International Business Machines (IBM) is betting on its recent cloud-computing acquisition Softlayer and in-house multi-billion-dollar financing muscle to crack the market for technology services among small- and medium- enterprises in India.
IBM is raising investments in business partners that can act as the last-mile link between it and small enterprises, especially those that are interested in renting computing services rather than buying and owning them, according to Jason Mosakowski, who heads the software division in India for the New York-based company.
“If the client wants to move to a cloud-based delivery model, they can have it with Softlayer and IBM. Now, from an India market place, when you can put my software on Softlayer and be able to deliver like that, that’s a great proposition,” Mosakowski said.
In July, IBM bought Softlayer for $2 billion (. 12,500 crore) in a bid to knock Amazon Web Services off its perch as the dominant provider of on-the-go computing services, including storage on-demand and hosting websites.
While the process of making all of IBM’s software solutions available on Softlayer has just begun, IBM has already announced its first deal in the space. Bharat Light and Power, a renewable energy firm that was incorporated in 2010, signed a 10-year deal with Big Blue to use its Softlayer cloud capabilities and analytics and mobile solutions to increase its power generation.
Beyond Softlayer, the company is also increasingly investing in its partners and leveraging its financial arm to grow in the Indian hinterland. “We are actually investing a lot more significantly into our partner network — through programmes, skill-building and more resources. Beyond the software group are parts like the Global Financing — it’s an area where IBM is offering a lot of financing solutions to help with their (partner) investments,” Mosakowski said.
IBM, which entered the Indian SME segment in 2009, is now seeing increasing competition from other players in that segment. HP, Oracle, SAP are all targeting smaller companies. And the move to the cloud and software-as-a-service makes it more affordable for companies to use technology as they do not have to own IT assets or spend on upgrading and maintaining it.
Research firm Gartner predicts that about $4.2 billion (. 26,200 crore) will be spent on cloud services in India over the next five years. Technology consultancy Zinnov estimates that there are at least 10 million enterprises in India that fit the “SME” label, and their combined technology spending is projected to grow to $15 billion (. 94,000 crore) by 2015.
“The thing about SMEs is that they don’t set aside money for IT. They buy as they see a need. So the cloud, with its operational expenditure model, is a compelling proposition. There is a lot of traction in that space,” said Praveen Bhadada, director of market expansion at research firm Zinnov. Bhadada added that the large multinationals were coming up with lucrative offers to target the smaller companies.
IBM has a physical presence in 22 Indian cities and also offers its partners additional margin programs to boost the sale of its solutions. The process of moving to the outer cities – called geo-expansion in IBM parlance – is also paying off. IBM’s longer term ambition is for such “geos” to grow faster than metro cities globally. In the third quarter, India was also among the company’s better-performing growth markets. While revenue from Asia-Pacific decreased 4% from a year ago, India revenues grew at 1%, IBM said in a filing with the US Securities and Exchange Commission. While the company does not break out India revenue, industry experts say IBM books close to $3 billion from India.