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IBM: Purer Blue, Brighter E

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DQI Bureau
New Update

This

was a new chapter: Tata-IBM became pure Big Blue. Top managers moved from

Bangalore to its biggest market. Notebooks and servers starred, and IBM took the

first steps toward a big ebiz push to SMEs.

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The joint venture from 1992 became IBM India last September,

and got "fully integrated with the IBM Asean/South Asia structure."

With big revenues from Mumbai and its financial and ebiz thrust, CEO Ranjit

Limaye moved there in February to downtown Mumbai.

The group comprises IBM India and IBM Global Services. The

latter has been a separate company, thanks to the joint venture. It still is,

but the two companies work more like divisions reporting to Limaye, with a

possible merger on the cards.

The 3,000-staff IBM India grew its sales 46% to Rs 707 crore,

with nearly four-fifths from systems and a tenth from packaged software (the

planned integration of Lotus with the original IBM Software and Tivoli units

made a bigger software division).

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The 2,600-staff IBM Global Services grew 34% to Rs 476 crore,

over half coming from systems integration exports. This company also maintains

IBM hardware, which brought in about Rs 50 crore. Domestic systems and network

integration added over Rs 110 crore. A 10-year deal to manage Ballarpur

Industries’ IS for an estimated Rs 6 crore a year, while absorbing 45 IT staff

from the latter, was a major step into facilities outsourcing. (This is a big

area globally. IBM recently won a $1 billion deal to run Bank of Scotland’s

network for 10 years, absorbing the bank’s 505 staff–and computers, for $69

million. But the nearly $11 billion of such deals for IBM USA in Q2 of 2000 will

add a small fraction to short-term revenues.)

The 350-person Pune software center, adding to the

1,400-person Bangalore center, will help in the services thrust. So will a new

center in Gurgaon near Delhi, set up in June 2000 to provide ebusiness services

to organizations–the second such IBM center in the world, after China.

For IBM India in 1999-2000, moving closer to its markets

meant a regional thrust, in addition to the traditional vertical markets focus.

Key people handling those markets are now also regional heads. VP Nipun Mehrotra

(public sector and communications) heads North, GM Ashish Kumar (SME business)

heads South, GM Amit Sircar (industry) the East, and VP Swarup Chowdhury

(financial services) the West region. The prefixes also give a rough idea of the

relative revenues from those regions and sectors.

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The changes were good for IBM. Its high-end servers brought

in Rs 138 crore. Multi-crore RS/6000 deals included Schoolnet, Telco, Tisco, UTI

bank, IIT Kanpur, et al. RS/6000 sales, strong with smaller ISPs, totalled Rs 54

crore. AS/400 sales kept up, over 100 units at nearly Rs 52 lakh each. Rs 30

crore from four S/390 units (sold to RBI), and integration services, kept

revenues and margins up.

Those AS/400 numbers should pick up this year, with a big SME-targeted

ebusiness media campaign–and events across cities small and big. And when VP

(marketing and channels) Murali Raman moved to Mumbai, channels GM Alok Ohrie

followed: he will handle PCs and AS/400s. This is the first time the AS/400

servers will be sold through the channels in India.

IBM ThinkPads topped the notebooks market, selling over 7,000

units. The NetFinity Intel-based servers were hot, at over 4,600 units. Desktop

PCs did 40,000 units and got in a much healthier average revenue than other

major vendors. That number should get a boost from lower prices and more varied

specs from the new Pondicherry assembly line that went live last November.

Finally, it now has some desktops priced low enough to compete with HP’s and

Compaq’s corporate models. Aptiva consumer PCs sold only a few handfuls, with

their unrealistic pricetags.

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Globally, IBM is also going through major change, with

e-focus in more ways than one. Last October, IBM took the dramatic step of

pulling its computers off US retail store shelves, keeping Aptivas for online

sales (ThinkPads continue in the stores). Even with over a tenth of the US

market, IBM’s PC unit lost $1 billion in 1998-99 and slipped to third place,

behind Compaq and Dell, in the global PC market. As in India, the US PC market

is price-sensitive and over half the sales are sub-$600 PCs. IBM does not exist

in that range.

IBM India is also involved in research–its India Research

Laboratory at IIT Delhi, set up in 1998, is one of eight such labs in the world

and the only one in the South Asia region. It works on weather forecasting,

speech recognition software, distance learning and mobile telephony. Its

Solutions Partnership Center in Bangalore is one among only 10 such IBM

facilities in the world, and independent software vendors can take their

ebusiness solutions there for porting onto IBM platforms.

This year’s hot products in India will continue to be the Netfinity,

AS/400, RS/6000 and ThinkPad–and perhaps the IBM PC. And revenues should

continue to be strong, as IBM ramps up its ebusiness and network integration

services, continues its aggressive AS/400 push into ebusiness for SMEs, and

focuses on pushing up corporate desktop PC volumes. DQ

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