Monday, November 14, 2011

Does IT Matter? Warren Buffet says Sure: By investing in Business of IT


Almost a decade after Nicholas G. Carr ignited a firestorm with his Opinion piece in the Harvard Business Review "Why IT Doesn't Matter," Warren Buffet has answered.

For years after the Mr. Carr’s article and book were published, IT executives and technocrats tried refuting the view with logical arguments. Perhaps the most resounding rebuttal to the view is the action by the Oracle of Omaha.
Media today is abuzz on the move Berkshire Hathaway investing $10.7 billion in International Business Machines (IBM) this year. What makes it noteworthy is that Warren Buffet had for long refrained from making major investments in tech companies.  In an interview, Mr. Buffett was quoted saying "It's a company that helps IT departments do their job better, It is a big deal for a big company to change auditors, change law firms”  . or for IT departments to move away from using IBM. … Buffet was also quoted saying that as the company retains existing clients, they are growing substantially around the globe.  (Ref: CNBC Interview transcript)

What was unsaid in the interview with Mr. Buffet was how well IBM has embraced the global delivery model , a.k.a Offshoring pioneered by Indian firms – TCS, Infosys, Wipro et al.  It is expected that in 2011 , IBM will recruit approximately 24,000 more employees taking it to a total of nearly 154,000 employees from India.  IBM India account for about 90,000 employees. Roughly translated, IBM's Indian employees would generate $35 billion of IBM's revenues in 2010 (out of about $120 billion) [Wikipedia

The Enterprise Architect in me is fascinated by the move. More than any the utopian goal of “moving up the value” chain, excelling in the “business of IT” that most technocrats profess to, the action by an uber business strategist : investing $10.7 billion in an IT firm in the current economic climate speaks volumes.