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IBM India staff reductions are sign of shift in outsourcing sector
March 6, 2016 – 04:33 am
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Talk of IBM reducing its India-based workforce by 50, 000 over the past three years, with more to come, is a reflection of the diminishing importance of low-cost operatives.

The reported reduction in staff in India, although unconfirmed, is in line with changing IT-outsourcing demand and delivery models. One source claimed India's Tata Consultancy Services (TCS) is now IBM Global Service's biggest competition.

According to a report from India, the IT giant has reduced its India-based workforce from about 165, 000 in 2011 to 113, 000 in 2014. The report quoted sources close to IBM’s plans who said this number will be down to 100, 000 in 2015. The firm’s global workforce is made up of 431, 212 employees.

In IBM Global Services, the company boasts the world’s biggest IT services firm. It is often referred to as an IT bellwether and its every move is scrutinised by IT executives at enterprise users and at its competitors. When the offshore-IT services delivery model was at its peak, the firm was the biggest IT employer in India.

But new technologies, such as automation software – including IBM’s very own Watson – and cloud computing, are reducing the need for high numbers of offshore staff to carry out business processes and software development.

IT services firms traditionally grew in a linear way – typically, they win more business, then add more staff to support it. In many cases this has involved building large offshore workforces. But service providers are now trying to reach the holy grail of non-linear growth. This means adding business without needing to add to the workforce to support it – reducing the proportional increase in the cost of providing an additional service.

IBM not moving away from offshore delivery

In a recent presentation to equity analysts IBM said it is not moving away from offshore delivery and, in fact, will be harnessing global delivery centres to make it more competitive.

We are executing on a clear strategy that is moving IBM to higher value, and we've taken significant actions to exit non-strategic elements of the business

Ginni Rometty, IBM

“In parts of our portfolio that aren't as well differentiated, we're continuing to see price and profit pressure, " said an IBM statement. "These are the areas where we'll be more aggressive on the use of global delivery centres and applying intellectual property for faster time to value for our clients and improved business results for us."

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