rebirth of ibm

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INTERNATIONAL BUSINESS MACHINEBY J.SUBALAKSHMI S. JAYASRI M. PRAVEEN RAJ BALAKUMARAN

Fall of IBMy IBM had saturated the international market. y Competition was increasing. y Major competitors

Amdahl, Honeywell, Burroughs, Univac, NCR, Control Data. y Changes in technology.

Fall of IBMy MINI COMPUTER

MARKET

y PERSONAL COMPUTER

y WORKSTATIONS

Fall of IBMy MINI COMPUTER

MARKET

y PERSONAL COMPUTER

y WORKSTATIONS

Fall of IBMy MINI COMPUTER

MARKET

y PERSONAL COMPUTER

y WORKSTATIONS

Fall of IBMSOFT WARE AND SERVICES:y IBM realized the importance of developing

proprietary software y It failed to recognize the developing market y Revenue from software & services. In 1981, 33% In 1993, 50%

Fall of IBMy It found that developing new applications software was a difficult business y Talented programmers were not attracted y They found that they could make more money if they were in business for themselves

y Sales people are expected to sell the products of software partners as well as IBM products

Fall of IBMSYSTEMS INTEGRATION AND OUTSOURCINGy IBM limited its service activities to providing support for its own software and hardware. y It didnt use its skills to systems integration. y It had not recognized the developing market for outsourcing data processing.

Fall of IBMTHE NEW COMPUTER INDUSTRYy By 1990, IBM received gross profit from y Mainframe 50% y Minicomputers 6% y PCs & work stations 18.5% y IBM has the most to gain from making mainframes. y It was facing stiff competition. y Market for mainframe computers was declining. y Suppliers of computer components have been the winners

VINCENT LEARSON 1972

FRANK CARY 1974

JOHN OPEL 1984

JOHN AKERS 1986

Fall of IBMRESTRUCTURINGy 1985- John Akers became CEO of IBM y Problems - identified y Failure to develop products fast enough y Sales people had become oriented to selling and servicing the mainframe y Highly BUREAUCRATIC organizational culture

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In 1988- reorganized IBM into 7 divisionsPersonal computer systems Mid-range systems Mainframes Information systems and communications Technology development Programming & software

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But the sales force was to remain a separate entity whose job would still be to sell the whole line of IBM products

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Disadvantages:The timeframe associated with making decision was so long. Sales forces would not be able to focus on a single product line. 20000 employees were transferred Akers embarked to downsize the organization Workforce of 405000 was reduced to 389300 through early retirement and attrition Products were still late to market Most decisions still required approval by IBMs corporate headquarters managers

1991 RESTRUCTURING` `

Try to decentralize decision-making authority Akers divided IBM into 13 separate divisions9- companys main product lines 4- marketing and service operations

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His plan was that each division would be an autonomous operating unit The heads were responsible for developing annual biz plans Goal was to free up IBMs powerful resources and to make it more competitive

NEW MANAGEMENT AND NEW PLANS

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1991 $2.8 billion 1992 $5 billion Pressure for change at the top was increasing John Akers resigned in 1993

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

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Louis Gerstner to take over as CEO"I r rt s r t rst , il r fl t t ir i rsit rk l i i r i i i l k s t ir rt it t tri t is t l t q lit f i s j t ir rf r , t i t rit f t ir rk." rk ts, t

er erf r ed st dy different di isi ns t i lement t e steps. New independent managers f r each di isi n f siness. Attracti e incenti es t the managers t perf rm well. eplaced seni r executi es with managers in l w down ranks. Changed the decision making process and way of meetings. Centralized hierarchical structure to quick decision making Gerst

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to remain as a single unit Complete and comprehensi e collection of hardware, software and ser ices To provide computer packages suited to new computer environment and to survive the competition peeding innovations and decision making

a complete state-of-art computing solutions Take advantage of Internet for marketing. To make I 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? Provide

To

design the hardware to meet the satisfaction of clients To customize the mainframe computers to suits to all usiness units small or ig Smaller mainframes enterprise servers to meet the clients of growing companies Problem solving ThinkPad devices evelopment of new advanced microprocessor chips Cost advantage over ainframe Computer. Customize the chip to suit to all computers needs for OE s.

change in software proved to challenge to I istake is that allowing icrosoft to provide S- OS operating system to I pcs & 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. eveloped iddleware software Rapid

Gerstner move is to satisfy all the clients and their needs. Computer services contributed to 2 % of the revenues. U.S govt to employ the I to run the major computing systems. Establishment of Integrated Systems Solution Corporation (ISSC)to develop the services. Electronic ata System and Accenture Followed Jack Welsh of GE. Renamed as Global Services Consultant - esign, Plan, Implement, aintain and Upgrade to reduce client cost structure. -It increase client loyal on long term

Investing

large amount to services To compete Accenture and E S to provide consulting and services Expertise in middleware Client to Client assessing. All above will give Clear idea on customer needs.....

y Growth of internet and e-commerce would major force

in the direction of computing futurey Established e-business is to serve internet related value

chain transaction before its competitorsy Acquisition of lotus enabled competitive advantage y Lotus collaborative software provided a model for making

IBM middleware software internet compatibley IBM initiative its e business in 1996 y Competitive advantage over competitors growing no of

clients

y IBM showed importance on SMB s and growing

industries to their needsy To manage their databases & functional value chain y 1999 two million SMB clients by 2001 y Advantage is early move to internet which helped in

cost cutting effortsy Saved billion of dollars by selling their products

directly to clients

y By 2000 IBM replaced EDS as global leader in y y y y y

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 known as street fighter in collage Change in the operating structure as to new service driven organisation

Sam palmisano

corporate headquarter

Global services

hardware

software

Global marketing

R&D

Global sales & distribution

y Global services y Hardware y Software y Global financing y R&D y Global sales and distribution

y LYNCHPIN most powerful group of operating group

y Services surpass hardware revenues y Work to deliver software and hardware to clients y They have to superior software such as PeopleSoft's HRM ,

SAP s ERP

y $ 3 billion dollar to develop Linux based OS which works

on all platform

y Major clients in Asia such as India and China which results

in lower cost OS

STRATEGIC OUTSOURCING SERVICES

provide customer with cost advantage INTEGRATED TECHNOLOGY SERVICES

designs, implementation and maintenance BUSINESS CONSULTING SERVICES

Business process innovation, application enabled

y Acquisition of PriceWaterhouseCoopers for $2.3 billion y Increase in consultants in services y To serve the needs of different industry clients y To offer the same complete IBM solution all over the globe y 40% revenues from global services y Improvement in online collaboration and global

teleconferencing to promote collaboration

Hardware:In 2003, IBM reorganized the hardware group - system & technology group - personal system group

System Group: eserver Linux

Storage products.Disk, tape & storage area networks

40% direct to customers, 20% through Internet. Managed Outsourcing operation

Technology Group: IBM microelectronics division:Offered:x Leading semiconductor technology. x Customized solution x Sold Engineering technology Services to Original Equipment manufacturers(OEM) x And offered service to other computer companies.

Microelectronic division: Offered 3 servi