Big Blue's 3-D VIEW

In 16 short years since IBM came back, India has become its fastest-growing operation thanks to long-term relationships and integrated business model.

A couple of years ago, IBM opened a Circuit City store, an electronics retail outlet, in Second Life. In this three-dimensional virtual world, one can try out products and examine them to fix problems.

Currently, IBM and Second Life creator Linden Lab are together developing software that will help organisations build virtual worlds.

When IBM executives talk, the term 3-D pops up often. You would think of the 3-D experiments, but it actually refers to the tenets of IBM's strategy: Deepening client relationships, Differentiated solutions and Delivered globally.

The Indian operations of IBM can easily be told apart by the way the Indian employees dress. They have largely discarded the blue suits and white shirts that dot the company's headquarters in Armonk, New York. In addition, the Indian arm seems to have quickly mastered the first D.

Four years ago, Bharti Airtel "" Bharti Televentures at that time "" wanted a partner to manage growth, not simply reduce costs. Step forward IBM, which won a fierce round of bidding by IT companies.

Bharti's group head Sunil Mittal was won over by "the hunger that IBM displayed, and the passion with which they came into this bidding process".

Under the deal, Bharti's hardware, software and IT service requirements were outsourced to IBM, but the story did not end there. The relationship has continued into a "joint go-to-market arrangement".

A part of IBM's revenue from this deal is linked to Bharti's subscriber growth. It was a good bet for IBM "" Bharti's subscriber base has since increased 10 times.

"The future of services is characterised by deep industry expertise and capabilities such as consulting, research and software, the ability to mitigate risk, and globally-integrated delivery. This is far different from the traditional labour arbitrage approach of the Indian pure-play services providers," explains Rajesh Nambiar, vice-president and general manager with IBM Global Delivery, India.

In the 16 years since IBM re-entered India (it was thrown out by the Janata Party government in the late 1970s), India has quickly become its fastest-growing country. According to its executives, the 3-D strategy is the key to its success.

With 73,000 employees in India (the most outside the US) and revenues of almost $1 billion (about Rs 4,000 crore), IBM is both admired and feared by its rivals, especially the Indian information technology service providers, as it has sewed up deal after deal, especially in telecom.

Research and data houses IDC and Gartner say IBM is the largest IT services provider in India. Tata Consultancy Services is a distant second with a domestic turnover of a little over Rs 2,000 crore.

In the last five years, the Big Blue has signed five- and 10-year deals worth over $2.5 billion in the telecom space alone with marquee names like Vodafone Essar and Idea Cellular, apart from Bharti.

Alok Shende, who heads IT and telecom for Datamonitor, points out that, while most telecom deals are struck with the chief technology officer or chief information officer, IBM manages to reach the chief executive officer, reducing layers of potential resistance and raising involvement down the line.

IBM's felicity is not limited to telecom. It has struck a comprehensive infrastructure and technology services deal with Union Bank of India, a five-year agreement with the Central Board of Direct Taxes to modernise its IT infrastructure and an enterprise resource planning deal for Indira Gandhi International Airport.

Healthcare IBM and Apollo Hospital Group announced a joint go-to-market initiative in April 2007 to build a National Health Data Network called Health Hi-way. Sony Pictures Entertainment's five-year contract with IBM is to support its global financial system.

D2: Creating and re-using solutions
"We spot emerging trends at least 6-12 months before they actually start," says Sandip Va Patel, managing partner and general manager with IBM's Global Business Services (India and South Africa).

IBM's Global Business Solution Centre in Bangalore, set up two years ago, works closely with the software systems group and research divisions.

Headed by Jeby Cherian, who was earlier an associate partner with PricewaterhouseCoopers, it houses nearly 800 PhDs, MBAs and engineers whose job description involves groundbreaking innovations for all IBM clients.

Unlike at a research lab with its own long-term research agenda, all solutions developed by GBSC must be given the go-ahead by IBM's Industry Solution Board "" a cross-divisional committee that identifies industry-specific, short-term business needs and funds GBSC's solution development. IBM invested about Rs 1,200 crore in this centre in 2006.

IBM is moving from a labour-based to an asset-based model, says Cherian. Customers now are involved in the process of defining solutions. All IBM division heads commit to revenue around the business solutions.

There's also an Institute of Business Value, which houses about 300 people, produces white papers and gives senior executives an early view of what's happening in different verticals.

Then there's the component-based model for each vertical, which creates 'Heat Maps' that list differentiators and under which IBM employees study clients' core competencies. These serve as inputs to IBM sales people. A Toyota, for instance, will never outsource its production, nor will BMW outsource sales and service.

IBM has also created assets around each vertical. It re-uses these assets even as it creates "industry templates" that serve as roadmaps in understanding verticals and the players within.

For instance, most telecom companies grew by acquisitions. They had customer and product databases that needed to be integrated, failing which the call centre would repeatedly call the same customer.

IBM's Telco SimpleOrder Solution allows telecom companies to capture and process customer orders. It has also developed a Fraud and Abuse Management tool, which detects potential fraud. "We have gone on to sell this tool to many insurance companies in the US and are looking at new markets," says Cherian.

IBM, according to Forrester analysts, is eager to introduce Indian pioneers' disruptive business models (such as the Bharti deal) and groundbreaking IT applications to clients in the West and emerging markets.

GBSC is working on a cutting-edge biometric-based rural banking solution that simplifies banking activities. There is also an interactive voice recognition solution under development that allows access to corporate ERP systems through a mobile phone. These solutions, once developed, can be applied in China, Poland, Brazil and South Africa.

D3: Global footprint
IBM is the only IT company in the world that offers end-to-end solutions: hardware, software, services, consulting and back office operations. What's more, it can deliver these from anywhere in the world.

"Our clients turn to us for work that wasn't really envisioned at the turn of the century. It requires an understanding of complex business issues, the ability to create, integrate and use information across the enterprise, and additional expertise in harnessing software and services.

Most companies can do one of these pieces very well, or several of them. But we do all of this in an integrated way and with a high degree of accountability," says Shanker Annaswamy, managing director, IBM India.

Indian IT service providers are strong in application, development and maintenance. They are getting strong in infrastructure, but have much to catch up with in consulting.

IBM, on its part, is not a stationary target. "As clients harbour global aspirations, our company helps them expand and reduce their time-to-market," says Patel.

The company operates in 170 countries and enjoys an increasingly broad-based geographic distribution of revenue. Its non-US operations generated 63 per cent of the revenue in 2007. It is investing in the future. More than $29 billion poured into R&D in the last five years.

IBM remixed its businesses to move to the emerging high-value spaces. It sold its personal computer business, seen as a commodity, to Lenovo and exited hard disk drives.

It strengthened its position in service-oriented architecture, information on demand, virtualisation and open, modular systems for businesses of all sizes. It has acquired 60 companies in the last five years, including PwC' consulting business. That has beefed up its operations in the more profitable segments.

IBM used to be country-centric five years ago. It's integrated now. For instance, MakeMyTrip, a web-based Indian travel company, recently signed a deal under which IBM Daksh will augment its customer service and back-office capabilities.

The BPO will do this by using the mother company's expertise in the contact centre business and understanding of the global travel domain.

PAINTING INDIA BLUE

IBM re-entered India in 1992 after being forced to exit in the late 1970s

It is the only IT company in the world that offers end-to-end solutions: hardware, software, services and consulting

In 2005, IBM acquired Network Solutions, an Indian infrastructure services company

IBM's Linux Competency Centre in Bangalore, one of only four facilities in Asia, develops standards and embedded software for open source

Its Software Innovation Centre in Gurgaon delivers e-business solutions for Indian organisations and the government

The India Software Labs in Bangalore and Pune develop, enhance and support IBM software products & technologies

Engineering & Technology Services Centre, Bangalore, provides technology design services for advanced chips, cards and systems

India Research Laboratory , Delhi (one of eight facilities worldwide) focuses on the country's technological infrastructure

Global Business Solution Centre, Bangalore, is the first of its kind

With the acquisition of Daksh eServices, IBM enhanced its BPO capability 

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