The Innovation Machine

It's not an exaggeration when it is said that IBM symbolizes

innovation. Its innovation exercise started with Bharti Airtel in a big way

three years ago, and now it's a continuing practice-thanks to 3,200

dedicated professionals deployed across IBM R&D labs in India. And, this

number is increasing with each passing year, and so is innovation in different

verticals.

Innovation is not only in terms of solution, but also in terms

of business model. And, this new thought process has transformed IBM India.

Presently, IBM is the only IT networking company in the world-and in India-to

offer end-to-end solutions to customers right from hardware, software, services,

and consulting. The company has been successful in morphing business and

technology integration.

Technology can enable and drive innovation. However, technology

must be combined with business insights to capitalize on technology's

potential, and be capable of unleashing an organizations' creative energy. IBM

is good in both of them-thanks to its consulting acquisition.

IBM is also bullish about BRIC (Brazil, Russia, India, and

China) market. It is expected that over the next four years, the IT markets in

Brazil, China, India, and Russia will grow with revenues more than two times the

worldwide revenues, creating a market opportunity of more than $150 bn by 2010.

And, it seems IBM think tanks were aware about the huge opportunities in BRIC

countries, and were working on India strategy for last four to five years to put

in place the missing links.

Under the leadership of Shanker Annaswamy, MD, IBM India/South

Asia, the missing links are already in place and it's time to reap benefits.

India is not only an exciting market, but also an innovation center for IBM

worldwide. In terms of growth, IBM India has grown by 38% in 2006, and India is

the highest growing market among BRIC countries. Not only this, the company has

been growing at around 30% over the last four years-an achievement not many

companies can boast of in the networking, hardware, and software space.

The company credentials are impressive. In terms of customers,

IBM India can boast of around 3,000 customers. It is also the biggest MNC

software exporter in the country. IBM manages more than 250,000 sq ft of data

center for more than fifty-five clients. It also helps more than fifteen state

governments to drive e-Governance related projects in their states. It has also

helped more than 100 plus clients prepare their business continuity processes

and disaster recovery systems. All this has resulted in 38% growth in employee

base from 38,500 employees in 2005 to 53,000 employees in December 2006.

Sensing India opportunity, Samuel J Palmisano, chairman and CEO,

IBM, on his India visit in 2006 says, "We will triple our investment in

India from $2 bn invested in the last three years to nearly $6 bn in the next

three years. This investment will ensure that we make the most of the

opportunities to grow this marketplace, while it also enables IBM to fulfill its

vision to become a globally integrated company."

The First Step



Number one in hardware and software space, the company had to increase its
foothold in the services space. This too happened with two acquisitions. The

first was Daksh eServices acquisition in April 2004, which helped IBM to enhance

its ability to deliver CRM and back office services to its clients in key

verticals like banking, insurance, retail, technology, telecommunications, and

travel and transportation. In addition, this initiative will increase the scope

of its business transformation delivery centers. Presently, IBM Daksh has over

20,000 employees and has over 200% growth in the last three years. The company

is servicing 200 processes at sixteen delivery centers spread across seven

cities.

The second was the acquisition of Network Solutions by IBM in

November 2005, which enabled IBM to augment its networking and managed services

portfolio of offerings in India, and broaden its reach across the country. It

also helped IBM to consolidate its leadership in the Indian domestic services

market by strengthening its service capabilities in the enterprise and

mid-market business segment.

Apart from this, the first of its kind model in the world called

the "On Demand Model" or "Risk Reward Model" got prominence,

thanks to IBM's willingness to share risk and opportunity with Bharti Airtel.

As part of the agreement, IBM was asked to deliver IT to Bharti as a service-and

not as a product or solution-and was paid certain percentage of Bharti's

revenue.

On March 26, 2004, Bharti signed a 10-year agreement with IBM to

consolidate, transform, and manage comprehensive infrastructure and

applications, joint development of marketing IT and telecom solutions and

services for India, and to be the preferred supplier of telecom services to IBM

India. Since then IBM has been focusing on IT and back office business

processes, while Bharti has been focusing on aggressive marketing. All this has

resulted in Bharti Airtel increasing its base from 6 mn to 42.7 mn.

IBM worked on parameters like: customer-facing interfaces,

thereby helping customers manage their accounts, view bills, make and track

service requests, register complaints, and more through multiple channels, like

the Web, phone and text messaging; predicting customer needs by building

business intelligence to the tune of 7 Tb and over 250 mn call data records

(CDR) per day; billing and mediation helped in integrating key business

functions like marketing, speeding up new product development and rollout; and

intelligent network monitoring, which monitors networks for issues even before

they might occur.

The company has increased its trust in IBM by expanding its

outsourcing relationship with additional $100 mn to incorporate next generation

servie delivery platform, which will enable Bharti to offer VAS to its customers

and open up new business opportunity in terms of innovative content and video

services. IBM is also working with Bharti to develop capabilities to implement

number portability and carrier access code as and when these services are being

allowed in India.

The Multi-year Deals



Having successfully completed Bharti Airtel outsourcing project for a period
of three years, IBM has also been successful in signing up with Idea for a

10-year business transformation pact to integrate, innovate, and transform Idea's

business processes and IT infrastructure. The pact is designed on an innovative

risk-reward revenue sharing model and covers Idea's existing operations and

potential new additions. The 10-year pact, depending upon Idea's business

revenues and circle expansion, would vary from $600-800 mn.

This partnership will enable Idea to meet the needs of its 14 mn

current subscribers and future growth; accelerate time-to-market of new

services; leverage opportunities from the convergence; add new revenue streams;

improve end-to-end customer management; and provide advanced revenue assurance

capabilities for top and bottom line growth. In addition, IBM, will also take

care of IVR self services. And, Bharti's learning will definitely help IBM to

complete the first phase of transformation in record time.

IBM is also working with Vodafone worldwide to speed up the

rollout of customer services. The company is also managing Vodafone's

application development and maintenace services to help improve software

capability. And, there are strong rumours of Hutchison Essar IT transformation

project also going to IBM once the integration formalities are completed.

"Outsourcing in India is not offshoring as the drivers are

different. And in India, the drivers are scale, explosive growth, flexibility in

system and time to market," says Vivek Gupta, director, communications

sector, IBM India/South Asia.

On the enterprise side too, IBM started to do wonders, as the

focus was on innovation and multi-year business transformation deals. The IBM is

focusing on six verticals -financial services, public, industrial,

distribution, communications, and small and medium business. With Indian market

booming, an increasing number of organizations started outsourcing non-core

functions to improve competitiveness in the market. IBM was able to leverage the

opportunity and win significant multi-million deals and multi-year deals. IBM

has been effectively leveraging its global know-how across different sectors,

combined with innovative technologies to boost its customer's business

efficiency and performance. Apart from this, IBM Global Financing helps in

providing flexible and attractive financing and leasing programs to fund IT

requirements of enterprise customers. Some of the unique deals signed recently

are CBDT, DIAL, DLF, FINO, and Apollo Hospital Group.

"We differentiate in terms of integrated suite of service

offerings with innovative solutions, depth of industry skills, and integrated

value proposition," says Sandip Patel, managing partner, Global Business

Services, IBM India/South Asia.

All these projects were unique and there were lot of

innovations. For instance, CBDT focused on public private partnership model and

payment was for services rendered, whereas in case of DLF, it was transformation

and management of IT infrastructure. In FINO, the focus was on core banking

platform coupled with distribution component and transaction acquisition system.

In Apollo Hospital Group, the focus was on joint go-to-market initiative to

build a National Health Data Network.

The Future



The company is preparing itself for the next phase of growth ie SMB and the
company has invested in the development of product and services specifically

priced and designed for the SMB marketplace under the IBM express portfolio. The

express portfolio comprises of hardware, software, services, solutions, and

financing, and is designed to meet specific criteria for SMBs that will provide

the requisite know-how to broaden its market base.

Seeing IBM's (India) success on enterprise side, the company

is also planning to focus on the SMB sector, trying to tap business potential

across fourteen cities. Though cost is still a priority for SMBs, the companies

have also begun to realize the opportunities provided by IT. This is where IBM's

domain expertise coupled with technology prowess and track record will make a

difference. The company has plans to spread its wing in smaller towns like

Nashik, Surat, Bhubaneshwar, Jamshedpur, Jaipur, Ludhiana, Dehradun, Vizag,

Madurai, Coimbatore, Goa, Lucknow, and Bhopal. The company is also planning to

spread its wing to other cities and towns through 2,500 business partners across

200 cities.

"We believe that we are at interesting point of growth in

this market and in this country. We will continue to focus on those areas which

are important to our clients," says Sandip Patel, managing partner, Global

Business Services, IBM India/South Asia.

In future, IBM is set to focus on enhancing partnership with the

government on e-Governance projects, expand industry specific business services

through the use of SOA, drive innovations through research lab and software lab,

and solidify leadership position in telecom, government, SMB, automotive, and

pharmaceutical sector.

Pravin Prashant



pravinp@cybermedia.co.in



(with inputs from Sonia Sharma)