Transformation of IBM in India

IT IS difficult to analyse IBM and its corporate strategies without recourse to superlatives. Samuel Palmisano, Chief Executive of the company, stunned the world when he announced in Bangalore on June 5 that IBM proposed to invest $6 billion in India over the next three years. "I am not going to miss the (India) opportunity,'' he added for good measure.

The surprise to IBM watchers was not the new investment as such but its magnitude. It is three times the investment made by the company in the past and more than the combined investments announced by Microsoft, Intel and Cisco.

For years, IBM was a model that embodied U.S. technology and stock market capitalism. It was a tight fisted monolith which held closely on to its technology and believed more in selling products such as computer hardware than software or services. Globally, it believed in operating through branches or wholly owned subsidiaries primarily to safeguard its technology.

In 1977, when it came to the crunch, the company decided to close its operations in India as it was unwilling to associate resident equity. As it then explained, "It was contrary to its globally orchestrated corporate policy.'' This posture did create bad blood with the Indian authorities. However, over the years, with both sides deciding to forget the past a new synergy has emerged.

End of a saga

The structure of the computer industry was changing and IBM was losing its dominance. It might have pioneered the mainframe computers in the post-war years and the personal computers (PCs) in the 1980s and dominated the market. By early 1990s, it was humbled when companies like Intel and Microsoft came out with their chips and operating systems. IBM was making futile attempts to fine-tune its OS/2 to retain market share.

By 1998, losses forced the company to abandon its PC business. In 2002, it sold its PC factories and began to engage in contract manufacturing with companies outside the group. This was a sad departure for a company that had looked upon in-house manufacture of its requirements as an article of faith. IBM's saga of PC business ended when it sold in 2005 the business to Lenovo, a state-owned Chinese company. When Lou Gerstner took over the reins in 1992, many analysts viewed the company as a crumbling empire or a fossil. Departments were fighting with each other rather than with competitors outside. There was inertia and unwillingness to change. In fact, serious proposals were afoot to break up the company into several operating units.

The turnaround

He set the direction and new priorities by promoting IBM Global Services. By a clever twist, IBM's business units for PCs, servers, software and technical services became "back end'' suppliers to solution sellers, who helped customers assemble complete computer systems. Selling "solutions" rather than products was the new thrust and "on demand solutions'' the new slogan.

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