Can IBM, over the long term, compete in the global IT services business without moving more -- or even most -- of its services operations to India or other low-cost labor countries?
It's a question worth asking after the company reported a year-over-year drop in new services contracts for the third straight quarter while its Indian competitors continue to report gains in the same category.
The 7% drop in services bookings -- and overall quarterly revenue growth of just 3% -- comes even as IBM's biggest Indian rivals are reporting high services growth.
Last week, Infosys reported sales that rose 30% from a year earlier. Wipro, which reports earnings tomorrow, saw IT services revenue rise 17% in its last reported quarter. Tata Consultancy Services reported 25% sales growth this week.
Various news organizations have reported that IBM employs between 45,000 and 60,000 in India. The company itself keeps such information close to the vest as it battles with unions trying to preserve U.S. jobs.
In February, 2009, IBM launched what it called Project Match, which offered to relocate laid off U.S. workers to other countries, including India, China and Brazil. IBM never officially announced the program, which came amid thousands of layoffs here.
But IBM, which opened its first facility in India in 1951, has made no secret of its plans to beef up its presence on the subcontinent. In 2006, it announced it would triple its investment in India to $6 billion within three years. That announcement, unveiled in IBM's Indian hub of Bangalore, came as IBM Chairman Lou Palmisano held the company's first analyst day outside the U.S.
A big part of the reason for its India push is a wish to raise the profit margin in its services business by lowering labor costs. IBM can pay workers in India less than half what it pays their counterparts in the U.S.
Yet prospective employees who visit IBM's careers website to search for jobs in India are directed to a third-party site when they select India as their country of interest.
An email and phone call to IBM seeking comment for this story were not returned.
Write to John Shinal
Related: Five Tips on How to Break into Sales at IBM from Bill Luse
