Although discussions on Aatmanirbhar Bharat may have gained prominence since the pandemic, IBM India has been living with the concept of Make in India for a long time, says the technology giant’s MD Sandip Patel. In fact, India has emerged as one of its research hubs, with a lot of the research work that happens within IBM having its origins in India, says the 55-year-old.
IBM has already made it clear that its thrust areas would be hybrid cloud and artificial intelligence (A.I.), with chairman and CEO Arvind Krishna highlighting how the company is laser-focussed on the $1-trillion hybrid cloud opportunity.
As part of this strategy, last year IBM decided to spin off its managed infrastructure services unit into an independent, standalone business, while the remainder would be a hybrid cloud and A.I. company, called IBM. The split is expected to be completed by the end of the year. On Monday, Armonk, New York-headquartered IBM revealed that the new entity, which was earlier referred to as NewCo, would be called Kyndryl, and headquartered in New York City.
Patel, in an interaction with Fortune India, explains how the split ties in with the IBM's strategy, how the company is gearing up for the split, how it will affect IBM’s business and workforce, and its strategy for this year. Edited excerpts:
What is the share of India in IBM’s global business?
We do not disclose countrywide numbers, but IBM India is and always has been a microcosm of the IBM enterprise. If you look at IBM India, it has all of our global businesses that are across the world, they are represented in India. We also have our global missions, which are our software labs, hardware labs, research labs, even some parts of our IT function, and others; they are all represented in India. What is more important, and this is where the way IBM operates around the world is somewhat similar to what we do in India, and which is our essential services in India. We actually have been living the notion of Make in India for India and the world.
This whole discussion around Aatmanirbhar Bharat that we have been talking about, we have been living that for many years now. We make in India and we make for India and for the world through our global delivery strength, as well as our research, software and hardware labs that are resident in India. We are the underlying tech fabric for essential services from banks, telcos, oil, milk supply. We actually design, build, and manage these complex hybrid multi-cloud infrastructure environments to meet the complex and mission critical needs of the world’s several industries. So, just to name a few, Amul, Mother Dairy, State Bank of India, Bharti Airtel, Vodafone Idea, which obviously, we’ve been talking about quite a bit, but also ones like Maruti, Honda India, IOCL, and ICMR—through the pandemic we've been doing a lot of work with them for frontline workers across the board.
There was a recent IDC report related to the first half of 2020, where they declared that we continue to be the No. 1 services company globally and in India with nearly double the market share of our nearest competitor. And we continue to use that projection to shape the digital transformation journey of close to thousand clients in India.
The clients are now asking for agile, collaborative, innovative, and in some respects, fun learning experiences with deep technical experts through which they can consume this technology effectively and very quickly. Therefore, in 2021, the company is taking even bolder steps and has designed a strategy to position IBM as a partner of choice for our clients in their journey to open hybrid cloud and A.I.Sandip Patel, MD, IBM India.
How much of R&D is happening in India?
India is one of the few research labs that we have globally. A lot of research work that happens within IBM has its origins in India. India labs are closely aligned to our strategy, and pioneering work from IBM Research India labs, IBM systems development labs, and IBM software labs is integrated into IBM products, solutions, and services. And one of the things that has been my personal priority since I came in last year is to have all of these global missions work together, in a much more integrated manner that actually starts to deliver value for our Indian clients as well.
A great example is the contribution by our India Software Labs to the development of the recently launched IBM Cloud Satellite. The Labs team was responsible for delivering IBM Cloud Satellite features that enable automated deployment of solutions on IBM and other cloud service providers. Using well-known automation technologies like Terraform, developers can now quickly deploy satellite services faster. The Labs team was also responsible for delivering IBM Cloud Satellite storage extension features. By providing customers the choice of storage solutions, the IBM Cloud satellite now supports easy integration of IBM storage partners and third-party storage solutions in the IBM Cloud Satellite.
I think for the 28th year running, we maintained our leadership position in patents, where we declared over 9,130 patents for 2020 globally. And that gave us the No. 1 position by a long shot in patents. And India was, for the fourth year running, the second largest contributor to that patent pool, with 930 patents.
What is IBM’s strategy for 2021?
Let me just recap what we did in 2020 and I will put it in context of how that sets up the strategies for 2021. Throughout the year, we built on the foundation we’ve set and focussed on the immense opportunity that hybrid cloud and A.I. represents for IBM and our clients. Among the clients we have helped with their hybrid cloud and A.I. transformations are VIL, Airtel, Emerald Jewellers, IOCL, and SBI. We launched new capabilities and innovations. And we forged a multitude of new partnerships. Red Hat continued its solid performance, growing 18% for the year. We had strong adoption of our hybrid cloud platform—our business now tops $25 billion globally, up 20% from the previous year. We also significantly increased our investments in R&D and capital expenditures and made a number of strategic acquisitions. All of which gives us the financial flexibility, the resources, and the capabilities to compete and win in the future.
At launch, NewCo [now named Kyndryl] will be twice the size of the next-largest services provider, with an enviable portfolio of Fortune 500 clients in technology-intensive and highly regulated industries. We anticipate the spin-off to be completed by the fourth quarter of 2021. We are continuing to work with clients to ensure a smooth transition where we continue to renew business that we are currently doing with them, signing new deals, etc. I can tell you that there is a great deal of excitement amongst our employees about the opportunities ahead for this new company.Sandip Patel, MD, IBM India.
Similarly, in A.I. we have launched many solutions to help organisations embark on their journey to A.I. We are focussed on three key areas. First, for NLP [natural language processing], advanced sentiment analysis and summarisation. In March last year we announced the first commercialisation of key NLP capabilities from IBM Research’s Project Debater, the only A.I. system capable of debating humans on complex topics. Now Watson [IBM’s data and analytics platform] is even more advanced in the nuances of human language—identifying and analysing idioms and colloquialisms for the first time. Second, automation with Watson AIOps. We significantly expanded our A.I.-powered automation capabilities with the launch of IBM Watson AIOps, which builds on underlying technology developed by IBM Research. Third, trust with AI FactSheets. In December, we announced plans to commercialise IBM Research-developed ‘AI FactSheets’ in IBM Watson Studio in Cloud Pak for Data throughout this year. Like nutrition labels for foods or information sheets for appliances, AI FactSheets provide information about a product’s important characteristics. In all of these we had contributions from IBM Research India labs.
Now, if you look at how we sort of translated that into India, all of the clients that I just talked about, they were all a move in that direction. The Red Hat growth was very consistent in a similar way in India as well. For 2021, the strategy continues to be moving forward and establishing a dominant brand that delivers value to our clients in the whole area of their journey towards hybrid cloud, data, and artificial intelligence. That is where we are going with this. In addition, doing that with a significant amount of deep technical capability and insight, which has been the hallmark of IBM.
It leads us to the overarching IBM strategy, which is to lead the adoption of open hybrid cloud and A.I. Therefore, in line with our client’s buying behaviour, at the very core, the strategy is all of growth; it is growth for IBM, growth for our clients, and our partners.
The clients are now asking for agile, collaborative, innovative, and in some respects, fun learning experiences with deep technical experts through which they can consume this technology effectively and very quickly. Therefore, in 2021, the company is taking even bolder steps and has designed a strategy to position IBM as a partner of choice for our clients in their journey to open hybrid cloud and A.I.
There are three fundamental areas that are going to underscore how we engage with clients. First is to win the architectural battle in the cloud. We have 2,800 clients [globally] using our platform, a number which has grown 40% over the last year—a direct positive impact of our focus on our hybrid cloud business. A platform-centric strategy requires a fundamentally different way of doing business and our strategy is aimed at creating value through greater focus on our portfolio, our operating model, and the needs of our clients.
Second, we will bring to the fore a new model of engagement that will enable us to create highly-experiential journeys through value selling for our clients—both digitally and through IBM Technology Garage sessions. We will have our cloud developers and data scientists engage with clients early on, to show the solutions capabilities through rapid prototyping.
Third, we will elevate our ecosystem of partners with the ‘One Ecosystem’ mission. We believe that clients benefit most from an ecosystem of partners working together to co-create and co-innovate to offer the best platforms, products, and services. IBM has a $1-billion investment committed in the hybrid cloud ecosystem over the next three years to support partners, as we help clients with the high-value skills, solutions, and expertise required to be competitive and resilient.
How are you preparing for the split and how does it affect your business?
Let me address the spin-off first. I don’t think it changes the strategy that Arvind [Krishna, IBM chairman and CEO] established at the beginning of last year and which Ginni [Rometty, former chairman, president and CEO] had laid the foundation for.
So, with the NewCo [Kyndryl] spin-off, we essentially focussed on creating two market-leading companies to unlock the value from each of those business models and accelerate growth. This enables IBM to focus on hybrid cloud and A.I. as the strategy.
We believe there is greater value for our clients and shareholders in separating the managed infrastructure services unit into an independent, standalone business with greater focus and agility to address the evolving needs of our infrastructure services clients and to create the future of technology services. This will place both IBM and NewCo [Kyndryl] on a clear growth trajectory.
There is significant growth potential for both companies, so it is an instance of the individual parts being stronger than the whole, and an opportunity to drive added benefits for all key stakeholders—investors, customers, partners, etc. with IBM and NewCo [Kyndryl] operating independently.
At launch, NewCo [Kyndryl] will be twice the size of the next-largest services provider, with an enviable portfolio of Fortune 500 clients in technology-intensive and highly regulated industries. We anticipate the spin-off to be completed by the fourth quarter of 2021. We are continuing to work with clients to ensure a smooth transition where we continue to renew business that we are currently doing with them, signing new deals, etc. I can tell you that there is a great deal of excitement amongst our employees about the opportunities ahead for this new company.
Would people be reskilled, or would there be new hirings?
We already have a workforce that is skilled in many of our focal areas that remain core for IBM and NewCo [Kyndryl]. I cannot get into numbers, but it is a materially sized set of workforce that already has these skills. So, from that perspective, the workforce that sees NewCo [Kyndryl] as a new entity, they have their own level of excitement about the prospects that it will offer.
Reskilling is nothing new for us. IBM continually remixes skills—our clients expect no less as they look to IBM to help them in their hybrid cloud and A.I. journeys. Our workforce decisions are made to best support our clients on their journey to adopting an open hybrid cloud platform and A.I. capability, and we are reinvesting in our business. We continue to make significant investments in education and skills development for IBMers to better meet our clients’ needs and we continue to hire depending on client and market needs.
In 2020, we saw active participation from IBMers as a part of our ‘Your Learning’ programme, with over 85% of IBMers in India completing 40 hours of learning. IBMers in India earned a total of 174,457 badges, an increase of 56% year-on-year and the top five badges were in the areas of emerging technology and trends—automation essentials, enterprise design thinking, agile explorer, cloud and cognitive. The total number of learning hours by IBMers in India was over 9.5 million, an increase of close to 20% year-on-year. The number of classes and training sessions that were conducted across emerging technologies like cloud, A.I., quantum for IBM India employees was over 11 million.
What are the cutting-edge technologies that you are bringing to your clients?
So, let me start by providing a little bit of context. We are today living in an era of extreme digitisation, and particularly with the pandemic, it has accelerated the pace of digital transformation for every enterprise, whether it is small, or a large enterprise. And this transformation is happening in every dimension of the business from the way products and services are experienced by customers to how they are sold, to how they are developed. And the currency in this era of transformation, is clearly speed and agility. And this is what makes the whole focus on cloud and other exponential technologies really, really relevant.
I want to distinguish between just the notion of cloud versus hybrid cloud. And this is for a very specific reason. I think what has happened is that all enterprises have woken up to the notion of cloud more as a way to gain speed, agility, cost efficiencies, a lot more efficiencies around their infrastructure and so on.
But until now a lot of that has been migration of simple applications and workloads to the cloud. Now, the majority of the workloads, particularly mission critical ones, they are yet to move. As enterprises consider the next phase of cloud migration, what is happening by its very nature is they are choosing multiple cloud providers and platforms, which are best suited to meet their business and unique workload needs. But, at the same time, as they do this, they want the flexibility of running these workloads seamlessly across any platform without having to rewrite everything as they go. And this is where hybrid cloud becomes really relevant.
As an organisation, we have taken a series of important actions to redefine our future as a hybrid cloud platform and A.I. company. This is where we are focussing the bulk of our efforts, time, and investments.
The opportunity in hybrid cloud and A.I. is enormous. In fact, clients find that choosing a hybrid cloud approach is 2.5 times more valuable than relying on public cloud alone. Benefits are across many areas: business value acceleration, developer productivity, infrastructure cost efficiency, cost of regulatory, compliance and security.
According to a recent study from IBM’s Institute of Business Value, customers in India currently have 17% of their IT spend allocated to cloud at present and as part of the cloud budget they plan to increase the share of spend on hybrid from 42% to 49% by 2023.
Let me talk about a few things that we are doing to make our foundation strong. We see the hybrid cloud opportunity at $1 trillion, with less than 25% of workloads having moved to the cloud so far. To move the rest, our approach is platform centric. We know that a platform-centric strategy requires a fundamentally different way of doing business. This is why our operating model is being quietly but substantially reshaped. These decisive moves are all aimed at creating value through greater focus on our portfolio, our operating model, and the needs of our clients.
Our hybrid cloud approach is differentiated by a vast software portfolio modernised to run cloud-native applications and our GBS [Global Business Services] expertise, which plays a key role in driving consumption and is currently helping hundreds of major clients on their own hybrid cloud journeys. We are successfully leveraging Red Hat as a unique platform to address what our global, complex, and highly regulated clients need: a hybrid cloud platform that is open, flexible, and secure.
We’re also making good headway in our focus on industry clouds, which are designed to tackle the specific needs of mission-critical and highly regulated industries with our IBM Cloud for Financial Services and IBM Cloud for Telecommunications offerings—we are witnessing many clients and partners working on PoCs [proof of concepts]. We have recently launched IBM Cloud Satellite that includes support for satellite locations on AWS, Azure, and Google Cloud. IBM Cloud Satellite extends secure and open IBM Cloud services to any environment where data is being collected, processed, or shared thereby giving clients across multiple industries—especially those in highly regulated industries such as telco, financial services, healthcare, and government the flexibility and efficiency of cloud in a secure manner.
Furthermore, we want to be the trusted partner of clients for data and A.I.: the opportunity in A.I. is massive while the current enterprise deployment rate is in the single digits. Clients are now at the point where they are moving from experimenting with A.I. to deploying it at scale. More than 40,000 clients globally have turned to IBM to unlock value from their data. IBM’s A.I. platform is differentiated by automation, natural language processing (NLP), and trust.
To strengthen our hybrid cloud and A.I. portfolio, we have announced 10 acquisitions since Arvind took over as CEO and seven acquisitions just since October. We are confident that we have the right strategy for our clients and for IBM. We are leading our clients in their next chapter of transformation, as they build agile organisations fuelled by data, guided by A.I. insight and able to work in any cloud environment.