With the IBM (International Business Machines Corporation) deciding to separate its managed infrastructure services business, a top company executive has said the "NewCo", as the spin-off is currently referred to, would help the tech giant expand its services in India and drive growth across the two "fundamentally distinct" business models.
The separation, which is expected to be completed by the end of 2021, would help IBM focus on its hybrid cloud strategy. "The market for both IBM and NewCo is huge in India. We are confident that joint business of IBM and NewCo will continue to grow in India as the client benefits from the added degree of focus that each company will bring," Sandip Patel, Managing Director, IBM India/South Asia, told IANS in an interview.
"For IBM India, the spin-off will accelerate our hybrid cloud and AI (Artificial Intelligence) growth strategy, leveraging 'Red Hat' as the glue to help clients manage network complexity. NewCo, on the other hand, will have the ability to help its clients modernise their infrastructure and accelerate digitalisation," Patel said.
The NewCo would have 90,000 employees. Nearly one third to one fourth of IBM employees in India would be a part of the new entity.
"Additionally, NewCo will immediately be the global leader and innovator in managing infrastructure services, twice the scale of its nearest competitor, with $19 billion in revenue and more than 4,600 clients in 115 countries," Patel added.
He, however, did not reveal how the transformation would impact jobs in India, while saying that the new way forward would unlock the "true potential" of everyone involved in the transformation -- from employees, clients to partners.
"IBM continually remixes skills -- our clients expect no less as they look to IBM to help them in their hybrid cloud and AI journeys," Patel said.
"Our workforce decisions are made to best support our clients on their journey to adopting an open hybrid cloud platform and AI capability, and we are reinvesting in our business. We continue to make significant investments in education and skill development for IBMers to better meet our clients' needs."
The IBM India/South Asia Managing Director said in 2021, the company would accelerate its investments ensuring it has the right capabilities needed to develop the next generation of infrastructure services with industry-leading reliability, service and efficiency.
"NewCo will be able to partner fully across all cloud vendors, while maintaining a strong strategic partnership with IBM and continuing to serve existing and new clients. In addition, NewCo will be IBM's strategic partner for managed infrastructure services, enabling seamless operations across the two companies for clients," Patel added.
"NewCo will design, build and implement systems incorporating hybrid cloud models for mission-critical environments such as global financial institutions, telecommunication service companies and global manufacturers," he said.
Citing a recent 'IBM Institute for Business Value study', Patel said that IBM sees tremendous market opportunity for hybrid cloud in India as organisations have allocated 17 per cent of their IT spend to cloud at present and they plan to increase the share of spending on hybrid from 42 per cent to 49 per cent by 2023, that is almost half of their cloud budget.
"Armed with 'Red Hat', we are at the forefront of capturing the $1 trillion hybrid cloud market opportunity," he said.
IBM completed the acquisition of 'Red Hat' in 2019 for $34 billion.
"The acquisition of 'Red Hat' has significantly strengthened our position as the leading hybrid cloud provider in the market. This gives us an edge over our competitors as with 'Red Hat' we have transformed our portfolio to give clients the unique ability to build mission-critical applications once and run them anywhere," Patel added.
"We're committed to making 'Red Hat OpenShift' the default choice for hybrid cloud in the same way that Red Hat Enterprise 'Linux' is the default choice for the operating system," he claimed.
IBM recently announced a $1 billion investment to further develop its hybrid cloud ecosystem -- including incentives for third-party software providers to build on the IBM open hybrid cloud platform.
"Wipro, Infosys, TCS (Tata Consultancy Services), Tech Mahindra, Persistent Systems, HCL, among others, are already on this journey with us," Patel opined.
"We've already earned a sizeable cloud business of $24 billion over the past 12 months and it grew 25 per cent in the last quarter, so we're seeing clients appreciate our focus on security, reliability and bringing the best technologies from IBM and our many partners," he said.