New Delhi: The Indian services arm of IBM Corp., which contributed almost $1 billion (around Rs4,200 crore) in company revenues during 2007, is gearing up to aggressively grow the business as it takes on competition from domestic rivals such as Tata Consultancy Services Ltd.
IBM’s aggressive targets here are significant not just because India is turning out to be the fastest expanding business for IBM globally and already plays a significant role in its global services strategy but, it comes as other top local tech firms such as TCS and Infosys Technologies Ltd are beginning to go after similar business within India.
But, in the fourth quarter ended 31 December alone, IBM India signed multi-year deals aggregating at least $1.4 billion in new domestic services contracts, making it the leading player inside India.
Demand for information technology, or IT, services in India is expanding at 30-32% annually, the fastest expansion of such a market anywhere in the world, from about $5 billion, according to market research firm Datamonitor India. Tech researcher Gartner Inc.’s local office estimates the market at Rs19,562 crore. Industry insiders estimate IBM has about half of outsourced contracts in India.
Managing partner of IBM’s global business services arm in India Sandip Patel (Photo by: Ramesh Pathania/ Mint)
Meanwhile, soon after setting up a division aimed solely at Indian customers in November, Kris Gopalakrishnan, Infosys’ co-founder and chief executive officer, told Mint the company was definitely increasing its focus on India.
“Right now, India contributes 3% of our total revenues and that’s purely from Finnacle (Infosys’ banking software product) and what we consider as significant contribution is when we cross the 5% mark. We are hoping that India at some point will be more than 5%,” he said.
On Monday, Infosys said it plans to focus on business from customers in manufacturing, government, banking and financial services, energy and utilities, retail, logistics and health care. “We will leverage end-to-end capabilities to serve turnkey projects... to provide value based services and do consulting led engagements in India,” Binod H.R., senior vice-president and head, India business unit at Infosys said in an email response to questions.
Bigger rival TCS said its India business, already one-tenth of global revenues (Rs22,863 crore last fiscal year), was now growing at 40% annually. The Mumbai-based firm is focused on “core infrastructure projects and emerging areas such as retail, utilities, ports, airlines, infrastructure and special economic zones,” said Venkat Ramani, vice-president and head, India geography, at TCS.
Analysts note that IBM has been focusing on the domestic deals for nearly 10 years. That coupled with their strategy of helping Indian businesses transform themselves by leveraging IT, has helped IBM build a strong domestic base. Bharti Airtel Ltd, Idea Cellular Ltd, Vodafone Essar Ltd, the government’s Central Bureau of Direct Taxes, the Delhi International Airport Ltd and real estate giant DLF Ltd are among IBM’s key customers in India.
“IBM has always seen IT services as part of the bigger business issue which is business transformation. This is their strength and so, their selling pitch and IT penetration is at a different level,” said Alok Shende, practice head at market research firm Datamonitor India.
Costs of IBM’s infrastructure and people are spread over work done for multiple foreign and Indian clients by a 73,000-strong staff in 25 centres in Bangalore, Chennai, Gurgaon, Kolkata, Pune, Hyderabad and Mumbai.