RESEARCH TRIANGLE PARK, N.C. – On the sixth day of the sixth month in the year 2006 and with Dr. A.P.J. Abdul Kalam, India’s president, at his side, IBM Chief Executive Officer Samuel Palmisano declared the importance of India to Big Blue’s future.
IBM will build new facilities there while increasing research and development. Adding jobs is a part of the $6 billion investment as well, but one IBM exec told The New York Times that a “significant part” of major Big Blue projects is already being “delivered” out of India.
Does the passage of jobs and project importance mean bad news for IBM workers – 11,000 of whom work in and around RTP and another 110,000 around the U.S.?
Traveling to Bangalore – India’s rapidly growing equivalent to Silicon Valley – Palmisano said on Tuesday that IBM would triple its investment in the country over the next three years.
“India and other emerging economies are an increasingly important part of IBM’s global success,” Palmisano said. “If you are not here in India, making the right investments and finding and developing the best employees and business partners, then you won’t be able to combine the skills and expertise here with skills and expertise from around the world, in ways that can help our clients be successful.
“I’m here today to say that IBM is not going to miss this opportunity. In the next three years, we will triple our investment in India — from $2 billion over the last three years to nearly $6 billion in the next three years. That investment will ensure that we make the most of the opportunities to grow this marketplace, while it also enables IBM to fulfill its vision to become a globally integrated company.”
India suddenly has become a showcase, according to analyst Bob Djurdjevic, at Annex Research.
“What IBM is doing is breaking new ground in that sense, by heralding its operations in India boldly and loudly as a success,” he told The Associated Press, “not something they should be reticent about.”
IBM is not alone in making attempts to capitalize on a growing India market and an expanding pool of talented workers. Red Hat, Microsoft, Intel and Cisco have made investments there. So too has much smaller Raleigh-based Relativity.
Still, the scale of IBM’s announcement generated big headlines in newspapers and reports on TV and the web around the globe. It also struck a sour note with some critics, who noted that while IBM was laying off workers in the U.S. and elsewhere around the world it was hiring at a red-hot pace in the home of Bollywood and the Taj Mahal.
“Never before had IBM shared so much about its plans to be the top computer company in the high-tech nirvana of India,” reported Julie Moran Alterio in The Journal News in White Plains, N.Y.
“Former IBM employee Lee Conrad, coordinator of the Alliance@IBM, a budding union, felt vindicated by the confirmation that IBM’s India work force is bigger than anyone thought.”
Conrad told Alterio that job creation in India was “job shifting” away from the U.S.
“For a couple of years, we said 30,000 to 40,000 jobs would be offshored, and people were skeptical,” Conrad said. “Now they are up to 43,000 jobs, up from 9,000 in 2003.”
Saritha Rai, writing in The New York Times, pointed out that more than jobs were at stake in IBM’s India commitment. He noted that Big Blue was taking 50 Wall Street analysts on a tour of its India facilities and then spelled out in great detail the depth and breadth of IBM’s strategy.
“The meetings are more than an exercise in public and investor relations,” Rai wrote. “They are an acknowledgment of India’s crucial role in IBM’s strategy, providing its fastest growing market and a crucial base for delivering services to much of the world.
“ ‘A significant part of any large project that we do worldwide is today being delivered out of here,’ said Shanker Annaswamy, IBM India’s managing director and country head, who presides over what is now the company’s second largest worldwide operation.”
But not all is blue skies in India. Manjeet Kripalani, writing for BusinessWeek, stressed IBM faces challenges:
“Palmisano’s visit to India is proof of how important the country has become to IBM’s future. Already the country is home to the second-largest contingent of IBM employees outside the U.S. Yet, while IBM India pays about 20% more than rivals to attract employees, the competition to lure and retain top talent is heating up,” Kripalani said.
The India investment hasn’t resolved all questions in analysts’ minds about IBM’s overall strategy, either. Analyst Megan Graham-Hackett of Standard & Poors also noted that investments in India are not free from risk. However, she maintained her “buy” rating on IBM stock.
Kim Caughey, an analyst with Fort Pitt Capital Group, called for a clearer vision.
“What they should do is say something like, ‘We’re not your father’s IBM’,” Caughey told Amanda Cantrell of CNNMoney.com . “I’m disappointed that the company isn’t doing a better job of explaining how it’s rejiggered its array of products and what effect that has had. It isn’t priced in yet – people just don’t get the story.”
Whatever “story” IBM continues to tell, it’s clear India will play a larger role.