IBM bounces back in India after shrinking for several years

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 the total workforce globally had been shrinking in size after hitting its peak six years ago. 
 
To be fair, the abnormal growth in the year ended March 2017 was due to an accounting factor. The firm saw nearly 39% jump in revenues after IBM India signed a unilateral pricing agreement with local tax authority covering transactions pertaining to export of IT services and recovery of related reimbursable expenses. 
 
The agreement was applicable for the period FY14 to FY18 and also applied to consecutive four rollback years (FY10-FY13) and was recognised in this financial statement as revenue from operations. 

  
As a result, revenues had crossed ₹32,000 crore with fat profit of over ₹6,000 crore in FY17, shows data collated by VCCedge, a data research platform and a sister unit of TechCircle. But the company had 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 has now bounced back in the year ended March 2023 with a growth after five consecutive years of declining business. The firm has clocked net sales of ₹27,854.6 crore, up 22% over the previous year. This growth came despite IBM losing an important business unit when it spun off its managed infrastructure services arm into a separate company as Kyndryl.  

Also read: IBM finds its feet in India after years of skidding business
 
TechCircle had first reported on October 11 that IBM India is on an upswing. 
 
IBM as a whole 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. Indeed, IBM and Kyndryl put together would have breached the previous peak in FY23.  

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’s third-quarter earnings for 2023 were reported last week, where the global giant reported quarterly revenue of $14.8 billion, up 4.6%.

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.
 
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 visualisation, integration, data engineering, and hyper-automation. It serves clients across domains like health and life sciences, financial services, professional services, among others.