Bangalore: International Business Machines Corp. (IBM) has quadrupled revenue from its India operations since Shanker Annaswamy, 53, took charge of the business in July 2004. The world’s second largest technology company doesn’t reveal country-specific revenue, but industry magazine Dataquest estimates that in 2009-10, IBM’s India unit earned Rs12,388 crore, nearly half of it from the domestic market, compared with Rs2,729 crore in 2003-04.
IBM is also cagey about disclosing its headcount in the country, but industry estimates indicate that it is the second largest information technology (IT) employer in the country, behind only Tata Consultancy Services Ltd, which had 174,417 people on its rolls as of 30 September.
In a rare interview, Annaswamy talks about competition in the Indian market both from local and multinational technology firms, IBM’s big bets and key growth drivers. Edited excerpts:
You are one of the longest serving India heads for IBM. How has IBM India evolved since you took over, and what were the challenges you addressed?
In July 2004, a large portion of our business was hardware-centric. Come November, Lenovo took over our PC (personal computer) business. That was a dramatic change towards a software- and service-led organization. It was also the year when we acquired Daksh. Then the second change was the deal to provide the IT layer to Bharti Airtel (Ltd), a strategic outsourcing deal that signalled a completely different business model.
As we became bigger, the challenges and opportunities were in getting a unified view of the client, with an outcome-related interaction with the client. When you drive a relationship based on outcomes, then it has to be value-driven, you have to bring in research, labs, global delivery. That is why when we say invest in India for India and for the world out of India, we take that very seriously in IBM.
When the Bharti deal was announced, there was some scepticism. Some domestic IT companies said: “We tried serving the domestic market and failed, how can a multinational company with its cost structures do this?” But you have grown at least four times over the years and proved the sceptics wrong.
In 2004, we signed Bharti, and the next big one did not come till 2007 (Vodafone Essar Ltd and Idea Cellular Ltd). But this was not just one more deal, it was a big business model change. I have heard very senior, very visible people say that what IBM did for India is enable a business model change in the telco business. Our approach, and that is the key strength of IBM, is to align our IBM strategies, the business model change, with domestic needs, the domestic market, the national priorities and the national agenda. How many companies here focused on the domestic market till 2008, when the financial crisis hit?
There is this apprehension that your Indian peers have been able to learn from you, from the Bharti deal, and are able to undercut you.
Can somebody take some parts of what we do and replicate it? Yes, sure, they can. But can somebody bring in the entire value proposition that we offer and at the pace that we will? Take telecom, look at the telecom towers: some 300,000 towers today consume 1.8 billion litres of diesel, and the largest tower operator consumes next only to the railways (2.35 billion litres). With our software assets, we can put a system in place for alarms, energy usage, asset management, bringing 10-15% savings. What a great thing for the country in terms of green progress. We don’t follow and track somebody. Others will follow, we create new spaces.
But the perception was that you had a lock on the telecom space, though of course you can’t win everything.
We constantly innovate. In IBM, we have taken what we call a big bet in research in the mobile platform. IBM India Research Labs is leading that initiative. Banking is a phenomenal area.
But most importantly, the chairman has said that by 2015, we will deliver an EPS (earnings per share) which will be substantial, and that is on four growth strategies—growth markets, analytics, next-generation data centres and cloud, and “smarter planet”.
In late 2008, we put together a growth markets team (GMT). I am the GMT leader, focusing on 140 countries out of the 170 we operate in. Last quarter, growth markets grew at 16%, India at 15%.
Second is analytics. Whether it is the towers that I talked about or data from call centres or from the healthcare business, energy and utilities, banking, the data generated is enormous, and we are taking a big bet in analytics.
A big bank like SBI (State Bank of India), say, can have enterprise data warehouses, do segmentation, focus on NPAs (non-performing assets), priority clients, create a dashboard, and so on. I can replicate it across industries—I just need domain depth. And here we have centres of excellence in different verticals. I go to worldwide industry with domain depth, technology and innovation.
The third is data centres. We can bring 50% of energy efficiency and we are already working with clients like Religare and Kotak. Our cloud initiative is across the board, with software and infrastructure as a service, applications, and I can wrap services around consultancy.
As for (a) smarter planet, it is very simple. Most of the devices today are instrumented. We have more transistors today than grains of rice, and they are becoming cheaper. And devices have become intelligent, and there is a phenomenal opportunity for IT to create smarter businesses, smarter cities, smarter communities.
Like you upended the telco outsourcing model with Bharti, is something new happening in IBM India that will create a fundamental shift?
I think our Spoken Web project can do that. That goes beyond people who can speak English, operate a computer and navigate the Internet. The Spoken Web will use your voice. We have now taken this to a few pilot programmes, we are testing, we need the ecosystem to be ready. I as a plumber, say, can load contacts and other information into a voice site, linked through voice links, connected to (a) hardware shop, give orders, transact payments, and so on. We are working with farmers, we are looking at NGOs (non-governmental organizations) and banking. Along with the mobile bet, this will enable a lot more businesses, and could be a very fundamental change.
Apart from domestic IT players, how does IBM India see competition from other multinational corporations, say Dell Inc. or Hewlett-Packard Co.?
When you look at our business model and the 2015 road map, with those four growth strategies, we are not focused on location advantage or labour arbitrage, but the ability to create value for the client, with domain expertise, technology and alignment to the market needs. Other companies may have a presence, but in offering a sustained commitment to the domestic market, IBM India has a dramatic leadership, across industries. And our plan is to expand across India, into tier II and tier III cities. All the four growth strategies I mentioned are not the prerogative of only big cities. And it is not just opening offices, it is skilling, creating the right type of manpower.
There is speculation that you will soon be moving on to a global role.
I am already involved in many global leadership initiatives, one of which is that I am the leader of a four-member team supporting Poland from the outside.