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