6. IBM: Services, Big and Blue



TALK about consistent: in the last two years, IBM in India grew 41%, and 41%. Healthy, though not quite as exciting as the Top 20’s 55%.

IBM in India includes IBM Global Services, whose support and other services back IBM’s systems sales. But IGS’ 63% growth really came from services exports to IBM and customers, doubling to Rs 506 crore and 2,866 employees. Also up was outsourcing (for Tisco, Ballarpur Industries, Whirlpool, et al) and solutions, including infrastructure, for ISPs and others. IGS is “brand-agnostic”, working on diverse platforms.

SWOT

  • Strength: Range, quality reputation. Strong brand, good for tenders. Reputation for reliability (large systems) and service (e.g. notebooks)
  • Weakness: Poor PC presence affects SME inroads. PC pricing, marketing, channel strategy (until recently). No consumer presence, no retail
  • Opportunity: Leveraging strong IBM brand further into services, education and PSU sectors
  • Threat: Compaq way ahead in PCs, servers; getting close in notebooks and services 

PERFORMANCE 
HIGHLIGHTS

  • Services grow 63%, led by exports, accounting for 2,866 employees
  • Major outsourcing deals and solutions
  • Systems growth 36%; notebook remain on top.
  • Server sales below expectations

FACT SHEET

CEO & MD: Abraham Thomas
START-UP YEAR: 1992 PRODUCTS & SERVICES: Sales and marketing of IBM Servers, PCs and Software product and services
(SI Consulting, ITES, Software Developments)
TECHNICAL COLLABORATIONS: Subsidiary of IBM World Trade Corporation USA 

Employees:
4,316 
Branch Office:
14 
ADDRESS:
Prestige Towers, Residency Road, Bangalore-560025 

TEL:
2079999 FAX: 2079313 WEBSITE: www.ibm.com/in

IGS’s growth took it up to nearly half of IBM’s revenues in India. Good for IBM, for even while adding over a thousand employees, mostly in services, it managed to improve productivity–and margins.

Systems growth was a modest 36%, to Rs 758 crore. IBM finally began to get its PCs act together, though staying at No 4, at under 70,000 units. It merged desktops into one brand, NetVista, and a full year of local assembly at Pondicherry meant some realistic pricing. Almost all PC sales were corporate. It also sold nearly 11,000 ThinkPad notebooks–just about staying on top.

Server (“eServer”) sales, at Rs 138 crore, kept the systems figure down. IBM’s iSeries (AS400, 84 units) and pSeries (RS6000, 431 units) sales were lower than expected, though it sold three zSeries S/390 mainframes for Rs 25 crore, and 6,612 xSeries (Intel-based) servers. S/390 customers included the National Stock Depository, TCS and Telco (running SAP). Banks such as BoB and Dena also accounted for large tender sales of PCs and Intel-based Netfinity servers.

Peripherals (including storage items) went down 40%, with some dropped printer lines. The network product division was sold off to Cisco. Packaged software (including Lotus, Tivoli, WebSphere et al) remained a thin slice in IBM’s revenues, growing 28%. IBM ramped up distribution, moving even large servers and storage to channels (Tech Pacific, Iris and Redington). It added ISVs and partners, and certified professionals (there are 80 of these among IBM partners now).

Even if IBM India is unlikely to top systems soon, watch out. It’s profitable, and the least cash-strapped, thanks to services. So it has the funds to push marketing and channel promotions in difficult times, while paying salaries (sans pay cuts or hiring freezes). Some innovation and aggression should inch it back up the Top 20.

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