IBM finds its feet in India after years of skidding business

The Indian arm of global technology giant IBM that offers technology, business, and cloud services to its parent company and other sister concerns and accounts for one in three of total workforce globally had hit its peak scale six years ago. 
 
Revenues had crossed ₹32,000 crore with fat profit of over ₹6,000 crore for the year ended March 2017, shows data collated by VCCedge, a data research platform and a sister unit of TechCircle. But the company has seen its business go on a downward spiral since then.
 
For five straight years its revenues declined and profits skid even more. 
 
But the firm appears to have broken out in the year ended March 23 with a growth after five consecutive years of declining business. 
 
Although the firm is yet to file its financials for the year ended March 2023, TechCircle has gathered that the firm likely managed to grow to its pre-pandemic level despite losing an important business unit when it spun off its managed infrastructure services arm into a separate company as Kyndryl. 
 
To be fair, IBM had grown in FY22 itself if one adds the business notched by the group including now separated company Kyndryl, during the year. IBM India and Kyndryl cumulatively clocked sales of more than ₹30,300 crore in the year ended March 2022. However, this was still lower than the FY17 high. 
 
But IBM, outside of Kyndryl, is believed to have clocked a neat double digit growth last year. If the numbers from the first half of FY23 is extrapolated, IBM India would have closed the year with a topline of more than ₹26,000 crore. Indeed, IBM and Kyndryl put together would have breached the previous peak. 
 
IBM spokesperson did not respond to TechCircle’s queries.
 
The firm had said in its last annual report that while Asia Pacific revenue decreased 0.7%, but grew 11% adjusted for currency, India was an outlier. 

Japanese revenue decreased 3.5%, but grew 15% adjusted for currency. India, on the other hand grew 20.3% (28% adjusted for currency) during the same period. 

Interestingly, globally, IBM’s revenue increased from $57.4 billion in 2021 to $60.5 billion in 2022, registering a growth of over 5%. But the company that crossed a milestone of $100 billion in revenues worldwide, a little over a decade ago, itself has shrunk in size to the tune of around 40% from its peak. This is partly due to business divestments and hive offs through the years. 
 
IBM-Kyndryl separation 
 
To be sure, IBM announced the completion of the separation of its managed infrastructure services business to Kyndryl in November 2021. The spun-off entity had global revenue of $18.5 billion at that time as a public company. 
 
The separation was seen as an attempt by IBM to move away from its legacy business to focus on expanding its hybrid cloud and artificial intelligence business. “The separation of Kyndryl is one of many actions we are taking to sharpen our focus on hybrid cloud and AI, leverage a portfolio clearly focused on technology and consulting, and achieve our growth objectives. We look forward to our partnership with Kyndryl as it moves forward as an independent company,” IBM chairman and chief executive officer Arvind Krishna had said then. 
 
Krishna, who has been the CEO of the company since 2020, has time and again emphasised the importance of these two technologies for the future of the global tech giant. More recently, during Q1 2023 earnings results in April he said that IBM is counting on hybrid cloud and AI to accelerate its growth. 
 
For the second quarter 2023 results, IBM reported a revenue of $15.5 billion, down by 0.4%. The software (7%) and consulting (4%) revenue rose, while the infrastructure revenue was down by 15%. "In the quarter, revenue performance was led by our growth vectors of software and consulting, and we continued to expand our gross profit margin, driven by our improving portfolio mix and productivity initiatives," said James Kavanaugh, IBM senior vice president and chief financial officer. He also added that for the year, the company announced seven acquisitions to bolster cloud and AI strategy. 

Neudesic acquisition 
 
One of the consequential acquisitions made by IBM for the India market in recent time is that of Neudesic that came with a price tag of ₹1,439 crore, as per sources.  A US-based cloud services consultancy that specialised in Microsoft Azure platform, Neudesic was acquired by IBM in February 2022 to further enhance its hybrid cloud and AI strategy. 
 
Neudesic has more than 1,500 cloud and data experts in the US and India. In fact, more than half of Neudesic’s headcount is based in India across Hyderabad, Bengaluru and Kochi. The company provides digital transformation services across advisory, application development, DevOps, cloud migration, data visualization, integration, data engineering, and hyper-automation. It serves clients across domains like health and life sciences, financial services, professional services, among others. 
 
IBM India hiring trends 
 
IBM has about 100,000 employees in India, as per media reports. The company is now expanding beyond metro cities to tier-2 cities to tap on the talent available in these pockets. For instance, IBM opened an automation innovation centre in Kochi last year. This center allows IBM and IBM Ecosystem partners to build automation solutions through their lifecycle including product design, engineering, and support. In collaboration with academia and industry partners, this centre will help in providing youth beyond metro access to jobs and exposure, Dinesh Nirmal, general manager, IBM Automation had said that time. 
 
Last year, IBM also opened an office in Odisha’s capital city Bhubaneshwar. A client innovation center, this new IBM office is expected to position the state as tech resource hub of India. The centre has a capacity for 500 employees. 
 
Notably, CEO Arvind Krishna said in May that IBM will stop hiring humans for roles that can be replaced by artificial intelligence (AI) in the next few years, in an interview with Bloomberg. He said that out of the 26,000 IBM workers involved in backend operations, 30% can be replaced by AI and automation in the next five years. Krishna said that the company has already paused or slowed new hiring in many backed functions such as human resources.