The Beginning, Not the End
Date: Tuesday , July 04, 2006
In the biggest move yet so far, the world’s largest computer software services company, said it would invest $6 billion in India over the next three years building on India’s reputation as the world’s IT superpower.
IBM chairman and chief executive Sam Palmisano, who addressed the company’s 10,000 employees in Bangalore in early May 2006, said the Indian investment would become the cornerstone in the global operations of the Armonk, New York based company.
Palmisano said the investment would be used to build service delivery centers in Bangalore, (the epicenter of the Indian IT industry,) and create a telecommunications research and innovation hub for IBM clients around the world.
The proposed investments would also mean IBM would hire more people in India. In the past three years, IBM has invested more than $2 billion, and hired more than 30,000 people in India, taking its staff in the country from 9,000 to 42,000 today. About half of that workforce is employed in IBM’s BPO division, IBM Daksh. Its workforce in India is the firm’s largest outside the U.S.
Palmisano met with the analysts to brief them on IBM’s work in India and its global plans for next year, an annual talk held outside the U.S. for the first time.
“If you are not here in India making the right investment, then you won’t be able to combine the skills and the expertise here with skills and expertise around the world in ways that can help our clients be successful,” he said. “I am here today to say that IBM is not going to miss this opportunity.”
For IBM, which returned to India in early 1990s after being forced to shut down during the nationalization era, the real momentum came after 2003 when it began making India a key base to support services for clients around the globe.
IBM today has five software development centers and a center to provide worldwide consulting services in India. This has helped it to not just employ affordable engineers but also tap into new revenues. Among the countries where IBM is present, India has proved to be the real gold mine.
In 2005, IBM clocked a revenue growth of 55 percent year-on-year in India, the highest such growth in emerging markets. In China the revenue growth was eight percent, Brazil seven percent and Russia 29 percent. That has partly helped IBM in its efforts to improve its bottom line despite fluctuating revenue growth elsewhere.
In India, the company is taking advantage of low cost talent by increasingly shifting work on high-value services to cities like Bangalore, Chennai, Mumbai, Hyderabad, New Delhi, Kolkata, such as supply chain management and financial services solutions.