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The Empire Strikes Back: IBM Automates Tech Services


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October 04, 2006

The Empire Strikes Back: IBM Automates Tech Services

Steve Hamm

For half a decade, the top Indian software services outfits have been giving fits to the West's tech services giants. With low prices and high quality, they have forced the likes of IBM, Accenture, and EDS, to discount prices and move massive numbers of programming jobs to India. Well, IBM has launched a counterattack. Its answer: automation. Big Blue is putting together services in product-like packages that combine off-the-shelf software components and standard services, all at standard, published prices. (It announced 11 of these on Oct. 3) This means less customization--with its huge requirements of manual labor. Unless the Indians respond strongly with their own product-like packages, this could be the turning point in the battle between the upstarts and the powers that be.

A key factor in how this competition plays out is the big trend in corporate software, called Service Oriented Architecture. This is the concept that pieces of software functionality, each mapping to a business process, can be written as reusable components??nd then the components can be stitched together to create large and complex applications. Also, existing applications can be broken up into components and used the same way. All of these software components exist on corporate networks and are listed in directories, so they can be tapped by programmers or service consultants as if they were services. The idea is to save a ton of money on programming and get projects done much more quickly.

IBM is playing the SOA card to the max. At its announcement of new SOA components and related services on Oct. 3, software unit GM Steve Mills and technology services GM Mike Daniels described it as a major thrust for the company. ??BM will invest more than $1 billion this year in SOA-related projects, in technology and in new services,?Mills said. On that day, they announced enhancements to 23 SOA products and four new products, in addition to the 11 new service offerings.

IBM’s SOA play is already massive. The company claims to have 3,000 such engagements—256 of them published references.

Where are the Indians in all of this? Not as far behind as you might think, according to Forrester Research. A Forrester report published in September put IBM, Accenture, and BeaingPoint at the head of the pack in SOA, but ranked India’s TCS not far behind and ahead of CSC and Capgemini. Forrester considers all of them to be strong performers. Both Wipro and Infosys, the other two top Indian firms, were right on the cusp of the strong performer category.

There’s a bit of a disconnect here, though. TCS says it has 100 SOA engagements going—way behind IBM. So it’s not clear to me if they’re counting the same way. Scale matters here, because the more SOA technology a tech company uses, the fewer programmers it needs to do the work.

Over the coming months, we’ll be able to use SOA deals as a scorecard to keep track of the competition between India’s tigers and the West’s old lions.

10:17 AM

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Why would IBM invest $6 billion in Bangalore alone?

Posted by: Strange at October 4, 2006 11:50 PM

Then why is IBM trying to mimick the Indian players by hiring 50000 people in India?

Seems to me more like talk of Big Revolutionary Things but behind screens Do What Your Competitors do!

There is nothing like absolute correct and partially correct methods and these are always relatvie and the metrics are the cost and the quality.

In 10 years from it would be very interesting to see the result of the software war.

Posted by: Harish at October 5, 2006 11:08 AM

Did IBM program the SOA applications in India?

Posted by: Francesc Muro at October 5, 2006 11:08 AM

Honestly, this is a waste of time. This article is a sales and marketing pitch. The SOA projects are as labor intensive as any other projects. The author does not understand the intricacies of a software project. The software development can't be automated due to the dynamic and ever-changing nature of the requirements. No two software applications are same. The bill-pay feature at BofA and Citibank are entirely different (in terms of user-experience). My point is just by labeling a software project as a SOA project will not win the market share for big-blue. Bring down cost, cut loose talent and stop bickering around SOA. SOA is here to stay and it will get diluted and integrated just like all past frameworks and will not be a differentiator. Indian software companies are here to stay and will slowly wipe out the larger IT consulting firms. The next on the list, management consulting firms. Advise for Mckinsey, Bain and BoozAllen - Watch over your back

Posted by: AJ at October 5, 2006 12:58 PM

Being in the web automation business, I'm familiar with the concept of using software to automate business processes. One thing that is needed is a deep understanding of the complexity involved in automation and a tight knit relationship with the customer to understand it all. Indian companies are only starting to do that. As they build their knowhow and provide a good track record, it's only a matter of time before cost becomes the only major factor in considering a vendor to choose from.

Julius Alba

Founder, Newbie Labs

www.mynewbie.net

Posted by: Julius Alba at October 5, 2006 01:27 PM

On a volume basis, IBM will appear greater than any newcomer in almost any space - they are many times the size of any Indian firm. But, as the Forrester study shows the Indian firms like Wipro and TCS are already a viable option to IBM. And given their rate of growth, they may rapidly become credible players in the space...Size is not the only metric. Indian firms are also investing in automation and reuse of components, so that is not the sole domain of IBM. In areas like Infrastructure Management firms like Wipro already match IBM in capability if not in volume of revenues. I think that given its sheer size it is unlikely that the Indian firms will match IBM in topline for some more time to come. But stranger things could happen.

Posted by: Lilian at October 5, 2006 09:43 PM

I know IBM has set up a big SOA factory in India, so doubtless some of its SOA components are fashioned there.

Posted by: steve hamm at October 6, 2006 01:28 PM

I agree with what Lilian has to say. I also have this add....in the future, leading Indian companies like HCL Technologies, which is the pioneer and the dominant leader in Remote Infrastructure Management services will be able to defeat the likes of IBM and EDS with ease. HCL has both the depth and breadth of capabilities (with strong presence in software services, BPO and Infrastructure Services) to win large, multi-year, multi-service deals which so far only the likes of IBM and EDS had been winning. It is interesting to note that HCL has recently won a $350 million plus multi-year, multi-service deal (the single largest I.T. outsourcing contract ever won by an Indian vendor) recently against stiff competition from global vendors such as Accenture and LogicaCMG (besides the other Tier-1 Indian offshore vendors)

Posted by: SB at October 18, 2006 10:52 PM

Just as your comparative advantage in labor rates appeared in the market, it will desolve over time. The interest of the cutomer is in maximum flexability, and SOA provides that.

And please don't threaten in the future tense, the Blue haired elders will not be in power forever.

Posted by: Blue Cub at October 21, 2006 10:55 AM

Well, let the games begin !

Its highly competitive yet chronically immature mark et place. It is fascinating to notice that India is no longer automatically the cheapest offshore solution for commodity business fuctions.

Very interesting to watch it unfold.

Posted by: Jason at October 24, 2006 09:53 AM


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