A little over a decade after it captured a landmark outsourcing contract from telecom firm Bharti Airtel Ltd, International Business Machines (IBM) has touched $5 billion in revenue in India—making it larger than a bunch of other top homegrown outsourcing firms like Tech Mahindra.

IBM, the world’s largest technology services firm that is popularly referred to as Big Blue, posted robust growth of nearly 41% in the April-March period, driven by strong technology spending in the domestic outsourcing market. According to filings with the ministry of corporate affairs, IBM reported revenues of Rs32,325 crore ($5.01 billion) in the fiscal year to March, compared with Rs23,005 crore a year ago.

The latest figures make IBM the biggest technology services firm in the domestic outsourcing market, which is home to information technology (IT) giants such as Infosys Ltd and Tata Consultancy Services Ltd (TCS). The India businesses of the likes of Infosys, Wipro and TCS pale in comparison to IBM’s India revenue.

IBM did not immediately respond to an email seeking comment.

Mumbai-based TCS generated 6.3% of its overall revenue ($1.1 billion) from India in the year ended March 2017, an 8% increase from a year ago. Infosys pulled in 3.2% of overall sales, or $326.7 million, in business from India in the year ended March 2017, a 32% increase from the year-ago period. Wipro does not disclose the revenue it generates only from India, but puts out a combined revenue figure from India and the Middle East.

IBM has dominated the domestic outsourcing landscape for the better part of the last one-and-a-half decades, with multi-year, multi-billion dollar outsourcing contracts from marque technology customers such as Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd (much before the Vodafone-Idea merger).

At one point, the size of IBM’s original 10-year contract with Bharti Airtel had swelled to around $2.5-$3 billion, or nearly $300 million in annual revenue. The size of that contract has since then shrunk by more than half, as Bharti Airtel reduced its exposure to IBM and also cut back on outsourcing, as part of a strategy revamp.

In the 2000s, IBM replicated the global delivery model perfected by Indian software exporters and built up a workforce consisting of hundreds of thousands of programmers in India who maintained software applications and back-office projects, among other things.

At one point, the size of IBM’s India workforce had touched 150,000—that figure has, however, shrunk in the past five years to about 100,000 as IBM has automated a number of commoditized services, such as software maintenance, according to at least three IBM executives.

IBM does not provide a region-wise breakup of its staff in its financial reports—the employee figures for IBM in India were obtained from company sources, brokerage reports and industry estimates.

To be sure, IBM’s latest revenue figures have been generated not just by domestic outsourcing contracts, but also include overseas outsourcing contracts, which are managed by IBM’s local teams in India—similar to the way homegrown IT services firms like Infosys and TCS generate a majority of their revenue from clients in North America.

According to two executives familiar with IBM’s latest numbers, IBM India generates a majority of revenue from selling services to overseas clients and from a process referred to as “cost recovery", where it recovers a big chunk of the cost of products and services it sells overseas from customers and service providers it works with.

Analysts tracking IBM globally indicated the firm needs to shrink its dependence on traditional outsourcing services such as software maintenance, which have become extremely commoditized in the past five years and are increasingly getting automated.

“We have ongoing concerns about global business services given that application maintenance is almost 50% of revenue, and we think the entire industry faces revenue and margin pressures. Hence, we think application maintenance will continue to face challenges in CY2018, and we believe IBM should consider getting out of this business as we have mentioned previously," said Keith Bachman, an analyst at BMO Capital Market in a note dated 18 October.

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