One-third of India employees could be part of new managed infra services company: IBM CEO Arvind Krishna

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October 9, 2020 9:05 PM

On Thursday, the 109-year-old IBM announced spinning off its managed infrastructure services unit into a new public company that has been temporarily named NewCo. The separation is expected to be completed by the end of 2021.

Within the SMB space, we will see technology adoption at a faster rate, says IBM Ajay Mittal.

About one-third of IBM’s employees in India could be moved to the managed infrastructure services business unit that will be spun off as a separate company to accelerate the tech giant’s cloud growth strategy, its CEO Arvind Krishna said.

On Thursday, the 109-year-old IBM announced spinning off its managed infrastructure services unit into a new public company that has been temporarily named NewCo. The separation is expected to be completed by the end of 2021.

The move is aimed at helping IBM, often referred to as ‘Big Blue’, focus on accelerating its hybrid cloud growth strategy and drive digital transformations for its clients.

“We are redefining IBM for the future. In doing so, we are creating two market leading companies…I’m very proud of the footprint we have in India, which will continue…We will have two entities in India at the end of this, not one, but that is going to take a year to play out.

And I would expect that people will find a place in one or the other,” Krishna told reporters on a call.

The first company, IBM, would focus on hybrid cloud and artificial intelligence, allowing it to tap into the trillion dollar total addressable market (TAM) as created by hybrid cloud, he said.

The second company will be a managed infrastructure services company, which will focus on service delivery excellence and automation that has a total addressable market of USD 500 billion.

“We do believe this will unlock growth for both and will return IBM to sustainable mid-single digit growth in the medium term,” he added.

Asked about the impact on India operations, Krishna said IBM is a globally integrated company and there are many services that are delivered from India and other centres concurrently.

“Close to a 100 per cent of our clients get touched by our infrastructure managed services employee centred competencies, practices in India…I’m going to guess maybe about a fourth or third of our employees (in India) would be part of the new company,” he said.

IBM had around 3.83 lakh employees at the end of 2019. While the company does not provide country-specific headcount, India is estimated to have well over 1 lakh employees.

Krishna did not comment on which of the two units IBM India and South Asia Managing Director Sandip Patel would join.

He said together with its partners (including Tech Mahindra), IBM will tap into the opportunity of digitisation and cloud transformation.

He noted that the business opportunity for IBM is USD 1 trillion of TAM that is roughly split as USD 350 billion of services, USD 450 billion of software or platform as a service, and about USD 230 billion on infrastructure.

“As our business expands and services, I fully expect there to be opportunity for employment, promotion, skills, interaction with universities, and all of that. We are very proud of our ability to be able to hire so many talented people in India, and that I expect will grow in proportion to the service opportunity,” he said when asked about the opportunity in the Indian market.

He noted that IBM has a very large R&D presence in India as well.

“…as our opportunity begins to grow in the next part on the software piece, then I expect there to be opportunity for our people in India in both employment skills, growth as well as taking those skills back into the local market…Third, on infrastructure, that may be less direct but there is a lot of support that goes on infrastructure also and a lot of our teams there are based out of India,” he said.

According to IBM, the new company will entirely focus on managing and modernising client-owned infrastructures, a USD 500 billion market opportunity.

It will leverage IBM’s expertise to offer hosting and network services, services management, infrastructure modernisation, and migrating and managing multi-cloud environments that are critical services, core to client operations.

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