June 6, 2006
By Khozem Merchant in Bangalore
IBM has announced it would invest $6bn in India over the next three years, the most striking example of a multinational information technology company identifying the country as a market in its own right as well as a resource for talent.
Presenting the plan in Bangalore, Samuel Palmisano, IBM’s chairman and chief executive officer, said: “We are [already] the largest IT company in India and we are so excited by the prospect of India that we are investing another $6bn in the next three years. This money will go into expanding the work force and creating a large technology centre, software development and R&D.”
“We see India’s role as central to our global enterprise.”
The company is among a host of foreign technology companies to have a strong presence in India, having invested $2bn in the country in the last three years. IBM’s planned investment is the biggest by a multinational in India for years. It compares with recent announcements by Microsoft, Intel and Cisco to spend a total of $3.8bn in the country over the next few years.
India’s President A P J Abdul Kalam, a scientist by training, gave a speech at the event calling for more scientific and academic cooperation between India, US universities and commercial organisations such as IBM.
He stressed the need to create a world knowledge platform in India and indicated a major role for IBM and other US technology companies to have more of their research focused towards application within India.
IBM’s revenue in India has gone up by 45 per cent in 2004, 55 per cent in 2005 and 61 per cent in the first quarter of this year compared with the same period in 2005. Analysts estimate that its India revenue in 2005 was $1.1bn-$1.4bn. IBM is already the largest IT services company in India, where it employs around 42,000 people, but half are engaged in the lower-value business process outsourcing services, such as call centres.
Analysts say that IBM needs to strengthen its labour force in India and move into the higher-value end of offshoring, such as entreprise resource planning, so that it can compete with the growing global strength of Tata Consulting Services, Infosys and Wipro. For example, Delphi, the bankrupt US auto parts maker, revealed recently that it would reopen all its IT contracts for renegotiation, which means that EDS, which once had a dominant grip on Delphi, will probably be challenged by lower cost Indian companies.
******