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Outsourcing:A Major Move to India for IBM

In a completely "stunning example", from doing back-office work for US and European firms, India has progressed to become a "centre for leading-edge innovation", prompting IBM to move all its business consulting design and development to India.

In a recent issue of Information Week, Paul McDougal writes about how IBM is gearing up to spend $200 million this year for the launching of its Indian centre, that will be responsible for handling the bulk of solutions development work for IBM worldwide, while its two existing development centres in India will play supporting roles. McDougal quotes Jeby Cherian, Head of IBM's new Global Solutions Delivery Centre in Bangalore, as saying: "Until this, we depended on any number of solution development centres across the globe. We're moving all of that development to India."

Cherian says, employees at IBM's new Indian centre will look to innovate and brainstorm as how best to combine IBM's vast array of hardware, software, and services products into pre-packaged offerings that their consultants can sell to specific industries. And, teams at the new centre will work on designing a system that will use telemetry devices, embedded processors and mathematical algorithms to help auto-makers better predict and manage warranty claim costs. As well, they will create systems that can work in so-called service-oriented architectures (SOAs), SOAs that feature reusable software components and applications that can be combined and re-combined in numerous ways. Currently, this work is being done at IBM's US and locations elsewhere in the world.

Confirming existing delivery centres outside India will not be closed, IBM says they will instead be "remapped" into demo centres, or as Cherian says: "They will become more customer-facing." Although, Information Week feels IBM's decision to off-shore virtually all its consulting offerings of design and development is sure to draw heat from critics, who believe American corporations should keep jobs, especially ones at this level in America, it has not deterred IBM's "hiring spree" in India, where it currently employs about 39,000 workers in the country, up from 23,000 a year ago.

Amitabh Ray, who runs IBM's global delivery operations in India, tells Information Week, the rate of growth will continue "for quite some time". If IBM's hiring spree in India continues as predicted, it will have more than 60,000 workers or about 20% of its worldwide workforce in India, by next year. While, it has 150,000 workers in USA, recent months have seen IBM quietly eliminating a number of domestic positions.

And, according to Ray, IBM's decision to shift its business solutions development to India will prove highly advantageous for the American company, but by extension its customers, as well. Not only will the move to India help lower costs, but greater centralisation will speed design and innovation. "In the previous model, these solutions were splintered across a number of development centres. We can get cross-visibility; something that's applicable in retail might be applicable in automotive." he went on to say.

IBM hopes its current initiative will give sales a badly needed boost, as the company's software revenues were rather flat in the last quarter, while service sales fell by five percent.

As India grows from strength to strength, the time has not come for it to rest on its laurels; instead the sub-continent should work on retaining its dominant edge.

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