Al Ahram, p.19, (13-6-2006)

India becomes a battlefield for IT giants

The visit of Sam Palmisano, IBM’s president in India, highlighted the role of the Indian IT industry in the competition of the world IT giants. During his visit, Palmisano asserted that his company, the world’s largest IT company, considered India a focal hub supporting its world business, indicating that workforce of IBM’s branch in India has went up to 43,000 employees out of 329,000 employees, the company’s total workforce throughout the world. While the Indian president was sitting by him, Palmisano addressed 10,000 of the Indian employees directly in the huge palace of Bangalore, and 6500 others in various Indian cities through satellites. IBM is not the only company to head for India as a business centre. Therefore, analysts consider this an Indication that India is gradually becoming an important centre for world giants seeking competition in the field of outsourcing and IT.

During the visit, Palmisano met senior chief executives in India. Shankar Annaswamy, IBM's chief executive in India, said: "A significant part of any large project that we do worldwide is being delivered out of India.” For example, IBM manages a system it developed for a large American oil company. The system keeps track of consumption and financial and administrative processes as well as the technical help desk, data network and servers. IBM is also researching tools to track company assets and reduce costs. All this is done in three of IBM centres in Bangalore, Chicago and London.

This is considered a follow-up to past years efforts. The company returns in India increased by 61% during the first quarter of 2006 up from 55% during 2005 and 45% during 2004. IBM workforce in India has been stepped up from 9000 employees in 2004 to 43,000 employees currently. IBM has bought a number of Indian companies taking on their employees as well. Among them is Daksh E-Service, an Indian large outsourcing company with 6000 workers. It was bought by IBM for $160 million in 2004.

That growth has not come just from taking advantage of India's pool of low-cost talent. In recent months, the technology hub of Bangalore has become the centre of IBM's efforts to combine high-value, cutting-edge services with its low-cost model. For instance, the IBM India Research Lab, with units in Bangalore and New Delhi, has created crucial products like a container tracking system for global shipping companies and a warranty management system for automakers in the United States. In a second project, IBM researchers have fashioned a very important system that helps track the failure of components inside a vehicle. In March, the company started a Global Business Solutions Centre in the city, announcing that it would represent the "future of consulting services." IBM is expected to invest about $200 million a year in the new centre. The company hopes to provide clients with access to the expertise of its 60,000 consultants worldwide in complex areas like supply chain management and compliance with banking rules.

But Indian and world competitors are trying to gain on IBM. Among these companies are the Indian Accenture, a strong competitor in the field of consulting services, Tata Consultancy Services of Mumbai and Infosys Technologies of Bangalore. Infosys has pioneered and perfected the low-cost model. With 52,700 employees, Infosys has $2.15 billion in annual revenues, a figure that is growing 30 percent annually. The company has a consulting unit with headquarters in Fremont, California, near Silicon Valley, where it now has 200 consultants, and an additional 1,800 consultants in India. US competitors include HP and EDS which has recently offered to acquire shares of Mphasis, a medium-sized outsourcing company in Bangalore. Annaswamy, IBM's chief executive in India, acknowledged that growth was difficult because thousands of recruits had to be quickly integrated into the company, salaries are rising, and employee costs are also moving up.

Many analysts think that IBM’s turn, along with other companies, to India as a business centre indicates the beginning of a new advanced stage in the Indian IT industry. India has become a hub for IT services and software adding considerably to the R&D industry. With its human resources, cadres and convenient investing atmosphere, it has become a centre for which world IT giants are heading.

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