IBM keen to expand into tier-3 cities

Source
Swetha Kanna
Bangalore, Dec. 12
IBM, which is present in 22 cities (primarily tier-1 and a few tier-2), is now looking to expand into tier-3 cities as well, as it seeks to shore up its mid-market business in the country.
The target is to expand its reach to 45 cities by 2013 — the new offices will come up mainly in smaller cities such as Ranchi, Raipur, Guwahati, Vizag, Allahabad, Indore, Udaipur, Nagpur, and Jharsuguda.
Small and medium enterprises (SME) account for a “reasonably large size” of IBM's business in India — the contribution to IBM's business from this segment is in the high double-digit, says Mr Nipun Mehrotra, Vice-President – General Business, Routes and Geographic Expansion, IBM India/SA. “Not only is the market large but the dynamism of the mid-market has prompted us to focus our attention on it,” he says.
IBM defines a mid-market client as a company with less than 1,000 employees with medium-sized infrastructure (running 15-30 servers). These companies do no have a data centre or a back-up recovery process in place. Their network and security systems are patchy, explains Mr Mehrotra.

SMB focus
IBM has been catering to the SMB market for four years now (some of its clients are Oswal Woollen Mills, Pathways World School and Travel XP) and is now keen to take it to the next level.
“We want to physically expand our capabilities and be present across geographies and cities,” says Mr Mehrotra. “The number of regular clients in the SMB space runs into a few thousands. We would like to double that footprint in the next couple of years.”
IBM is looking to expand into small cities such as Ranchi, Guwahati, Jamshedpur, Udaipur, and even as far as Jharsuguda. The offices here will take care of front-end interface (sales, marketing), business development, maintenance and services. In July, IBM opened ‘virtual branch offices' in tier 2 and 3 cities such as Surat, Coimbatore and Chandigarh, which is the first step towards setting up full-fledged brick and mortar offices eventually. Hiring and planning for these offices is already on.

Smb biz model
Likening the SMB business model to the sachet business that revolutionised the FMCG category, Mr Mehrotra says IBM has packaged its offerings in smaller modules — a bit of infrastructure monitoring (for instance, an SMS alert when there is a break-down in the server), a remote fixing module, or help-desk services, and back-up recovery. These are standardised modules which are priced as low as $0.5 million.