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History has put IBM and Amul in
two different worlds. IBM is a
key flag bearer of the US in global
business. It got thrown out of
India in the late 1970s as the last
gasp of the Third World desire to rid itself
of the neo-colonial yoke. Amul is not
just a flag bearer of desicompetitiveness
but an icon of the cooperative movement
to boot. Still, Gujarat Cooperative Milk
Marketing Federation, which owns the
Amul brand, recently outsourced its information
technology operations to IBM.
This will help Amul become even more
competitive as it will get equipped with
a state-of-the-art IT system that weaves
the automated village milk collection
centre and the management
information system into a
seamless whole.
For well over a decade, Indian
software services leaders
have taken the world by storm
by recording exceptional growth
and industry-beating margins.
But even as they have done this,
they have not adequately looked
at their own backyard, the domestic
market. There, with a
minimum of noise, IBM has
emerged as the largest player
with a 10.8 per cent share of the
Indian domestic IT services
market in 2008, according to the
analyst and IT market research
firm Springboard Research.
This, in itself, would not
have mattered that much to the
Indian players were it not for
the fact that the global economy
tanked the same year and
took the developed world’s IT
spending decisions with it. Even
more dramatically, the Indian
government woke up to the
need to sharply up IT spending
and UPA II took giant strides to
e-enable governance. Suddenly,
the Indian market was the
growth engine which no one
could ignore and there was
IBM at the head of the pack.
According to Dataquest, in
2008-09, IBM’s total business
grew 19 per cent, whereas
those of its competitors like
Cisco, Oracle and HP grew by
under 5 per cent. If you exclude
domestic business process outsourcing,
IBM’s top-line growth was even
more impressive at 36 per cent. This
growth took the domestic revenue share
(excluding exports) of IBM’s revenue
from 42 per cent to 48 per cent. In 2008,
IBM’s India business grew the fastest
among the BRIC countries.
How has this happened? IBM India
Managing Director Shanker Annaswamy
says: “IBM is fundamentally a different
company than what we were a decade
ago. We have remixed our portfolio to focus
on what one would call ‘higher-value’
spaces, including high-end hardware,
software and services.” It has significantly
improved service margins globally over
the past five years by automating labourbased
processes and creating intelligent,
software-like assets. “In India, we have
been successful at replicating our
telecommunications expertise in business
model transformation in emerging
sectors such as insurance (Reliance Life),
FMCG (Cavincare), infrastructure (Hiranandani)
and pharmaceuticals (Torrent),”
says Annaswamy.
THE DRIVE FOR SMALL AND MEDIUM BUSINESSES
HAS BROUGHT IN NEW CATEGORIES OF
CUSTOMERS LIKE PRIVATE HOSPITALS,
EDUCATIONAL INSTITUTIONS AND COOPERATIVE
BANKS THAT WISH TO BECOME PROFESSIONAL
Saving costs
Explains Mukul Mathur, director of the
company’s systems and technology group,
IBM’s Indian and global strategy is to move
on the two legs of consultancy and systems
integration towards high-value enterprisecritical
solutions. Along with this has been
the strategy to show customers that partnering
IBM, using its servers, can cut costs.
Seventy per cent of IT expenditure goes in
meeting infrastructure maintenance costs.
IBM GOES DESI
The IT major is working with a host of Indian companies in emerging
sectors to enable them to improve efficiency and cut costs — spelling
both good business and sound investment for the future
Greater energy efficiency of servers means
lower air-conditioning and backup costs.
To this is added the cost-saving
achieved by sharing servers as, research
shows, 85 per cent of server capacity goes
unused. Reducing client and own costs
goes hand in hand. Since 1997, IBM has
reduced its global data centres, where
clients increasingly host their computing
and data, from 155 to seven! IBM is still
number two in India (behind HP) in server
revenue but it is catching up fast and
Annaswamy claims that it does not run
for the sake of numbers but keeps an eye
on how paying the business is. However,
it leads in non-x86 Unix-based servers
and also in external disc storage.
IBM in India has also gone after
small and medium businesses.
Serving such customers should be
difficult for a global firm with its
overheads and preponderance of
large customers who can be efficiently
served in a distributed manner
round the world. Small businesses
in India, for their part, could
feel overawed and sceptical about
engaging with a firm of the size of
IBM. So, the approach has been,
says Jyothi Sathyanathan, vicepresident
for the mid-market segment,
to offer as simple a solution
as possible where the customer acquires
a capability which he can
virtually “plug and play”. To reach
such customers, IBM India is
spreading out from metros into Tier
II and III towns.
The main platform through
which customers are served is
Smart Business. “It does not customise
solutions but offers options
in terms of packages and features
off the shelf, not tailored garments
but T-shirts of many sizes and standard
designs,” explains Sathyanathan.
And there is great flexibility
in terms of whether you want
to host, manage or share, in dif-
ferent combinations of the three.
This drive for small and medium
businesses has brought in new
categories of customers like private
hospitals, educational institutions
and cooperative banks
that wish to become professional.
A private hospital should be
able to give a patient checking out
his bill with the same speed as a hotel.
A private engineering college should be
able to digitise its course content so as
to build a reputation that will bring in
good students who will then go on to get
good placements.
P Kulkarni, who was till lately managing
director of Pune-based Mahesh Sahakari
Cooperative Bank, recalls that in
2006 it had engaged IBM for the installation
of hardware and networking for core
Subir Roy
T U E S D A Y 22 DECEMBER 2 0 0 9
Shanker Annaswamy,
Managing Director, IBM India
BS PHOTOS
banking at a project cost of just under Rs
2 crore, including replacement of desktops.
Core banking was installed in August
2008 but not without some effort as
“initially there was resistance from staff
who had to be given training.” The bank
has ten branches plus head office, done
Rs 550 crore of business, and clocked a net
profit of Rs 3.5 crore. “We had a good experience
of IBM which was not just the
vendor but also guided us, setting aside
concerns for its own sales. We never felt
IMB was a very big company. It often sent
very senior representatives to us and gave
us a one-point contact,” says Kulkarni.
Innovation Auto Risk is a joint venture
between Innovation (turnover: £140
million) and Auto Risk (Rs 19 crore). It
has a full-time staff of 30 and works
through a network of 1,400 engineers who
work through regional offices. Says Director
Manu Mehta: “We offer a claim
management solution in motor insurance.
We needed a portal and a facility to host
our software. Our main requirement was
connectivity and speed.” When a truck
meets with an accident, the insured gets
in touch with Auto Risk, which helps him
to lodge a claim through their portal.
Recalls Mehta: “The hardware and
software were tested by calling us from
remote parts of the country. The crucial
thing was how soon we could be reached.”
Auto Risk has a data centre at its office
which has been created and is served and
run remotely by IBM. “We are capitalising
its cost, close to $1.5 million, over five
years.” The agreement with IBM, signed
in July, is getting off the ground now.
Innovation hub
Annaswamy adds: “IBM has treated
India as an innovation hub and a
market with immense potential. There
is a lot of interesting work that we do in
our Indian research labs and software labs
where we have created solutions keeping
the Indian clients and business landscape
in mind.”
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It recently showcased some
of the latest technologies developed
like the medical analytics
platform, drug pedigree
and traceability solutions,
and threat and fraud detection
solution.
At another end is the Spoken
Web project, one of the innovative
initiatives currently
being piloted by the India research
team which aims to
transform how people create,
build and interact with information
using the spoken instead
of the written word. The
Spoken Web is the World Wide
Web in a telecom network,
where people can host and
SINCE 2007,
IBM HAS EXPANDED
ITS PRESENCE IN
14 NEW CITIES. IT
IS FOCUSING ON
NEW PRODUCTS
AND SERVICES AND
STRENGTHENING
THE CHANNEL
NETWORK IN
THE COUNTRY
browse “VoiceSites”, traverse
“VoiceLinks”, even conduct
business transactions, all just
by talking over the existing
telephone network.
Does IBM, which does not
share India-specific figures,
make money in India, aside
of exports? Annaswamy recalls
that since 2007 it has invested
in the domestic market
and expanded its presence
in 14 new cities. Today, it continues
to invest and focus in
more cities and sectors, bringing
in new products and services
and strengthening the
channel network. “In addition,
we continue to leverage
our global footprint to help
clients in India.” It works the
other way too. For example,
as a result of its strong relationship
with Bharti Airtel, it
has been able to generate takeaways
that have helped it
serve other telecom clients
elsewhere in the world.
So IBM India seems to be
in the “investment mode”,
which means it is building resources
here. Industry sources
say that what it does for the Indian
market clearly makes
money today but the investments
are aimed at making
things better for the future.
Globally, IBM is doing well and
India is a part of its global
scheme of things.
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IBM GOES DESI
IBM’s office in Bangalore
...AND THE BIG THREE
Dismissed until recently
as a low-margin business,
the domestic market
has come to hold the key
for Indian IT companies.
Some top companies have
been vying for projects in their
own backyard. Last week,
Wipro, Infosys, TCS and others
bid for the home ministry’s
Rs 2,000-crore online FIR
(first information report) project
to devise an automated
complaint filing and tracking
system across the country.
Winning strategy
In May, Wipro went past rivals
IBM, Tech Mahindra and
TCS to bag the Rs 2,200-crore,
nine-year contract from
Unitech Wireless which is
rolling out mobile services in
the country. Earlier this year,
Wipro had signed a contract
worth Rs 3,000 crore with
Aircel and got an e-governance
order of Rs 1,182 crore
from the Employees’ State Insurance
Corporation.
The price quoted by
Wipro in most of the recent
bids is said to be far below rivals’,
which has helped it bag
deals. For instance, the company’s
quote of Rs 1,182 crore
for the ESIC bid was way lower
than TCS’ Rs 1,530 crore
and Infosys’ Rs 1,791 crore.
What has worked in its
favour, says the company, is
its emergence as “an end-toend
solution player.” The
company spent time till 1987
“establishing a pedigree in
hardware”, concentrated
next on systems integration
and networking, graduated
to professional services and
managed IT services, and
has now got into application
development and consulting.
This, according to
Wipro, has helped it bag
large multi-layered deals like
Unitech Wireless.
Wipro has also mastered
the art of transaction-based
pricing which has played a
key role in the recent orders
it has won. For instance, a
bank will be billed
for each customer
transaction rather
than a pre-decided
sum. If footfalls increase,
it’s a winwin
situation for
both the bank and
the IT vendor. If
there’s a fall in the
customer base, the
risk is contained for
the bank. This is opposed
to outcome-based pricing
where the bank shells out
a huge sum of money upfront.
Strong footprint
TCS, the country’s largest information
technology company,
is not far behind. In September,
the company won the
country’s largest State Wide
Area Network (SWAN) project
from the Andhra Pradesh
THE DOMESTIC
MARKET HAS
COME TO HOLD
THE KEY FOR
INDIAN IT
COMPANIES SUCH
AS TCS, WIPRO
AND INFOSYS
government on a five-year
build, own, operate and transfer
model. On implementation,
government offices in
1,088 mandals and 23 district
headquarters in Andhra
Pradesh will have video conferencing
facility. In October
last year, it signed a Rs 1,200crore
deal with the Government
of India to migrate passport
services to the electronic
platform.
TCS expects to double the
revenue from the country over
the next three or four years.
According to Country Head
(India business) G S Raghavan,
“The com-
pany believes in
bringing its entire
branding and
global experience
to its local
clients.” Like
Wipro and IBM,
it has an integrated
business
unit (as opposed
to just sales offices)
to address
customer acquisition, management
and delivery. The
company has around 12,000
people dedicated to the India
business. TCS has a very
strong footprint in the finance
sector which happens to be
the largest buyer of IT services
in the country. Fifteen of the
top 30 players in the industry
are its customers. Five of the
top 10 Indian retailers are its
BLOOMBERG
customers too. In the insurance
sector, it works with 15
of the 24 players.
Experts say TCS is the
company to watch in the domestic
space because of the
work it has done with the central
and state governments.
The space poses a Rs 24,000
crore-Rs 48,000 crore opportunity
over the next five years
for TCS as the government
plans to roll out its 30 mission
mode projects (of which TCS
has already bagged two).
Growing presence
Infosys, too is getting its feet
wet here. India contributes
around 1.3 per cent to its total
revenues, the larger part
of which comes from its banking
product, Finacle. Last year,
however, it announced the
formation of a separate business
unit to focus on just the
domestic market. Infosys
signed an e-governance deal
with the Income Tax Department
to establish back-office
hubs in four states. In the private
sector, the company has
about six customers including
Thermax. And it is ready
to up the ante. In June, the
company bagged a prestigious
10-year eBiz project of
the Department of Industrial
Policy and Promotion in a bid
which also saw participation
from TCS, HCL and Wipro
among others. Infosys will develop
and maintain the eBiz
portal which will work as a
one-stop shop to provide efficient
services to investors,
business and industry.