INTERNATIONAL BUSINESS MACHINE
REBIRTH OF IBM
IBM corporation future was decided to divided into 13 different companies
1991-93,80000 employees were laid off sought to lowest cost structure
Restructuring causes closing of factories losses up to $15 billions stiff competition from Dell, Gateway,
Sun due to cost advantage
JOHN AKER’S LAST STAND
In 1990s- major change in business level strategy◦ Avoided to rent the software and hardware to
clients for year basis ◦ The implementation of strategy they decided to
sell instead of renting Selling boost the short run but loss of
special relationship with clients Sale of network computers were rocked but
mainframes plunged thinking of switching cost.
CONTD…
Louis Gerstner to take over as CEO
"In order to serve markets, we have to understand them, reflect their diversity and build a workplace in which every individual knows their opportunity to contribute is gated only by the quality of their ideas and job performance, and the integrity of their work."
Gerstner performed a study on different divisions to implement the steps.
New independent managers for each division of business.
Attractive incentives to the managers to perform well.
Replaced senior executives with managers in low down ranks.
Changed the decision making process and way of meetings.
Centralized hierarchical structure to quick decision making
GERSTNER’S MOVES
IBM to remain as a single unit Complete and comprehensive collection of
hardware, software and services To provide computer packages suited to
new computer environment and to survive the competition
Speeding innovations and decision making
GERSTNER’S DECISIONS
Provide a complete state-of-art computing solutions
Take advantage of Internet for marketing. To make IBM as customer-driven company Low profit margins & to provide unique so
that customers pay on premium price Challenge –How to customize the products
according to the needs of the customer?
NEW BUSINESS MODEL
To design the hardware to meet the satisfaction of clients
To customize the mainframe computers to suits to all business units small or big
Smaller mainframes “enterprise servers” to meet the clients of growing companies
Problem solving “ThinkPad devices” Development of new advanced
microprocessor chips Cost advantage over Mainframe Computer. Customize the chip to suit to all computers
needs for OEMs.
CHANGES IN HARDWARE
Rapid change in software proved to challenge to IBM
Mistake is that allowing Microsoft to provide MS-DOS operating system to IBM pc’s & mainframes
Then they tied up with ERP to increase the value by mainframe to server, server to PCs.
Started to acquire the software companies like lotus –Lotus notes for corporate Intranet.
Developed Middleware software
CHANGES IN SOFTWARE
Gerstner move is to satisfy all the clients and their needs. Computer services contributed to 20% of the revenues. U.S govt to employ the IBM to run the major computing
systems. Establishment of Integrated Systems Solution Corporation
(ISSC)to develop the services.◦ Electronic Data System and Accenture◦ Followed Jack Welsh of GE.◦ Renamed as Global ServicesConsultant
-Design, Plan, Implement, Maintain and Upgrade to reduce client cost structure.
-It increase client loyal on long term
CHANGES IN CONSULTING AND SERVICES
Investing large amount to services To compete Accenture and EDS to provide
consulting and services Expertise in middleware Client to Client assessing. All above will give Clear idea on customer
needs.....
GLOBAL SERVICES DIVISION
Growth of internet and e-commerce would major force in the direction of computing future
Established e-business is to serve internet related value chain transaction before its competitors
Acquisition of lotus enabled competitive advantage
Lotus collaborative software provided a model for making IBM middleware software internet compatible
IBM initiative its e business in 1996
Competitive advantage over competitors growing no of clients
E-BUSINESS AT IBM
IBM showed importance on SMB’s and growing industries to their needs
To manage their databases & functional value chain
1999 two million SMB clients by 2001
Advantage is early move to internet which helped in cost cutting efforts
Saved billion of dollars by selling their products directly to clients
CONTD….
By 2000 IBM replaced EDS as global leader in computer services
Gerstner continued to work to strengthen his new services driven model across all IBM
New pay-for-performance at the all levels of employees
Change of IBM structure to became entrepreneurial, collaborative and customer oriented
Gerstner’s successor Sam Palmisano took charge of global services, he was known as “street fighter” in college
Change in the operating structure as to new service driven organisation.
GARNER TO PALMISANO
Sam palmisano
corporate headquarter
Global services hardware software Global
marketing R & DGlobal sales
& distribution
ORGANISATIONAL CHART
Global services
Hardware
Software
Global financing
R & D
Global sales and distribution
DEVELOPMENTS IN OPERATING GROUP
LYNCHPIN most powerful group of operating group
Services surpass hardware revenues
Work to deliver software and hardware to clients
They have two superior software such as PeopleSoft's HRM , SAP’s ERP
$ 3 billion dollar to develop Linux based OS which works on all platform
Major clients in Asia such as India and China which results in lower cost OS
GLOBAL SERVICES
STRATEGIC OUTSOURCING SERVICES provide customer with cost advantage
INTEGRATED TECHNOLOGY SERVICES designs, implementation and
maintenance
BUSINESS CONSULTING SERVICES Business process innovation,
application enabled
THREE LINES OF GLOBAL SERVICES
Acquisition of PriceWaterhouseCoopers for $2.3 billion
Increase in consultants in services
To serve the needs of different industry clients
To offer the same complete IBM solution all over the globe
40% revenues from global services
Improvement in online collaboration and global teleconferencing to promote collaboration
MAJOR COUP OF PALMISANO
In 2003, IBM reorganized the hardware group
- system & technology group
- personal system group
Hardware:
IBM microelectronics division:
◦ Offered: Leading semiconductor technology. Customized solution Sold Engineering technology Services to Original
Equipment manufacturers(OEM) And offered service to other computer companies.
Technology Group:
• Offered 3 services:▫Manufactured & tested Semi-conductor products
for customers.▫ IBM provides integrated supply chain services to
deliver the product to Customer and clients. Eg: Sony P3 and Home media centre
• In addition, Technology group launched its new Engineering and Technology services division that provides system and component design service.
Microelectronic division:
Include the companies lines of PCs, printers and Point of Sale terminals used in retail stores and fast food restaurants.
And include IBM Thinkpad devices
Intense price Competition Dell, Hitachi and Samsung
Personal System Group:
Could not match efficient Competitor. So in 2000, sold hardware to Hitachi And in 2002, 3 years Outsourcing to SCI
Despite outsourcing they plunged in profit (2005).
Sold Computing business to LENOVO.◦ LENOVO can sell under the brand name of IBM.
Cont...
Analysed the Core competencies and gained through the leadership of new CEO
Hardware Software and services Servers Storage Devices
Leads to more profit and Operating margins are high.
IBM
Failed in commodity product because of DELL competition
Gerstner insight was to offer complete range of computer products and solutions.
Cont..
Offered:◦ Open Source middle ware solutions
IBM once again to strengthen its competencies in application software went for stratergic acquisition.◦ Lotus◦ Tivoli System◦ Rational System
Software Group:
To provide its clients with the financing to facilitate them to purchase their computer products and services.
This decision is the major source of profitability.
IBM is the largest IT financier in the world.
Global Financing divisions
IBM has an operating division devoted to advanced research
Focused on emerging technologies like nanotechnology and autonomic computing.
R&D:
• Palmisano introduced the “e-business on demand initiative”
• He searched for new IT business Solution
• His teams objectives
To further innovation To significantly reduce cost To integrate activitiesIt has developed 17 expert system
E business on Demand:
By 2005, increased IT budgets IBM was working hard to promotes its
Customized on demand hardware
Software offerings.
Future of IBM:
HP- Compaq merger.
Microsoft-SAP merger.
IBM eyes on lucrative SMB segments
Threats to IBM:
Thanks to new CEO s.
GERSTNER’S GROWTH
THANK YOU