Report From India: Key IBM Unit Grows From 60 People To 800

In 2006, my colleague Paul McDougall was the first to spotlight the significance of IBM centering one of its key strategic units in India. That group, which creates reusable, SOA-based systems that IBM's consultants re-sell around the world, began with just 60 people then, and has grown to 800 today, part of IBM's 73,000 employees in India.I met with the head of that group, Jeby Cherian, at one of IBM's Bangalore offices Friday. The idea behind the group is this: any industry will have a lot of the same pain points -- say, warranty tracking in the auto business. So, IBM looks to build a software-based system for doing that, which its consultants can sell to anyone in the industry. Cherian runs that group out of Bangalore, though the industry-focused teams are spread out across Indian cities. "If it's automotive work, we want to do that in Pune and Chennai, because that's where our customers are," Cherian says.

Wipro's got a similar model, which N.S. Bala, head of Wipro's manufacturing group, described to me yesterday on the India-based company's Bangalore campus. Companies may have their own, say, accounts payable process that they've customized over many years, Bala says, but they're probably not getting much competitive advantage from it. So Wipro's trying to persuade companies -- it recently pitched a Fortune 50 company on the idea -- to use Wipro's software systems for doing that, plus let it take over the actual service work through a business process outsourcing deal. "We're showing we can create a catalog of services," Bala says.

But IBM's move back in 2006 was so notable because it centered the leadership and resources for a very strategic business group, from a U.S.-based company, in India. If anyone still clung to the notion that India did the scut work but the high-end strategic work was safely ensconced in the United States, this move blew that idea to shreds. Still, Cherian had something to prove: "It's an adjustment. India is very good at technical things, are they good at business process work? We had to prove that."

Now the teams that build these systems are connected to consultants and customer-facing teams around the world. There's an internal advisory board for each industry, where the consultants, Cherian's team, and others collectively decide what systems the teams build, based in large part on what those consultants think they can sell.

CIOs don't always like the sound of these pre-built systems. Cherian says the first resistance is that IBM keeps -- and can re-sell -- any intellectual property they gain from the implementation. Back to the warranty claims example, if IBM learns something new about how to solve a warranty problem, it's going to build that into the system and re-sell it. "The answer is you can own that intellectual property for, say, $3 million [project cost]," says Cherian, offering generic pricing. "Or, we can get it done for $1 million. You can take that $2 million and invest it elsewhere."

Cherian's teams get measured on how often the systems they sell get sold, but even before that they get measured on how many components within the software are re-used from previous projects. That's made possible through a service-oriented architecture development approach. There's enforcement built in: part of the QA process is how much is re-used, and developers have to justify their choices to build new components.

Cherian's group's still small compared with the IBM organization of 73,000 in India, and more than 300,000 worldwide. But it's one model for how global IT will be done going forward, concentrating the bulk of a company's work and expertise around a particular knowledge area in one part of the world.