March 11, 2006
Consolidation In India
IBM says its existing delivery centers outside India won't be closed but will be "remapped" into demo centers. "They will become more customer facing," Cherian says. Still, IBM's decision to put in India virtually all of the design and development of the bundled solutions its consultants offer won't comfort U.S. workers who hoped such high-end work wouldn't go abroad, at least not this quickly. The company employs about 150,000 workers in the United States but has quietly eliminated a number of domestic positions in recent months. It has lowered its costs in global services, improving gross margins about 3 percentage points last quarter, to 27.4%, compared with a year ago.
The systems created in Bangalore will be marketed and sold to customers through IBM's Business Consulting Unit, which posted a 6% decrease in revenue in its most recent quarter. With the bulk of the unit's offerings to be designed in India, IBM will need to find a lot more people with the skills and experience of a Purohit. That won't be easy in India's tightening labor market (see story, India Calls Its Talent Home).
Ray predicts IBM and its customers will get two main advantages from the move to India: Costs will be lower, and greater centralization will speed design and innovation. "In the previous model, these solutions were splintered across a number of development centers," he says. "We can get cross-visibility--something that's applicable in retail might be applicable in automotive."
IBM's challenge will be to make sure this centralized development group is close enough to customers' real-world business problems and to the consultants and researchers around the world working on them.
A pilot project in Washington and Oregon shows where IBM can excel. Called GridWise, it links 200 homes to see if it's feasible to make power consumption more price sensitive. The plan is to use the Internet to connect home thermostats to a real-time feed of energy prices, letting homeowners automatically lower the temperature in response to spikes. GridWise runs over an Internet-based messaging system that IBM developed. It works because IBM energy experts understood the problem and what information is vital to maintaining a stable power supply. "They've been able to bring a technology I presume they developed elsewhere and apply it here," says David Chassin, staff scientist at the Pacific Northwest National Laboratory, which runs the GridWise project, set to go live next month.
Chassin says he's not concerned or surprised that IBM is sending this kind of development work to India. The energy industry wants the lowest cost for the right product. Plus, global development is the reality, he laments, given the dearth of American computer science and engineering graduates. "We're dependent on foreign intellectual engineering capacity already," Chassin says.
In Need Of Growth
IBM needs big ideas that drive software and consulting sales, not just cost cutting from a lower-wage operation. But the SOA market is a risky bet because companies, while keen on the concept, aren't spending big money on it. They're doing one-off component-software projects, but very few are creating an entire architecture based on it that requires major investment. If they ever do embrace that "holistic view," says David Grossman, an analyst at Thomas Weisel Partners, IBM's broad portfolio of technologies and services give it an advantage over more specialized vendors like BEA Systems and Systinet.
IBM this week will unveil an online library to help companies track its components and services. Called SOA Business Central, it also will stock offerings from IBM software partners such as Actuate, a financial services specialist. The library is one small example of how IBM CEO Sam Palmisano "is making a double-down bet on SOA," says Sandy Carter, IBM's VP for SOA strategy. IBM's system integration arm handled 1,800 SOA engagements last year, and Carter expects a big increase this year.
Behind IBM's SOA push will be Indian managers and technologists like Purohit. Finding such experienced talent in India will be tough, but there's no doubting the ambition behind this latest expansion. Purohit says he and his colleagues at the center are expected to deliver "thought leadership." That and a heap of revenue growth is just what IBM needs to show results from its Indian hiring spree.
About the Author(s)
You May Also Like