We have the largest analytics practice in India: IBM

IBM has entered into a six-year deal with Janalakshmi Financial Services (JFS) to provide the microfinance company technology solutions to disburse more loans and expand its India footprint. In an interview with BusinessLine , IBM India Managing Director Vanitha Narayanan spoke on how the JFS deal has the potential to transform microfinance using data. Edited excerpts:

With this deal, is IBM looking at building an ecosystem in a segment which it did not focus much in the past?

What makes this deal interesting is its strategic nature. When we sat with JFS, they were open about their challenges, areas where they had to be disruptive and areas where you need to look at non-linear growth. One thing to remember is that growth and investments in technologies cannot scale at the same levels. This is where we decided to cross leverage learning from other industries, most notably telecom and bring in those capabilities. In this journey, there will be learning and we will take it into other businesses with similar challenges. I see this deal as a very nice way in which IBM can address areas such as financial inclusion.

Can you expand on the learning from the telecom sector that you refer to?

Look at the mobile business in India, wherein prepaid business forms almost 80 per cent and transaction volumes turn into billions of records. Then when you look at the call rates and match it with the missed calls rate, the transaction costs associated with it are not revenue generators. Also, the average revenue per user is low and when you factor in all these things, you have to learn to drive your operations, systems, data storage all of these in a manner where it meets all the business requirements. When we looked at that, there were many similarities with the business models.

JFS is looking at expanding its footprint all over India, they are reaching a segment where the transaction size s low but the number of transactions will be high, price points will be different from general Indian banking customers. So, what we looked at was how we could apply some of the learning from the telecom business and how we design the IT infrastructure for JFL. It also gives insights into the microfinance business. Also, we could learn from the e-retailers. They have demonstrated that the value will come more from insights into their customers. A traditional bank cannot understand the nature of every transaction with its customer, contextualise and make business sense of it. Our aim is to get these insights.

Are you looking at more such engagements in India and other emerging geographies?

If you go back to our smarter cities strategy and go behind the principle of it, we believe that in the next decade, there will be thousands of 'smart cities' in many developing markets. And in this construct, some of the principles are that the demand will also exceed supply—whether it concerns water, power or other forms of energy. We will have to find ways to efficiently manage it and unlike the past, we may not have an opportunity to overbuild it like some of the countries. The concept was how to use technology at the right intersection points to avoid leakage, greater efficiencies and better customer service. So, the underlying capabilities are relevant to what we are doing now.

Coming to IBM India, how is it keeping up with the changes happening at Armonk (IBM's headquarters)?

In some ways what we are going through is not that different. In every decade, there has been continuous transformation. In the last two-three decades, on an annual basis, we are constantly evaluating. The good part in IBM India is that it represents all part of the global business. In a way it is like a mirror and we are a complete microcosm of IBM. All growth areas are represented here and as we shift from one to another, we have the required capabilities here. When we announce that we are divesting certain businesses, that will have some impact in India. But we then make investments in other businesses. As a case in point, in India we have the largest analytics practice.

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