-end solution provider.
Therefore, though BT was the flagship deal, equally significant (especially in
strategic importance) was the JV with Motorola to form CanvasM Technologies, a
telecom SI. Another piece in Tech Mahindras telecom offering came from its
acquisition of iPolicy Networks, developers of next-gen, carrier-grade
integrated security solutions.

The BPO business also took off: starting last year it reached
1,700 people by the end of the year. Incidentally, it was not only service
providers and equipment manufacturers who enjoyed a honeymoon with Tech Mahindra
in FY 07; investors and analysts too gave it a big thumbs up, making it one
of the best IPOs of the year. DQ