India is IBM's fastest-growing market, exec says

Large outsourcing contracts was main growth driver for IBM in India last year

India is the fastest-growing market worldwide for IBM, with the company increasing revenue there by 55 percent last year, a senior IBM executive said Thursday.

The growth was driven by IBM's focus on specific industries, such as banking and government, Shanker Annaswamy, managing director of IBM India, told reporters in Bangalore. "Growth came from all our businesses, with services also a significant component," he said.

Annaswamy did not disclose a dollar figure for IBM's India revenue. The growth rate does not take into account PC revenues, as IBM sold this business in early 2005 to China's Lenovo Group.

The growth rate in 2004 was 45 percent, Annaswamy said.

Parent company IBM ended 2005 with revenue of $91.1 billion, a 5 percent year-on-year drop. Revenue was up 3 percent to $88.3 billion if the PC business was excluded.

The main growth driver for IBM in India last year was likely to have come from services, particularly large outsourcing contracts, said Kapil Dev Singh, country manager of research firm, IDC (India) in Gurgaon, near Delhi.

IBM currently operates in 40 cities in India and has about 2,500 partners.

Besides being a fast growing market for the Armonk, New York, company, India is one of three hubs for the global delivery of services to IBM's customers worldwide. The other two are Brazil and China.

"India is the largest hub for services for IBM, and we do work for over 250 customers from India," said Amitabh Ray, director for global delivery at IBM Global Services India. The company has set up a remote delivery center for outsourced infrastructure management services across multiple technologies and platforms, he added.

In 2004 the company acquired Daksh eService, a business process outsourcing (BPO) company in Gurgaon. Besides BPO services, IBM Daksh also offers business transformation services, which include consultation to clients worldwide on transforming and optimizing their processes, Ray said. IBM also acquired last year Network Solutions, an infrastructure services company in Bangalore, India. But the focus of this acquisition was to improve its presence in the local market.

The company also runs software labs, application services centers and research centers in India.

IBM employed 38,500 staff in the country at the end of last year, up from 24,000 at the end of 2004. The company does not break out the number of staff that are employed for the domestic market and those employed for the global services business.

A number of multinational services companies including Accenture in Bermuda and Electronic Data Systems of Plano, Texas, have set up offshore services capabilities in India to take advantage of the low cost of manpower in India. Some of them are now competing on price for contracts from local outsourcers like Wipro and Infosys Technologies, according to a report last year by sourcing consultancy firm, Technology Partners International Inc (TPI) in Houston, Texas.

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