Building a smarter strategy for India, the IBM way

Big Blue is not only a leading employer in India, it also has the highest IT services revenues.

IT giant IBM is not just one of the largest private sector employers in India, but is also the biggest player in the domestic IT services space. Its portfolio of clients includes Bharti Airtel, Idea, Vodafone and Max New York Life, to mention a few. Data collated from various reports, analysts and industry shows that the US company derives annual revenues of over $2 billion from the domestic IT services market, with a marketshare of over 13 per cent.

At this level, Big Blue — as IBM is known — is ahead of domestic rivals HCL (both HCL Technology and HCL Infosystems), TCS, Wipro and even global rivals like the HP-EDS combine (including MphasiS) and Accenture. HCL's IT services revenues in India are estimated to be around $1.2 billion. Wipro, which draws around 22 per cent of its IT services revenues from India, is believed to be the number-three player, with estimated revenues of $1 billion, closely followed by HP/EDS. TCS, which recently renewed its focus on India, generates revenues of $500 million.

An email sent to IBM India's spokesperson for this article remained unanswered.

Being among the first IT firms to establish its presence in India, for its hardware business back in the 1930s, IBM has been able to harness its offshore operations for global delivery. With an offshore workforce estimated at 100,000, IBM has paid India and Indian firms no less than what it has made from India. For example, most Indian IT services providers provide manpower to IBM on contract to cater to its domestic as well as global customers.

“IBM is an exception in the domestic market. Its association with India is longer than most Indian or global companies. Other than as a market, it has used India as a strategic location for its global delivery model,” says Amneet Singh, vice-president of Global Sourcing at research firm Everest Group.

While IBM no longer furnishes the geographic break-up of its headcount, the company's last publicly announced figure for India was 53,000 employees as on January 1, 2007. The latest figure, according to estimates of HR consultants and analysts, is expected to be double that, of which 70,000 work at its strategic global services division, which includes BPO IBM Daksh. This means that of every three employees working with its global services division, at least one is from India. IBM's global services division is estimated to have a worldwide headcount of 190,000.

Besides, of the 70,000 working for its global services division in India, 20,000 work for the BPO business. The domestic business is also believed to have around 10,000 people. The R&D and consulting divisions are estimated to have 3,500 and 2,000 people, respectively. While the employee strength of IBM's hardware division in India is unknown, this is manpower intensive and requires strong sales and service capabilities.

But more than IBM's success in utilising India as a strategic global delivery centre, its success may be viewed more for its success in leveraging India as a key growth market. In the last five to six years, IBM has clinched most of the IT outsourcing contracts announced in the domestic telecom space, thereby maintaining its leadership position.

Starting with an outsourcing contract worth $1 billion from India's largest telecom service provider, Bharti Airtel, in 2004, it signed another multi-year mega outsourcing contract with Idea Cellular in 2007, worth about $800 million. In the same year, it bagged an outsourcing contract from Vodafone, which is estimated to be worth more than $600 million. Besides, state-run BSNL has also awarded IBM an outsourcing contract, although the size is comparatively smaller.

“The only other company which has been able to compete with IBM in the domestic telecom space to a certain extent is Wipro, especially since it pocketed a $600-million outsourcing deal from Aircel and similar-sized deals from Unitech Wireless in the last two years,” said an industry analyst, requesting anonymity.

Other than telecom, IBM has also established a solid presence in the domestic insurance sector, snapping up large outsourcing contracts from leading insurance players like Max New York Life, Reliance Life, Birla Sun Life and ICICI Prudential. The largest deal it signed in this space was with Max New York Life in 2008, estimated to be worth around $500 million.

In banking, though, it has not been able to make much of a dent. It has only managed deals with Canara Bank and Kotak Mahindra Bank. Its customers in manufacturing include Bhilai Steel Plant and SAIL, mostly for SAP implementation.