TEN years ago, the world’s biggest IT company then, IBM, did the unthinkable: it struck a deal with a company in India (Cadbury ) to take care of its IT needs. It was one of the country’s first domestic IT outsourcing deals. The rest, as they say, is history. More than a dozen such deals later — including the game-changing contract with Bharti Airtel — IBM is the king of the hill in domestic IT outsourcing. Recently,ET NOW’s R Sridharan caught up with Shanker Annaswamy, regional general manager of IBM India & South Asia, to talk about Big Blue’s journey so far and the road ahead. Excerpts from the exclusive interview:

Shanker, it’s been 10 years since IBM bagged its first outsourcing contract in India . It’s been a long journey. How do you look back on it?

1999 was indeed when we signed the first contract, but 2004 marked the biggest turning point for us — the outsourcing deal with Bharti. It was $750-million contract, and 2006 followed with Idea cellular and Vodafone. I think, we’ve done wonderfully well.

If you look at the last year and a half, every Indian IT vendor has been hit by the global downturn, especially in the financial services market. How has IBM in India coped with the downturn?

Given the global market conditions and the fact that large deals were not happening, we were looking at our successes here, and asking ourselves how we can replicate the successes beyond the telecom industry. I am very happy to share with you that we looked at customers beyond telecom, to customers like Amul and media companies like Sun TV.

You have a lot of Indian vendors now competing for domestic outsourcing deals. Wipro, for example, recently bagged the Aircel deal, which IBM was pitching for as well. How do you see the competition from India vendors?

It took some time for other competitors to look at, understand the model and then go and win one or two accounts. But if you look at the real strategy behind it, it’s not simple IT consolidation. It is your capability to bring in tools and asset-based services than labourbased services, and bring research to play.

You also have HP and Dell, which were traditionally hardware firms, getting into services. Are they a bigger threat?

Industry domain knowledge and capabilities are not built overnight. The differentiator for us is very clearly our integration: consulting and system and technology business like the mainframes and big computers, then the software business, which is an integrating business, then we have services end-to-end . Our ability to take a certain portion of the customer business and turn it into a profitable proposition for them is very big and it will take competition time to catch up.

But what are the other sectors apart from telecom and manufacturing that will open up to outsourcing within India?

BFSI area would be a potential opportunity for us to look at. Public sector will take time. Healthcare could be a huge opportunity, but it may take some time as well.

IBM doesn’t disclose its India headcount, but as I understand it’s 90,000 or even one lakh. How does this number split up?

Actually, we are 73,000-plus employees and we are growing. The large proportion of the employee population is in global delivery missions , including the global delivery and then the IBM Daksh BPO outsourcing processes. The rest of the business will be then the domestic business, research labs, software labs and other groups.

At what point would IBM want to de-risk its India strategy or do you think that’s not a concern?

There is no timeline by which we go. This base of 73,000 was built not on a certain number to be achieved or cut off, it depends on our customers, our clients, their projects, and their core competence and domain expertise that comes in. So, India continues to be a key component of this and I would expect it to grow.

Finally, before the global economy slipped into recession, there was a lot of talk about how India had become an expensive place for IT outsourcing. Is India still competitive?

I think so. We will continue to be so. Because India has a unique advantage of being a pioneer here and also it has a large skill base, and the track record. But we have to be careful not to sit on these successes but continue to train and skill our future workforce.

Source : http://economictimes.indiatimes.com/infotech/ites/BFSI-is-the-next-big-thing-in-domestic-outsourcing/articleshow/5339018.cms