‘Press The Pedal’

ravi.jpg (4902 bytes)“We
have to accelerate,” says Ravi Marwaha Chief of IBM business interests in India. And
accelerate they have to. After bifurcating the company into solutions and services
entities (Tata-IBM Ltd and IBM Global Services), it is speed which will determine the
place that Big Blue will hold in the Indian IT landscape. Not that it has done badly.
Nevertheless, a 13-percent growth is modest, by the high standards of IBM and the Indian
industry.

However, not much can and should be read
into the 13-percent growth as this could well be a year of shifting gears for IBM in
India. If its declared ambition of becoming a $ 1-billion company in India by the year
2001 has to bear fruit, then the entire scale of operations has to be lifted by several
notches. It is in this context that Marwaha’s focus on acceleration of the pace of
business has to be seen.

The entire strategy of the company is
centered around one common mantra-solutions. The focus has shifted from shipping boxes to
building solutions around the Blue Box. As a strategy, there is little that is at fault
with this thought. If anything, this will enable IBM to create much higher value-add in
the end user site, and thus is likely to lead to higher revenue per customer. This also
gives the company a much closer relationship with the end-user. This assumes importance as
and when, large users start rebuilding their organization’s structures around IT
solutions. From the vantage point that IBM can command, and the relationships that it can
create, the company could well assume leadership in creating IT solutions for the Indian
enterprise.

S T R A T E G Y
  • To become and remain the preferred solutions
    provider for Indian organizations.
  • To focus on the solution around the Box and
    add value rather than move Iron.
  • To provide global solutions to global
    companies using expertise available and become one of the major solution exporters to
    end-user companies in the world.
  • To assume leadership in ecommerce worldwide
    and evangelize to lead in future.

T A C T I C S

  • Shift away from systems. Go for solutions.
  • Push AS/400 and RS/6000 simultaneously into
    heterogeneous markets.
  • Pull PCs into the solutions fold. Volumes
    come from bundling PCs with servers.

O B J E C T I V E S

  • To reach $ 1 billion by the year 2001 in
    India.
  • IBM Global Services to become one of the top
    five software exporters from India.
  • To be in the top five PC vendors.
  • To evangelize Notes as a platform of choice
    for enterprises.

The same is true across the
enterprise, including the PC strategy. While the PC shipments have been satisfying for the
company, according to Marwaha, the ramping up that was expected to happen has not
happened. And this is one area where even internationally, IBM has faltered. While
competitors such as Compaq and HCL have been able to move quickly into the numbers game,
and de-emphasize the solutions end of the business in vanilla PCs, IBM has been slow off
the mark. As a result, it has already fallen behind in the global PC ranking. The same
danger is applicable to the Indian market. While IBM concentrates on the solutions end of
the business, which is both higher revenue earning as well as helping to add value to IBM,
the Box market is also alive, vibrant and kicking. And while IBM’s internal targets may
have been met in this segment, it will be worth its while to figure out strategically how
the company is going to leapfrog in the sweepstakes.

IBM’s advantage across the world is its
brand value. During the first few years of its re-entry in India, the company was unable
to, or did not, take full advantage of the brand strength and kept emphasizing on an
entity called TISL. This was also the time when the Indian market was booming. However, in
the last three years, since the induction of Mukesh Aghi, Marwaha, and Pawan Kumar, in
that order, there has been a significant jump in the visibility of the IBM brand name in
India. As also, last year was when IBM finally changed the name of the company from TISL
to Tata-IBM Ltd. In retrospect, never has been a bigger and more glaring error committed
by so many wise men, when a global brand was given the go-by and a new hybrid was created
and peddled. The errors of the past have done their damage. The crucial initial big-bang
advantage which IBM could have derived from 1992 throughout the bull phase of the Indian
IT has been sacrificed by the company in India. While many might dismiss the mistake as
minor, the loss of four years will probably end up shifting the $ 1 billion target also by
a few years, if not proportionately. What has also happened in the interim is that across
the product segments, competitors from all over the world have penetrated well and truly
into a space that IBM might well have ruled. For example, the PCs. In 1993, the total
number of PCs sold in India was just over 200,000. Currently, it stands at over 600,000.
Conventional wisdom would suggest that penetrating a 200,000 market would be easier than
one which is three times bigger. In the interim, Compaq has come in aggressively and has
literally swept the PC market by its pricing and marketing strategies. Consequently, IBM
struggles to find itself in the top five PC vendors in a growing market such as India.

In contrast, IBM’s taking over the notebook
market is also a matter of history. Coming in at the right time, Aghi’s team moved
decisively and fast. And in a space of 14 months came in from # 5 spot to lead the
industry in the mobile commuting category. As we have constantly said, it is the speed
which pays, both in the short run as well as in the long.

The key is the positioning of IBM as a
solutions provider in the enterprise. With the price-sensitivity of medium and large
enterprises declining and it being replaced with a value proposition, the window of
opportunity for IBM to penetrate into these markets is already open. However, the key
inhibitor to this positioning is still the price tag associated with IBM. Despite the best
efforts of IBM management, the image of the company as an expensive vendor refuses to go.
This manifests itself in the fact that while large and medium enterprises might yet aspire
to be a part of the IBM world, the value that is perceived to be derived may not be very
explicit. That is a long road for IBM.

In the meantime, Big Blue would do itself
proud by doing several things simultaneously. For one, it must move rapidly to reach into
the PC market. Second, the value proposition has to be made significantly and at a higher
decibel level than what it has done before. One of the more successful strategies that IBM
has adopted in India is the roadshow route. In 1996-97, the company consciously embraced
this method for reaching out to customers in metros and mini-metros. Somehow, probably the
roadshows have become institutionalized, the impact has lessened last year. It will be to
IBM’s advantage to reinvigorate this route once again. Third, it will have to evangelize
‘ecommerce’ in India. Despite the fairly low levels of Internet penetration, IBM will be
in a position to reap enormous benefits as and when actual business is transacted over the
Net. Over at Golden Enclave, Internet as a real business opportunity should be realized at
two levels-one, to serve the interest of enterprises and ISPs to use IBM platform to
proliferate their presence, and two, to use IBM solutions to facilitate transactions
across the Net and thus deliver real commercial advantage to the enterprise users in
India.

One of the key spin-offs that the company
made last year was the creation of IBM Global Services. More a fait accompli, IBM Global
Services (IBM GS) has made rapid strides in the first six months of its existence and
promises to accelerate its pace in the future. With partnerships with many IT companies in
the Tata fold itself as the key business model, IBM GS will provide a wide (possibly one
of the widest) gamut of expertise available for solutions for customers abroad. It is also
expected that given the growth and the opportunities that arise, IBM GA might go in for
key strategic domain-expertise based acquisitions in the coming year.

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