Case 3 DAKSH and IBM Ppt 1: synopsis of case Ppt2: case foundation Ppt3: Discuss the dynamics of the

global BPO industry. What are its key drivers? Can India leads its as the world preferred off shoring destinations. Ppt 4: what are the common paradoxes associated with high growth industries? Ppt 5: what prompted DAKSH to sell out to IBM instead of pursuing the much publicized IPO? Ppt6: what role might IBM DAKSH play in IBMs overall strategy? Discuss any post merger problems that you anticipate? Ppt7: in terms of the lifecycle of an enterprise, describe the progression of DAKHS from inception to maturity. Evaluate the harvest options open to the founding members and suggest the best way forward.

Background In 2004 the face of the global software industry was changing and IBM hoped to be at theforefront of this evolution. The market was being defined by customers who were looking for serviceproviders who could help them change their operations, add value, and take up responsibility formanaging many of their business processes. IBM's strategic initiative was to offer costumers aninnovative service which combines process, people and technology into a network on demandebusiness.Through intergrading a full service outsourcing solution consisting of: consulting, InformationTechnology, and technological capabilities to its services, IBM would begin and lead the trend of Business Transformation Outsourcing (BTO). These solutions included human resources, finance andaccounting, supply chain, risk management, logistics, and new product development. Key Issues IBM was on the crusade to acquire businesses that would help achieve its vision. IBM wanted tobecome a Business Transformation Outsourcing service provider (BTO), offering customers tomanage their businesses from end to end. In order to achieve low cost BTO services, IBM acquiredDaksh in 2004. At the time of the acquisition, Daksh specialized in Business Process

Outsourcingservices (BPO) in customer relationship management (CRM) and finance and administration (F&A).The company was doing very well financially and was growing.Daksh provided low cost skilled work, but the array of services Daksh had to offer was too limitedto BTOservices. The purpose of a BPO service, what Daksh provided, was merely to save costs. A customerwould leave a business function to be managed by Daksh, as long as they could perform it correctly.However, the long term goal for IBM Daksh is to become as efficient, yet Daksh properly so that it can bring IBM to becoming a global BTO serviceprovider, while managing its growth and differences. IBM cannot compromise the quality of itsservices due to poor management of Daksh. Daksh needs to be properly structured in order to servecustomers globally.Finally, in order to be an efficient global operation, IBM must find a way to synchronize theconsulting services provided by PwC and the execution performed by Daksh in India. Two differentcompanies working for a same customer can be challenging, especially when they are geographicallyfar from each other. Strategic Management CASE ANALYSIS Quantitative Analysis By the end of 2004, IGS, IBM global service division, was not doing as well as hoped. It missed itsrevenue and earnings targets. This was contributed to a sluggish European market. Therefore, IBMcut 14,500 jobs in its European operations and added 15,550 jobs in India.Daksh was acquired by IBM for 170 million, which was estimated to be 50-60% less than the valueit would have reached had the Initial Public Offering been launched. Why would Daksh accept suchan unattractive deal? The reason was simple: first, customers felt more comfortable dealing with bigname companies such as IBM, and second, a multinational long term potential benefits of being part of IBM were perceived as far better than going public independently.The few years following the acquisition have shown progress in the right directions. Indeed,Daksh had revenues of $53 million pre acquisition, and by 2005 reached $128.94 million, increasingby 55%. The clientele doubled, remaining mostly in India. IBM was now the fourth largest ITCompany in India, and planned on tripling its investments in India to a success it will take more thanjust money. Qualitative Analysis The approach on corporate strategy IBM displayed was very dynamic: it was preparing for thechanging environment. IBM was ready to change itself based on the market changes. end strategy run by IGS. However,Samuel Palmisano, CEO, identified two obstacles were in the way of this vision: IBM did not have apresence in high-end consulting and there was no low

cost base for executing technology drivenservices support. Therefore, Palmisano invested in PricewaterhouseCoopers (PwC) to build up aconsulting arm and acquired Daksh eServices India was part of the BRIC countries (Brazil, Russia, India,China) that IBM was planning on entering. IBM was decided to build a BTO hub in India, because of its army of tech savvy h margin consulting solutions and have them implemented by Daksh at low costs.IBM had developed a thorough plan that would further enhance its ability to provide end-to-endoutsourcing enefits of implementing similar services, and especially set foot in India. Indeed, IBM had to watch out forAccenture and EDS but also Indian companies such as Wypro and TCS who were trying to becomecompetition. This factor pushed IBM to build presence in India as soon as possible.But, why India? Because IBM had just signed a multi-billion dollar outsourcing deal with Sprint and a$750 million deal with Bharti Tele Ventures in India, which the company could not fulfill withoutacquiring more skilled labour.Furthermore, IBM had good reasons to choose Daksh. First, Sprint was already a major Dakshclient: the familiarity between the two companies was a Resources Planning, and therefore was familiar withDaksh. Strategic Management CASE ANALYSISSo far, IBM has been adopting the right approach concerning the values of Daksh. Instead of changing the company from top to bottom, IBM business. However, some values that defined IBM were difficult forDaksh to understand, brought IBM to acquire Daksh. This acquisition was designed to transform thecompany in order to provide an innovative service. While, for now, IBM found a solution to thisproblem by letting Daksh redefine this value, the long term consequences of this disagreement canbe quire businesses that had good technologies and pair them withconsulting in order to create a unique service. However, Daksh still does not have the skills requiredto support the type of service IBM wants to offer. Alternatives 1. IBM previously did not have a presence in high-end consulting. As a result of this, IBM obtained anacquisition of the consulting arm of PricewaterhouseCooper (PWC). IBM Daksh can benefit from thisacquisition by having PWC establish an office or department within IBM Daksh. This would result in afull consulting service available, working hand in hand for optimal results. The length/distance of thecommunication between PWC and IBM would be reduced tremendously. Operations would be muchmore efficient. There would also be higher levels of production. An increase in customer satisfactionmay also occur. On the other hand, it is costly for PWC to establish an office or department withinIBM Daksh. By opening

its The disadvantage of the high cost outweighs the advantage of PWC opening an office ordepartment within IBM Daksh.2. Another alternative for IBM Daksh to consider is developing its own consulting service. Those topperforming employees that have the knowledge and necessary experience can be promoted to workwithin the consulting services segment. This may lead to a healthy internal growth. This provides anincentive for employees to continue to perform at a high level. After all, from an employee point of view, one of the benefits of joining IBM was to have more career growth opportunities. IBM Dakshwould be able to reduce its prices for consulting services to its customers. Conversely, by developingits own consulting service, IBM Daksh would not be using PWC. There has already been anacquisition of the consulting arm of PWC. IBM would be wasting this investment by developing itsown consulting service in India. PWC also has a better reputation with consulting services. Bydeveloping its own, IBM Daksh must decide which employees to train, and the extent of theirtraining. This could result in high costs and potentially little return on investment.3. IBM Daksh also has the alternative of hiring local consultants in order to achieve objectives. Thisprovides the company with the relative experience and knowledge of the Indian market, from whichIBM Daksh operates. Then again, PWC is already controlling the consulting services. An additionalalternative that can be considered is expanding the array of services offered. Some of thesedepartments may include production research, marketing, hardware, and research anddevelopment. This benefits IBM Daksh as a whole. It would align IBM Daksh with the one stop shopstrategy, with low operating costs in India. The only disadvantage to this alternative is that it wouldbe a large investment, but it would diversify the company. The more diversified a company, the lessrisk they have.