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IBM INDIA: The 3S Play

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DQI Bureau
New Update

Shanker Annaswamy managing director

Sharat Bansal



Business Consulting Services

Alok Ohrie Systems & Technology Group

R Dhamodaran Software Group

Ganesh Margabandhu



Mid-market Business

Mats Agervi Global Delivery

Amit Sharma CFO

Martin Apel country manager-HR

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India CEO Shanker Annaswamy says they're steps in the "transformation

into a solutions company": the services thrust, the manpower ramp-up in

India last year...two years after the global acquisition of PwC and its 30,000

people that created the world's largest consulting organization, and Rational

Software, inter al. The most recent step was IBM's exit from the PC business.

End-2004 saw the $1.75 bn sale of IBM's PC division to China's Lenovo;

IBM India's PC division head Neeraj Sharma became MD of Lenovo South Asia; in

the US, IBM veteran Ravi Marwah (once head of the Tata-IBM JV in India) moved

over to Lenovo as head of worldwide sales.

HIGHLIGHTS




Sells PC division to Lenovo; shifts further from hardware to services

BPO Entry: Buys Daksh, adding 6,000 people





New India chief; Manpower ramp-up





Services topper, ten-year contracts



(e.g. Bharti)





Narrower focus: easier to maintain leadership in a few areas

Aggressive pricing in services mega deals, low-end servers, can erode

profits





Exits high-growth mobility area; topline growth could slow

l Start-up Year: 1992 l Products & Services: Sales and marketing of servers, PCs and software products and services

l Address: Subramanya Arcade, 12 Bannerghatta Main Road, Bangalore-560029 l Tel: 22063000



l Fax: 22063871 l Website: www.ibm.com/in 
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Overall, India sales (just under $1 bn in 2004-05) are a tiny 1% of IBMs

global revenues. Of IBM's $96 bn global pie of 2004, 22% came from

Asia-Pacific; but India has just 5% share of that APAC slice. But India makes up

5% of IBM's global workforce-that's thanks to the global services exports

activity.

The trend is clear: IBM is moving to services (and software), and away from

hardware. Half its 2003 global revenues came from services (at 25% gross

profit); and that share will increase further post Lenovo; in India, that's

25% of revenue, or nearly 60% if you count its services exports (DQ estimates).

With strong recruitments in the services organization, IBM India's exports

went from 34% to 46% last year. And the whole operation in India is now part of

one company: IBM Global Services India Pvt Ltd.

The big win was Bharti, a ten-year IT outsourcing deal signed in March 2004.

Worth over $700 mn, it involved the transfer of Bharti's IT-related assets

(including people) to IBM.

With the PC business on the block toward the end of the fiscal year, IBM's

systems sales focus moved on to servers. It topped the server market by revenue

share in 2004 with over 30% share (IDC) and 16% growth. It was especially strong

in Intel-based (xSeries) servers with 20% growth and 36% share, well ahead of

HP. Unix server performance was far behind, though the August launch of Power

5-based systems helped a bit in the second half. Server and services customers

included Bajaj Auto's data center, Mahindra, HDFC, Yes Bank (from its SMB

sales division), IDBI, and Aviva Life Insurance (some of these, post fiscal

2004-05).

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