IBM: China, India pivotal for growth

Market conditions make the two countries a strategic part of Big Blue's global customer delivery strategy.

BANGALORE--India and China will be "pivotal" markets for IBM going forward, say Big Blue executives.

Michael Cannon-Brookes, IBM's vice president for business development in China and India, said at a media briefing here Tuesday that the ability to innovate business models and having access to a ready talent pool are key for a global enterprise to be successful.

The two most populous countries in the world meet both conditions, said Cannon-Brookes, adding that there are "dramatic changes in business models coming out from China and India".

Pointing to research from McKinsey & Co., Cannon-Brookes added that China and India had the most cost-effective developer pools in 2005, compared to other geographies such as Latin America, Russia and Western Europe. By 2010, the number of Chinese and Indian developers is expected to triple, while remaining the most cost-effective.

India is a particularly significant market as it also has a young workforce, said Cannon-Brookes. Quoting data from the United Nations, he pointed out that India is expected to have a median age advantage of 10 to 20 years over competing economies by 2025. By that time, the median age of India's workforce will be 30 years, compared to China and the United States at 39 years, Western Europe at 45 years and Japan at 50 years. Currently, the Indian workforce's median age is estimated at 24.

IBM has made substantial investment in both China and India, as part of its global integrated enterprise strategy which develops business capabilities in various locations to serve the global market.

In June, the company announced a US$6 billion investment in India covering hardware and software, services and research. Big Blue currently employs over 43,000 personnel and operates over 25 facilities in India.

In October, the company relocated its procurement headquarters in New York to Shenzhen.

China and India are also important hubs for business transformation outsourcing and business process outsourcing services, said Randy Walker, general manager for managed business process services in the Asia-Pacific region, in an interview with ZDNet Asia.

The regional growth potential for BTO and BPO is high, with many businesses wanting to have access to skills and best practices. Typical BPO deals start on a small scale and gradually build into larger, more complex ones, he noted.

According to Walker, IBM will be opening a new BPO center in Vietnam, another emerging market for the delivery of services. However, Vietnam will not be as key a market as India, China and even the Philippines which specializes in human resource services, he said. The company has identified Vietnam as a site with the potential to service the French and Japanese markets.

There will always be new and cheaper locations to provide labor, but China and India will maintain the skills edge, Walker pointed out.

He added: "If you're looking at 'cheap', there'll always be a Christmas Island (new low-cost locations). If you're looking at 'skills', the 'what next' will always be India...the 'what next' will always be China."

ZDNet Asia's Vivian Yeo reported from Bangalore, India.