IBM - From Computers to Computer Services

Over the years, IBM Chief Executive Palmisano had built these concepts of revamping customers' operations and even running them into a strategy. His goal is to free IBM from the computer industry, which is growing at just 6% a year. Instead of merely selling and servicing technology, IBM is putting to use the immense resources it has in-house, from its software programmers to its 3,300 research scientists, to transform themselves from a computers and technology services into a business solutions provider. Palmisano had said that they are going to give a transformational process of running the entire business for their clients.
Palmisano expects that within 10 years IBM could build an annual revenue stream of as much as $50 billion in business consulting and outsourcing services. If so, Palmisano will have created a second services miracle and hitched IBM to a crucial growth market. And in the process, his company will be running or managing the majority share of the World’s business.

Rivalry and Competition is one of the Porter’s models which IBM is facing. Over the years, Computing and technology services are becoming more and more like a commodity business. The arrival of rivals in the industry such as Dell Inc. whose services are more efficient also made to think Palmisano on embarking on this journey. Though Dell’s business is small compared to that of IBM’s business, their growth rate of 30 percent a year should be taken seriously. Continuing in this way will result in slower growth and dwindled profit margins. Even in the outsourcing services industry. IBM has to face tough competition from Accenture and couple of Indian players like Wipro and Tata Consultancy Services. IBM had to compete with costs against these competitors as they are offering low cost without compromising on the services which are on par with IBM had promised.

Another Porter’s model which I think IBM has is creating barriers to entry. If IBM were able to deliver what they are promising, they can create an environment where clients could not be able to think beyond IBM for business outsourcing services. They also had their early win in securing ground breaking contracts. As IBM is a kind of company which constantly innovates, they can also venture into new markets and create an environment where they can enjoy monopoly.

Problems faced by IBM include completion in this business outsourcing industry and other Indian players. They offer the same kind of services as IBM plans to offer at lower cost. So in order to overcome this problem IBM should offer business services at competitive costs. As it is transforming into services industry, IBM faces the big challenge of making all their salesmen to get accustomed to the tricks and trade of the business solutions industry.

IBM should research on what are the services their competitors are providing, their business strategy and what is the future of this business outsourcing industry, how well it can sustain in the long term as it would help them to gain advantages over their competitors.