IBM India set to cross $ 1bn in revenue in 2007

NEW YORK, US: IBM Corpn. disclosed financial information about its business in India last year to a group of Indian journalists at New York and hinted at an important milestone for the current year.

Closing the year 2006 at $ 0.7 billion, IBM India is set to cross the $1 billion mark in domestic business in calendar year 2007. This includes IBM India's domestic systems, software and services billed in the country plus the revenues of its BPO entity IBM Daksh. With a revenue growth of 39 percent compared to same period last year and a 5-year compounded annual growth rate of 49 percent, IBM India's domestic revenues for FY2007 would surely exceed $1billion.

More importantly, the other part of IBM's footprint in India which represents its global delivery and research activity is in fact larger and is growing faster, said Jesse Greene Jr., VP - Financial Management, IBM Corp. Taken together, the combined entity would be significantly larger than $ 2 billion growing at more than 50 percent per year, estimates DATAQUEST. With a reported figure of 53,000 employees as of 2006, the number this year could even cross 70,000.

But for IBM's senior executives at its Armonk, NY headquarters neither the revenue nor the employee numbers make the India story complete. Said Greene, "IBM India is an important element of IBM's transformation. India is the hub of global delivery and global innovation as much as it is a growth market for us." India's contribution to the overall IBM growth story would be in terms of market expansion through revenue increase at 50 percent plus levels for a company that is growing at 3 percent annually and margin expansion through global delivery and innovation.

IBM's senior executives plotted the roadmap for earnings per share (EPS) growth by 2010 from the current level of $ 6.06 per share to nearly $11 per share, a 16 percent growth. Of this, IBM India is expected to bring in at least $2 per share through margin expansion and market expansion towards overall IBM financials.

This level of clarity of the role of a country operation like India at the headquarter level for a $90 billion company is unprecedented and remarkable.

Coming back to IBM India's growth story in 2007, the domestic services business has been the major contributor in terms of revenue and profitability. Telecom has been the fastest growing market followed by financial services and small and medium business (SMB). "Unlike the western markets where IT is looked upon to take costs out, Indian companies are looking at IT to help achieve growth and innovation capability," said Nipun Mehrotra, Director- Global Technology Services, IBM India.

Some of the large sign ups in 2007 include a $45 million, five-year services contract from CBDT, ERP implementation at Delhi International Airport, a $29 million infrastructure project from DLF Limited, an over $800 million, 10-year strategic outsourcing deal from Idea Cellular, and the creation of national health data network with Apollo.

IBM was named the largest domestic services company by IDC in terms of market share.