IBM INDIA: Bucking the Trend

MD Abraham Thomas Startup-Year 1992 Products & Services Sales and marketing of servers, PCs and software products, and services Branches 14 Address No. 12 Subramanya Arcade, Bannerghatta Road, Bangalore 560029 Tel 2063000 Website www.ibm.com/in

Abraham Thomas Managing director Amitabh Ray Director, IBM Global Services PS Gopalakrishnan Director, IRL COUNTRY MANAGERS S Choudhary (ISG) Ashish Kumar (IGSI) Alok Ohrie (PCD) Frank Luksic (SWG)

Took on about 800 local staff of PwC after global merger, 40 from Rational. PwC business line now called IBM Business Consulting Services Software exports remain flat. Growth driven by aggressive pricing on system sales and domestic services

Strong services business and extensive channel network Powerful enterprise systems brand equity in the country

Poor presence in telecom space, which continues to grow fast

If there was one company where the story turned on its head last fiscal, it
was IBM India. Fiscal 2002’s overall growth of 7% had come almost exclusively
from software exports–which was the only segment that had seen growth during
the year anyway. In fiscal ’03, software exports–astonishingly–was the
only segment that remained flat. Instead, growth was driven almost entirely by
the domestic business–it grew 28% after a decline of 10% the previous year and
accounted for 65% of overall revenues.

The domestic business, in turn, was driven by systems sales that grew 20% and
now accounts for 40% of the total turnover. It came from a new-found aggression.
It bid competitively, and barring PC servers, ASVs declined across all segments
that did well and were mostly lower than the ASV of closest competitor HP.

As the overall personal workstation market declined 1% in unit terms, IBM
unit sales grew sales 233% to 3,500 units, accounting for 50% of the entire
market. In unit terms, PC servers grew 33% and PCs 39%, while domestic services
was up 32% in value terms. The domestic services business is handled by IBM
Global Services (India)’s domestic division that works closely with IBM India
backing up its systems sales with services and taking up SI work for key
customers. The only segment that performed poorly was the Unix server business,
which was down 27%, compared to a healthy segment growth rate of 21% during the
fiscal.

Essentially, the company capitalized on its existing verticals–BFSI and
manufacturing–with a growing presence in others like pharma, education and BPO.
The big gap–a year after it set up a special business unit, the telecom sector
still evades it with possibly just one high end server deal that it won against
HP.

The big surprise–completely flat exports from IGSI (exports), when peers
like Infosys (39%) and Wipro (29%) have had a relatively better year. Given that
the company also hired around 17% more staff during the year, it also spells
falling productivity per employee.