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

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

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.