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Analysts believe IBM Corp's move of splitting its business into two companies is a step in the right direction (Bloomberg)
Analysts believe IBM Corp's move of splitting its business into two companies is a step in the right direction (Bloomberg)

IBM business split: One-fourth of India staff may be part of new entity

  • We are committed to our footprint in India, said Arvind Krishna, chief executive officer, IBM
  • Krishna said IBM will focus on its open hybrid cloud platform and AI capabilities

With IBM Corp. splitting its business into two companies to build focus on hybrid cloud and artificial intelligence (AI), up to one-fourth of its India employees are expected to be part of the new entity, Arvind Krishna, chief executive officer, IBM said on Friday.

While IBM does not disclose the India headcount, it is estimated that the country accounts for about a third of its global workforce of over 350,000.

The split will have “no material impact" on India operations, Krishna said. Sectors such as telecom, banking, and government are driving the adoption of hybrid cloud in India, he added.

As part of this split, IBM will separate its Managed Infrastructure Services unit of its global technology services division into a new public company by the end of 2021. The new public company, yet to be named, has more than 4,600 clients in 115 countries and an order backlog of $60 billion, according to IBM.

Krishna, the first Indian-origin executive to lead the 108-year-old American IT giant, has been trying to turn around the company by focussing on hybrid cloud ever since he took up the top job in January. His focus on cloud comes as no surprise as until last year, he headed IBM’s cloud and cognitive software unit and was the principal architect of the $34-billion Red Hat acquisition, which was completed last year.

“IBM is laser-focused on the $1 trillion hybrid cloud opportunity," said Krishna. “Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating. Now is the right time to create two market-leading companies focused on what they do best."

Talking about the opportunity in India, Krishna said, “We are committed to our footprint in India. We also have a very large R&D presence in India and as our business begins to grow, we expect opportunity for people in India both in terms of employment and growth."

Krishna said IBM will focus on its open hybrid cloud platform and AI capabilities. “The new company will have greater agility to design, run and modernize the infrastructure of the world's most important organizations. Both companies will be on an improved growth trajectory with greater ability to partner and capture new opportunities."

With tighter integration and focus on its open hybrid cloud and AI solutions, IBM will move from a company with more than half of its revenues in services to one with a majority in high-value cloud software and solutions, the company said. IBM will also have more than 50% of its portfolio in recurring revenues.

Analysts believe it is a step in the right direction. “This move mirrors the tough call that IBM took ages ago when it let go of its PC business and sold to Lenovo. There’s power in focus, and growth is much more likely when an entire company is aligned to select areas of core strength and importance," said Sanchit Vir Gogia, CEO & chief analyst, Greyhound Research.

As part of this strategic move, IBM said it is trying to “simplify and optimize its operating model for speed and growth. This includes streamlining its geographic model and transforming its go-to-market structure to better engage with and support clients."

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