IBM’s Makeover

NYTimes writes about how IBM is becoming “less tech, more touch”:

The moves [IBM’s CEO] Mr. [Sam] Palmisano has made since he became chief executive less than two years ago have been bold, even risky. And if successful, his strategy promises to redefine not only I.B.M., but also what it means to be a computer company – making it far more a side-by-side partner with businesses, helping them improve their marketing, planning, procurement and customer service, rather than merely a supplier of hardware and software.

“The aim is to create a very deep connection between I.B.M. and its customers, and at that level it is a very powerful strategy,” said David B. Yoffie, a professor at the Harvard Business School. “But it’s making I.B.M. more like a service business with technology thrown in than a technology business.”

With the addition of PwC Consulting, the big I.B.M. services unit is more focused on executive-level business consulting instead of traditional technology services, like managing data centers for corporate customers.

This year, the 38,000 people in I.B.M.’s software group are being reorganized and retrained to focus on making and selling products tailored to the most common business problems of 12 major industries, including banking, insurance, automobiles, utilities, consumer packaged goods, telecommunications and life sciences.

For I.B.M., the strategy also moves the center of gravity in its relationships with corporate customers further from its traditional mainstay, the mainframe, and closer to business consulting services.

I.B.M. needs a new basis for securing and maintaining its relationships with big corporate customers, many of which spend hundreds of millions of dollars a year on I.B.M. offerings…Mr. Palmisano’s answer is to use the business consulting arm of I.B.M. Global Services to cement customer relationships. That, in turn, will pull in plenty of hardware and software sales – or so goes the thinking.

The development and spread of Internet-based software standards in recent years has opened the door to greater efficiency and cost-cutting opportunities in computing. Software using these standards can be thought of as the geeky glue that allows proprietary systems to talk to one another, sharing data and workloads. It helps make corporate data centers more nimble and flexible, and it is a crucial technology behind I.B.M.’s new ability to offer corporate data processing as a pay-for-use service, much like an electric utility.

That is the easier part of what I.B.M. calls its on-demand strategy, and all of its rivals – Microsoft, Hewlett-Packard, Sun Microsystems and others – are employing these Internet software standards to help corporate customers cut costs. But I.B.M. wants to go much further by trying to capture in software some of the things businesspeople actually do – like sifting and analyzing information – and automate it. This is where much of the I.B.M. research effort comes into play and involves sophisticated text analytics, modeling, simulation, mathematical optimization and the like. And for this to really pay off for I.B.M., the ideas and techniques developed for one customer have to be useful for an entire industry or several industries.

We have to become the IBM for SMEs in Emerging Markets.


Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.