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IBM: 'India and China are our future'
Looks to "the biggest pools of skills and talent around the world"

By Reuters

Published: Wednesday 10 May 2006

IBM, the world's biggest computer services company, sees growing contribution from Indian and Chinese markets helping it maintain its global position despite a shortage of skills and rising wages in the industry.

The tech powerhouse employs 38,500 staff in India, up from 9,000 three years ago, and 7,000 professionals in China, the world's manufacturing hub.

Michael Cannon-Brookes, vice president for business development in China and India, said on Tuesday from his office in Shanghai: "India is the epicentre of the flat world. If you look down from one mile up in the sky, India and China are the biggest pools of skills and talent around the world."

The world's two most populous nations also have booming IT domestic markets.

Cannon-Brookes said: "Five years from now, these two markets will be even more important than they currently are for the company. The markets themselves are growing very rapidly, and they [will] remain two major engines of growth for the world economy in five to 10 years."

IBM, which derives about half its revenue from IT consulting and outsourcing, has made India a global delivery hub for software needs and client services.

China is IBM's eighth-largest market.

IBM's business in India grew 61 per cent in the past year, the highest in the first quarter of 2006 for emerging countries, as telecommunications, banking, insurance and services sectors bought computer hardware and services to spur expansion.

Its revenue in China rose 15 per cent, Cannon-Brookes said but he did not give actual sales figures.

IBM, which began operations in India in 1992, is the largest multinational employer in Asia's third-largest economy. The $15bn domestic sector is important enough for IBM chief executive Sam Palmisano to hold his annual briefing for analysts in India's tech haven, Bangalore, on 7 June.

Cannon-Brookes, who visits India nearly once per month, said: "To move that to Bangalore is an amazing statement and very symbolic of the way we feel about these two markets. It has never been held outside the United States."

IBM, ranked fifth in India's IT and hardware sector on sales in the year ended March 2005, also competes with domestic giants Infosys Technologies, Tata Consultancy Services (TCS) and Wipro for clients as well as talent.

All three Indian software developers are raising their presence in China as a part of a move to serve multinational clients and tap Japan, the world's largest IT services market after the US.

Cannon-Brookes welcomed more competition, saying IBM enjoyed a better branding and a wider service offering. "They broaden the marketplace... a lot of the companies here are beginning to see what they can give to external vendors versus [servicing] internally."

He said the industry was battling rising salaries in India and facing some difficulty in attracting experienced application developers and consulting professionals who are in short supply in China, traditionally a hardware powerhouse.

He added: "Both marketplaces are very competitive from a skills standpoint.

"These countries are not about low-cost labour - they are about high value that you can get at a low cost compared to many countries."

Demand for code-writing skills is surging in India's booming software services industry, whose exports are forecast to cross $23bn in the year to March 2006. The top two firms - TCS and Infosys - alone plan to hire more than 55,000 professionals in the current fiscal year.