Macro-economic cues have continued to worsen over the past few quarters. How has the slowdown affected IBM’s business in India?
This time, the slowdown is pretty widespread. Typically, we see one sector getting impacted, but in the past two years, we have seen a relay of crises in different industries. For example, the first thing that hit us as a company was the disruption in telecom sector. That started two years ago with a new operator (Reliance Jio) entering the space. Given that we had multi-year outsourcing operations with the three largest telecom companies, Bharti Airtel, Vodafone and Idea, we had the responsibility to support them during their transition. It has been a tough journey. Our multi-year contracts took a major hit. The only good news I see at the end of two years is that they are still with us despite the merger. But it’s been a bruising time for everyone involved.
Just as we were coming to terms with what was happening in telecom, the airline industry faced a hit. While Jet Airways vanished, Air India is still in a very tough spot. For both players, we were the core IT providers. In hindsight, in that industry, we overleveraged, over-invested and we should have taken some calls early enough. But you understand the importance of technology in these industries. If the tech breaks down for even one hour, then the airline falls to its knees. So it was very difficult, as the elbowroom to do something different was limited. But we reconciled with the realisation that Jet Airways was going to go under and Air India is going to be in a tough situation for a long time.
Plus, the auto industry has not been in great shape as is evident from all the data points over the past four quarters. During such situations, companies first eliminate non-essential spends. When the auto industry was coming around, the banking industry suddenly started facing issues. Even if one bank goes down, the cascading effect of that can be very broad. These sectors — telecom, air