Karan Ba­jwa, Man­ag­ing Di­rec­tor, IBM India, dis­cusses the fi­nan­cial per­for­mance of his com­pany for the year 2018-2019

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What is your view of the per­for­mance so far, of the In­dian ICT in­dus­try in 2019? The IT sec­tor in India con­tin­ues to be driven by 75% ex­port and 25% domestic and we par­tic­i­pate in both sec­tors. On the ex­port side, while India main­tains its po­si­tion as lead­ing sourc­ing des­ti­na­tion for IT Ser­vices, we have wit­nessed an in­ter­est­ing de­vel­op­ment in last 12 months – an in­crease in pace of es­tab­lish­ment of Cap­tive Global Ca­pa­bil­ity Cen­tres in India. This is be­cause world­wide, as large or­ga­ni­a­tions move to in­sourc­ing, they are in­creas­ingly housing their teams in India and build­ing cap­tive cen­tres specif­i­cally for dig­i­tal ca­pa­bil­i­ties. This is good both for ex­ports as well as domestic In­dus­try in India.

On the domestic front, the IT spending has been grow­ing across sec­tors ex­cept for tele­com which is un­der in­tense cost pres­sure. As we con­tinue to wit­ness mar­ket dis­rup­tion, or­gan­i­sa­tions are in­creas­ingly lever­ag­ing tech­nol­ogy as an en­abler to trans­form and grow. So the growth driv­ers for the in­dus­try have been - mod­erni­sa­tion of IT In­fra­struc­ture and im­ple­men­ta­tion of new ap­pli­ca­tions/ so­lu­tions. This mod­ern­sa­tion is at the intersecti­on of cloud, data and Se­cu­rity; all of which have im­mense po­ten­tial of un­lock­ing or­gan­i­sa­tional ca­pa­bil­ity and ca­pac­ity, hence driv­ing growth.

What is your view on FY 19 in terms of busi­ness and fi­nan­cial per­for­mance? Please share any two key highlights.

With the Gen­eral Elec­tions in first half of FY 19, we did wit­ness a rel­a­tively slow and weaker Q1, but in Q2 (AprJuly), there was more ro­bust growth and we see this trend con­tin­u­ing. Ex­cept for Tele­com sec­tor where the IT spending is rel­a­tively lim­ited, other sec­tors con­tinue to in­vest. How­ever, what has changed is the con­struct of deals – as-a-ser­vice, pay -as-you grow, larger num­ber of deals that are smaller in size etc.

On the tech­nol­ogy side, busi­nesses are fo­cussed on mon­etis­ing the ben­e­fits of emerg­ing tech­nolo­gies like cloud, IoT, data & an­a­lyt­ics, blockchain to dig­i­tally trans­form. The in­cum­bents are be­com­ing cog­ni­tive en­ter­prises – up­grad­ing their legacy sys­tems, man­ag­ing their data, con­sol­i­dat­ing their work­flows across multiple cloud. Digi­ti­sa­tion is hap­pen­ing across the board, though the scale and scope may vary.

What is the way ahead in an en­vi­ron­ment of de­clin­ing mar­gins, softer IT spending and tighter out­sourc­ing, and GDPR regime, in the tra­di­tional ver­ti­cal seg­ments?

We do not think IT spending is be­com­ing softer; it is just

shift­ing from tra­di­tional ar­eas to new ar­eas. Or­gan­i­sa­tion are driv­ing cost sav­ings in ar­eas like end user ser­vices, in­fra­struc­ture man­age­ment and ap­pli­ca­tion main­te­nance to fund their dig­i­tal projects with those sav­ings. So mar­gins will con­tinue to de­cline in tra­di­tion ser­vices and de­liv­ery model. Sur­vival will need ser­vices de­liv­ery trans­for­ma­tion through au­to­ma­tion and or­ches­tra­tion etc.

What is your busi­ness out­look for FY 20 and what are the key fo­cus ar­eas?

Our strat­egy is piv­oted on key pil­lars of mod­ern IT – cloud, AI, data and se­cu­rity - and in­cludes so­lu­tions, ser­vices and part­ner­ships. We will con­tinue to be the part­ner of choice for dig­i­tal trans­for­ma­tion.

IBM has been in­vest­ing to lead in the emerg­ing, high value seg­ments of the IT in­dus­try. Red Hat rep­re­sents the lat­est and largest move as part of that high value strat­egy. This is a game-changer for IBM and will change the cloud mar­ket. We are two best-in-class hy­brid cloud providers and we will help com­pa­nies move be­yond the ef­fi­ciency eco­nomics of their ini­tial cloud de­ploy­ments, to the next chap­ter of the cloud, which is all about shift­ing busi­ness ap­pli­ca­tions to the cloud…while ad­dress­ing the is­sues around porta­bil­ity, man­age­ment con­sis­tency, se­cu­rity, re­main­ing open, which avoids ven­dor lock-in. We ex­pect the trans­for­ma­tion ini­tia­tives to pick up pace in 2020 and we are well po­si­tioned to address that mar­ket op­por­tu­nity.

How­ever, it will take more than tech­nol­ogy and more than busi­ness to achieve growth and suc­cess. We be­lieve that busi­nesses must do more than dig­i­tally rein­vent them­selves. They need to act as re­spon­si­ble stew­ards and work to build new lev­els of trust. This can be done by en­sur­ing that clients’ data is se­cure, that clients re­tain con­trol of their data and that they can trust AI tech­nol­ogy and its rec­om­men­da­tions. We are also in­vest­ing in equip­ping stu­dents and work­ing pro­fes­sion­als for a new gen­er­a­tion of in-demand skills.

What is the in­flu­ence of the emerg­ing tech­nolo­gies? How will it im­pact the next cou­ple of years?

We are see­ing an un­prece­dented con­ver­gence of tech­no­log­i­cal, so­cial and reg­u­la­tory forces. As emerg­ing tech­nolo­gies such as AI, au­to­ma­tion, IoT and blockchain be­come per­va­sive, their com­bined im­pact has started re­shap­ing stan­dard busi­ness/tech­nol­ogy ar­chi­tec­tures. A clear pat­tern is emerg­ing among or­gan­i­sa­tions – whether in­cum­bents or new en­trants – their fo­cus is to go dig­i­tal to be able to ac­com­mo­date high cus­tomer ex­pec­ta­tions and deal with per­va­sive in­ter­con­nec­tiv­ity. With three strate­gic re­sources that an or­gan­i­sa­tion has – data, peo­ple and pro­cesses, they will con­tinue to lever­age emerg­ing tech­nolo­gies such as AI, blockchain, au­to­ma­tion, IoT for a com­pet­i­tive edge. As ran­dom acts of dig­i­tal of the past get re­placed with real dig­i­tal trans­for­ma­tion, these emerg­ing tech­nolo­gies will be­come per­va­sive and their com­bined im­pact will re­shape the busi­ness as well as tech­nol­ogy ar­chi­tec­tures. We call this Chap­ter 2 – mov­ing from ex­per­i­men­ta­tion to true trans­for­ma­tion, gain­ing speed and scale in dig­i­tal trans­for­ma­tion.

There are three core ar­eas that will be crit­i­cal for busi­nesses to suc­ceed:

• Dig­i­tal and AI – Busi­ness are pur­su­ing two dis­tinct ap­proaches to dig­i­tal trans­for­ma­tion: out­side-in and in­side-out. While an out­side-in ap­proach is largely “driven by the mar­ket and demand for new dig­i­tal ser­vices,” an in­side-out ap­proach is about mod­ernising core sys­tems and “ar­chi­tect­ing their busi­ness for change.” Fur­ther there can’t be AI with­out IA” (in­for­ma­tion ar­chi­tec­ture). This is be­cause com­pa­nies need a busi­ness plat­form to con­nect of all their dig­i­tal ser­vices and man­age the life­cy­cle of their AI apps.

• Hy­brid Cloud – you can­not be­come a dig­i­tal busi­ness with­out an ag­ile hy­brid cloud in­fra­struc­ture – to man­age data, work­loads, which is open, se­cure and man­aged, al­low­ing to seam­lessly use private, pub­lic and multi cloud en­vi­ron­ments, flex­i­bly as needed, to host and run AI and other so­lu­tions in­clud­ing au­to­ma­tion, an­a­lyt­ics, blockchain etc. Com­pa­nies to­day are around 10-20% into their cloud jour­ney. Their ini­tial for­ays in Chap­ter 1 have fo­cused on rent­ing com­pute power at scale, to drive cost and pro­duc­tiv­ity ef­fi­ciency. The next 80% of the cloud op­por­tu­nity fo­cuses on shift­ing busi­ness ap­pli­ca­tions to the cloud and op­ti­miz­ing ev­ery­thing from sup­ply chains to sales. • Re­spon­si­ble Stew­ard­ship – For busi­nesses to fully em­brace the AI and cloud trans­for­ma­tion, they need to know their data is se­cure, that they re­tain con­trol of their data and that they can trust AI tech­nol­ogy and its rec­om­men­da­tions. We be­lieve sev­eral el­e­ments or pil­lars form the ba­sis for trusted AI sys­tems : fair­ness, ro­bust­ness, ex­plain­abil­ity and lin­eage. More broadly, busi­ness and gov­ern­ment need to jointly in­vest in pro­grams, from in­tern­ships to 21st cen­tury ca­reer ed­u­ca­tion, to bet­ter equip stu­dents and work­ing pro­fes­sion­als for a new gen­er­a­tion of in-demand skills.

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