Business

IBM chief Arvind Krishna bets big on India business

India appears to be playing a big part in this story. “Globally, 70% of IBM’s revenue will now come from software and consulting. The India market revenue is expected to mirror the global trajectory,” Krishna told a select media gathering on Friday.

While IBM does not share growth figures for India separately, Krishna said Asia “did really well” in the third quarter, “and India was a big piece of that”. “We feel good about our business in India. We have a good footprint with financial services and telecom, in government, in the industrial sector, among many others,” he added.

Krishna, who was on his first official visit to India after becoming chairman in January, met Union finance minister Nirmala Sitharaman, Union minister of state for IT Rajeev Chandrasekhar and railways and telecom minister Ashwini Vaishnaw on 18 November to explore how his company could help the government implement the ‘Gati Shakti’ master plan for multi-modal connectivity across the nation.

Gati Shakti is described as “…essentially a digital platform to bring 16 ministries including railways and roadways together for integrated planning and coordinated implementation of infrastructure connectivity projects”.

“I was very enthused with the speed at which they’re (the government) willing to make decisions, and rightly so, we feel good about our business in India,” Krishna said.

In the last six months, IBM has expanded in tier-II cities in India and accelerated hiring. Krishna, however, did not share any India hiring numbers. IBM recently launched Software Labs development centres in Kochi and Ahmedabad. “We will be setting up new centres, but I cannot share anything specific at this point in time,” he said. IBM also launched a Client Innovation Center (CIC), specializing in design, software engineering and analytics, in Mysuru and set up new consulting business process operations centres at Hyderabad.

IBM’s India labs, too, are “closely aligned” with the global IBM strategy “and pioneering work from these labs is integrated into IBM products, solutions and services”. The core innovation and technology work for the IBM POWER10 processor that plays a critical role in IBM’s hybrid cloud strategy, for instance, was designed in India by IBM Systems Development Labs.

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Further, IBM Research Labs in India is advancing Watson’s ability “to understand natural language processing (NLP), building trust and transparency and confidence in business predictions as well as helping businesses automate and scale AI”. “Our software labs also collaborate with our technology ecosystem to co-create solutions for clients and industry,” said Krishna, citing IBM Cloud Satellite as an example of that collaboration.

IBM has transformed itself globally, too, under the leadership of Krishna. “For the past three years, we’ve done a lot of work to position IBM to have the right portfolio for growth, beginning with the acquisition of Red Hat that was completed in 2019. This month, IBM spun off its managed infrastructure services business, now known as Kyndryl, and transferred 89,554 employees from IBM to the company,” said Krishna, who was the key architect behind IBM’s $34 billion acquisition of cloud company Red Hat.

IBM is not new to reinventing itself. On 12 August 1981, IBM startled the world by introducing the smallest and lowest-priced computer system (IBM Personal Computer-5150). PCs were mostly referred to as IBM-compatibles. To be sure, Apple II was introduced in 1977, while the Atari 800 was launched in 1979. IBM sold its PC business to Chinese computer maker Lenovo in May 2005 to focus on providing services to “enterprises” rather than consumers.

With the acquisition of Red Hat two years ago, IBM strengthened its hybrid cloud business, and this “is the highest growing part of our software portfolio”, Krishna said.

Krishna was also instrumental in having IBM spin-off its managed infrastructure services business, now known as Kyndryl. IBM has “a stronger (technology and services) portfolio today than in any time in the past decade”, Krishna said.

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As part of the global strategy, according to Krishna, IBM is increasing its spending on research and development. Globally, IBM was a leader with 9,130 US patents in 2020, and India continues to be the second-highest contributor to IBM’s patent leadership, with 930 patents granted to inventors from India. IBM is also spending more money on mergers and acquisitions (M&A). “We have acquired 17 companies since last April,” Krishna pointed out.

IBM is also “simplifying” its business. “It means two things. First, we (are) making it simpler for how we go to market our own people in front of clients. In addition, we’re partnering with (companies like) Microsoft and Amazon. They’re not competitors; they’re partners,” Krishna emphasized, adding, “Let me be clear, our pipeline of business with each of them is measured in the billions of dollars. But it’s not just (Microsoft and Amazon). It includes SAP, Oracle, Salesforce, Adobe, etc.,”

Krishna reasoned that this partnership is a “win-win” for all of them. Nevertheless, Amazon Web Services (AWS), Microsoft Azure and Google Cloud cumulatively accounted for 61% of the total spend on cloud services in the third quarter of 2021, according to market research firm Statista.

AWS was the most popular vendor in the cloud infrastructure services market at 32%, followed by Azure with 21%, and Google Cloud with 8%. IBM Cloud has much catching up to do, but analysts expect that the company will be able to gain more momentum, now that it has split its managed infrastructure business into a new company, leaving it to focus on consulting and software (of which, cloud is a major part).

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Meanwhile, Krishna said IBM “will generate $35 billion of cash flow over the next three years…we will give a return to shareholders in the form of dividends; the remaining will get reinvested back into the business in order to help grow revenue, and actually further increase the cash flow”.

Krishna concluded: “We are the world’s largest open-source company…We can learn to change.”

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