The Worlds Largest IT Company - Case Study Example

Business Analysis - IBM Submitted by: IP Disclaimer: All material, including information, news article references and images, pictures and graphs are leveraged from online sources, with due acknowledgement of source - they are being used 'only' for academic study and non-commercial use. Table of Contents Introduction 3 Web presence 3 Picture 1 - Source: Actewagl website 4 Picture 2 - Source: wolrath.com 5 Competitive Advantages of web services 5 Organisation Changes over the years 6 Organisation changes needed to meet market demands 8 How should IBM change in the next 5 years and beyond 9 Picture 3 - Source: IBM Website 10 References 11 Introduction Today, there are many historical companies that have become famous because of their high-class customer service, ability to survive in spite of difficult circumstances, understanding of market conditions and ambition to be leader in the middle of the competition. IBM is one such company and is probably one of the world's best known companies. IBM was found towards end of 19th century as a machine producing tabulating machines. But now, it has grown over the years and now it is the world's largest IT Company. IBM's secret of survival has been it has constantly changed according to market conditions and requirements of customers. It is therefore chosen as the subject of this business analysis. The analysis is divided into three parts as follows: 1) Analysis of its presence on the web - its different web facilities, its strength against its competitors and how different and unique it is. 2) Organisation structure - how it has changed over the years, and what can be done to change it for meeting new demands of market. 3) Changes that will affect the company in the next 5 years and how the company should adapt to this. IBM Premier Partners, Partner Awards, Partners in Open Source, Rational, SOA and Cloud Computing Web presence IBM was one of the earliest companies to start using the Internet as a marketing tool. The rise of World Wide Web became a strong factor for its enormous growth during the 90s. The Internet has grown very quickly as can be seen in the graph below: Picture 1 - Source: Actewagl website IBM therefore consciously made use of the Internet to grow its business. Key elements of IBM's web strength are listed below: 1) IBM has highly reliable web infrastructure used to host its website and is available 24X7. 2) It has adopted its own web services platform known as Websphere for hosting its web services. 3) Back-end is hosted on its robust server infrastructure consisting of IBM mainframes. 4) The website is intuitive and easy to use, without complicated English or too much of technical words - IBM's site is one of the simplest to read and understand. 5) The web services are country-specific covering all services for a given country. This is a huge competitive advantage because IBM operates out of more than 170 countries! 6) The 'support and services' part of its website is designed very well - it is simple and easy to use. 7) It's e-commerce facilities are built on its own CommercePOINT platform - The platform details are shown below: Picture 2 - Source: wolrath.com 8) It has solid partner services in the form of 'IBM Partnerworld' - All partner business facilities are available as part of this website. 9) It has a very robust data warehouse and business intelligence back-end to interpret web requests and serve the relevant information. Competitive Advantages of web services The key elements that make IBM stand out apart from its competitors such as HP, Accenture and others are as follows: a) The Websphere web services platform has become very popular and it is even used by competitors today for packaging and use web application services. b) Its back-end mainframes are very robust and are built with the longest duration of research and development within the market. c) Its country-specific services are completely localized to individual countries and this has proven very useful for marketing and sales targeted at individual geographies. d) IBM is a big supporter of open source development. It has built a separate web facility called 'DeveloperWorks' to help software and IT professionals. This is hugely popular and is seen as an advantage over competitors. e) The PartnerWorld web portal for its developers is used very well by its several partners. IBM has been a strong partnering company right from the beginning and this strength has come over to its web services for the partners as well. Organisation Changes over the years IBM has been a company of radical change all through its decades of existence. The Organization is traditionally known to be very conservative and formal in its management style - but surprisingly, it has made very strong and firm moves repeatedly to meet changing market conditions and demands. Major changes are discussed below: i. The turning point in IBM's history was when the company decided to enter the field of digital computers (manufacturing) in the early 1950's. This needed strong investment in research and development in the product area. IBM did this very successfully and soon became the leader in mainframe computers at a time when the computing industry had just taken birth (MSN Encarta). ii. The next major change happened when the company made an entry into manufacturing of personal computers - this happened in 1981 (MSN Encarta). iii. IBM, in keeping with its trend, entered and became a strong player in the storage market. iv. Probably the biggest organization structure change was the formation of IBM Global Services. Formed in 1991, this major structural change helped IBM concentrate all its business and technology services business into a separate part of the organisation. At that time, very few analysts had expected IBM's entry into the services business. IBM was known as more of a product and research company until then. This sudden change was the best thing that happened to IBM because today, IBM is the world's largest technology services provider with more than 190,000 employees across 160 countries (wikipedia, April 2009). v. The company, in a surprise move then, became a strong supporter of Open Source movement and began taking up Linux as a major OS brand. Since then, it has built several Open Source platforms by joining hands with several major partners. vi. IBM had long eyed the consulting business - it therefore fulfilled its ambition by taking over the consulting arm of Price Waterhouse Coopers in 2002 (ZDNet, July 2002) vii. IBM wanted to become an established leader in Software services especially tools. Hence, it was logical to buy a major tools provider - this, IBM did, with the purchase of Rational Corporation in 2002 (The Register, December 2002). This move can be seen as a good move when seen from the present, because all of Rational tools such as Clearcase, etc. are still the default tools used by most developers. viii. Again, in 2006, IBM made a major organisation change by splitting Global Services into Global Technology Services and Global Business Services - this helped greater market alignment and also helped in better reporting. ix. IBM recognized that margins in the PC business were falling rapidly - and finally, IBM decided to take away its PC business altogether (CNET News, December 2004) - This helped the company to become slimmer and sharpened focus on its other market-leading areas such as mainframes and services business. ('IBM announces management changes', January 2006) x. The company recently made a failed attempt to take over Sun Microsystems - This was attempted to gain complete market leadership in Open Source (Java, etc) as well as strengthen Enterprise Servers and Storage business. The takeover failed because of purchase price issues. Organisation changes needed to meet market demands IBM has been a leader in always reading the market well. However, there have been some spectacular failures as well. For example, IBM had eyed EMC for a long time for a takeover. EMC resisted and finally IBM had to partner with EMC in the storage business. Likewise, the move to separate PC business was initiated to face falling margin realities. IBM has always known to be a slow and conservative company - in fact, it is famous for conservative management. IBM is also known as a 'manager-driven' company where managers are given vast powers over their subordinate teams - this has, at times, led to employee dissatisfaction as they have compared it against the very open and empowered culture of companies like Oracle and HP - IBM is slowly making employee-friendly moves, but this will take time to emerge as real change. Likewise, IBM has opted for other moves such as greater representation for women workforce to ensure gender balance. The company has also recently started encouraging 'work from home' and 'work commuting' in a big way. These facilities were available long ago in other competitor companies, but IBM is showing that it can change too. Further, IBM is probably the most compliance-conscious company - Compliance is managed by the very powerful Business Controls department and the Corporate Audit function. These two functions are feared and respected at the same time, by the entire workforce. The compliance levels of IBM in terms of contractual commitments and legal/statutory/regulatory commitments are legendary. IBM should continue to sustain this strength as this is a strong branding strength in the market as well. IBM's research group again is legendary and comes under IBM labs. IBM has, since its beginning, had the concept of 'IBM fellows' - this is a rare breed of genius scientists, many of whom have gone on to become Nobel laureates. IBM should continue to nurture this great group. Likewise IBM has leadership forums and leadership awards given annually - this has helped produce the industry's best management leaders - IBM should continue this too. How should IBM change in the next 5 years and beyond IBM is recognized by common people in the market for two things namely - 'supercomputers' and 'on-demand' computing. While IBM has always been one of the leaders in supercomputer manufacturing, 'on-demand' computing is seen by the market as more of hype. However, the company's unique offering to make processors and computing power available on lease was a market-changing move - Other players in the market have also started doing this now. IBM should continue moves to retain leadership in mainframe computing and supercomputing. However, IBM may have to find another game-changer like 'on-demand' computing - otherwise, there is a risk of IBM being seen as a company with only 'old and well-known, traditional' products. The company should continue its gamble with Open Source - this segment will certainly grow rapidly and will not slow down even with fierce opposition from software giant and business rival, Microsoft. Many stories are told even today of how IBM made its biggest mistake in history by rejecting Bill Gates' offer to come up with disk operating system (DOS) and the personal computer - they say, what Microsoft is today should actually have been a part of 'big blue' IBM if only they had not closed the door on Bill - This shows the company has made historical mistakes but it has always been willing to learn - IBM should continue scanning the market for potential partners as well as potential competitors. IBM should get its 'Storage Business' model right - somehow, this has always been dicey and has not taken off the way IBM wanted it long ago - The storage market is going to become fiercely competitive especially after the recent acquisition of Sun Microsystems by Oracle. Likewise Data Warehousing is another area where competition is increasing every day. IBM should prepare and plan better in these areas. IBM can be safely expected to remain the leader in mainframes. The graph below shows competition is far behind (graph is generated before acquisition of Sun by Oracle) Picture 3 - Source: IBM Website The market today is moving rapidly towards several new areas - to name a few, Cloud Computing, Software As Asset Services (SaAS), Service Oriented Architecture (SOA), new generation Data Warehouse and Business Intelligence, next generation of Open Source products and platforms, etc. It is important for IBM to retain its sharp eye for catching the market trends, do the right levels of organizational changes and acquisitions, and move with the market. IBM has been making good moves in the area of SOA and Cloud Computing - but, one cannot say how the market will evolve for these new areas and IBM should be to pull out quickly if the expected market fails to emerge. References Picture 1 - actewagl.com [Online]. Available from: http://www.actewagl.com.au/education/_lib/images/communications/internet/InternetGrowthChart.gif [Accessed 22nd April 2009] Picture 2 - wolrath.com [Online]. Available from: http://www.wolrath.com/images/ICommerceImages/SET_Images/7_IBM_eTill.gif [Accessed 22nd April 2009] Picture 3 - ibm.com [Online]. Available from: http://www.ibm.com/investor/attachments/artifacts/chart2-26-07-05-1.gif [Accessed 23rd April 2009] DeveloperWorks IBM developerWorks. [Online] Available from: http://www.ibm.com/developerworks/ [Accessed 22nd April 2009]. IBM Global Services (2009). Wikipedia. [Online] Available from: http://en.wikipedia.org/wiki/IBM_Global_Services [Accessed 23rd April 2009] International Business Machines Corporation (n.d.). MSN Encarta. [Online] Available from: http://encarta.msn.com/encyclopedia_761566825/international_business_machines_corporation.html [Accessed 23rd April 2009] IBM takes over PWC Consulting (2002) ZDNet. [Online] Available from: http://news.zdnet.co.uk/itmanagement/0,1000000308,2120076,00.htm [Accessed 23rd April 2009] IBM buys Rational for $2.1 Billion (200). The Register. [Online] Available from: http://www.theregister.co.uk/2002/12/09/ibm_buys_rational/ [Accessed 23rd April 2009] Lenovo completes buy of IBM's PC Business (2005). CNET News. [Online] Available from: http://news.cnet.com/Lenovo-completes-buy-of-IBMs-PC-business/2100-1042_3-5691487.html [Accessed 23rd April 2009] IBM announces management changes (2006) ibm.com. [Online] Available from: http://www.ibm.com/investor/attachments/ircorner/06-03-20-1.pdf [Accessed 23rd April 2009] ======== Read More