Rise, fall and rise of IBM in India

Dinesh C. Sharma   New Delhi     Last Updated: June 17, 2011  | 17:52 IST

The story of IBM in India is surrounded by several myths and folklore, particularly relating to its infamous exit in 1978.

George Fernandes, who was industry minister in the Janata government, is often credited for throwing out IBM over foreign exchange rules, but the trouble for IBM had started way back in 1967. It had a good run of the Indian market for two decades after its entry into India in 1951, facilitated by Jawaharlal Nehru himself.

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The real reason for IBM's exit was a power struggle between a multinational firm and the government. With a market share of 80 per cent, IBM was able to dictate the industry's growth rate in size as well as sophistication by deciding which products to market in India. The troubles for IBM began when the Electronics Committee, headed by Vikram Sarabhai, wanted it to end its business practice of bringing in old machines to India, refurbishing and leasing them out at inflated rates to government departments.

IBM justified selling outmoded equipment saying it wanted India to grow step-by-step in computer technology. But the system of lease and maintenance followed by IBM resulted in a culture of dependence and hindered natural growth of engineering and programming skills among users.

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Once the department of electronics (DoE) was formed, it wanted to be in the command of the situation. The parliamentary investigation into the functioning of IBM and ICL provided further ammunition against the two multinationals. The Foreign Exchange Regulation Act (FERA) only came in handy to facilitate IBM's exit.

In the nearly 25 years that IBM operated in India in the first phase, it helped create a computer culture and pave the way for introduction of computers on a large scale.

It created of a pool of highly trained computer professionals in systems engineering, programming and maintenance and IBM's training programmes helped develop basic knowledge about programming.

IBM's journey back to India began soon after it left. It shut its operations in June 1978 and began exploring business with India in 1980. Ironically, CMC, which was set up to maintain IBM computers in India, became its first customer in this post-1977 period. In 1986, IBM sent a proposal to DoE to set up a software development and training institute. In 1989, it supplied a major system to the Aeronautical Development Agency and by 1990 it was talking with DoE for a possible return to India in collaboration with the Tatas.

It was back in operation in February 1992 as Tata Information Systems Ltd, which eventually became Tata IBM and finally IBM India in 1997. Today it is a full spectrum IT company in India and one of the largest employers in the private sector. Life has come full circle for the Big Blue in India.

Courtesy: Mail Today 

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