THE REBIRTH OF IBM

THE HISTORY

International Business Machines, abbreviated IBM and nicknamed "Big Blue", is a multinational computer technology and IT consulting corporation headquartered in Armonk, New York, United States. The company is one of the few information technology companies with a continuous history dating back to the 19th century. IBM manufactures and sells computer hardware and software (with a focus on the latter), and offers infrastructure services, hosting services, and consulting services in areas ranging from mainframe computers to nanotechnology. Samuel J. Palmisano is the chairman and CEO of IBM.

IBM has been well known through most of its recent history as one of the world's largest computer companies and systems integrators. With over 388,000 employees worldwide, IBM is one of the largest and most profitable information technology employers in the world. IBM holds more patents than any other U.S. based technology company and has eight research laboratories worldwide. The company has scientists, engineers, consultants, and sales professionals in over 170 countries. IBM employees have earned five Nobel Prizes, four Turing Awards, five National Medals of Technology, and five National Medals of Science.

DEVELOPMENT AND GROWTHIn April 1993, IBM hired Louis V. Gerstner, Jr. as its new CEO. For the first time since 1914 IBM had recruited a leader from outside its ranks. Gerstner had been chairman and CEO of RJR Nabisco for four years, and had previously spent 11 years as a top executive at American Express. Gerstner brought with him a customer-oriented sensibility and the strategic-thinking expertise that he had honed through years as a management consultant at McKinsey & Co.. Recognizing that his first priority was to stabilize the company, he adopted a triage

Louis V. Gerstner

mind set and took quick, dramatic action. His early decisions included recommitting to the mainframe, selling the Federal Systems Division to Loral in order to replenish the company's cash , continuing to shrink the workforce 405,535 to 220,000 employees in 1994, and driving significant cost reductions within the company. Most importantly, Gerstner decided to reverse the move to spin off IBM business units into separate companies. He recognized that one of IBM's enduring strengths was its ability to provide integrated solutions for customers . Splitting the company would have destroyed that unique IBM advantage.

These initial steps worked. IBM was in the black by 1994, turning profits of $3 billion. But stabilization was not Gerstner's endgame – the restoration of IBM's once great reputation was. To do that, he needed to come up with a winning business strategy. Over the next decade, Gerstner crafted a business model that shed commodity businesses and focused on high-margin opportunities. IBM divested itself of low margin industries (DRAM, IBM Network, personal printers, and hard drives). The company regained the business initiative by building upon the decision to keep the company whole – it unleashed a global services business that

rapidly rose to became a leading technology integrator. Crucial to this success was the decision to become brand agnostic – IBM integrated whatever technologies the client required, even if they were from an IBM competitor . IBM augmented this services business with the 2002 acquisition of the consultancy division of PricewaterhouseCoopers for $3.5 billion US. Another high margin opportunity IBM invested heavily in was software, a strategic move that proved equally visionary. Starting in 1995 with its acquisition of Lotus Development Corp

Lotus Development Corp

IBM's software strategy focused on middleware – the vital software that connects operating systems to applications. The middleware business played to IBM's strengths, and its higher margins improved the company's bottom line significantly as the century came to an end. Not all software that IBM developed was successful. While OS/2 was arguable technically superior to Microsoft Windows 95, OS/2 sales were largely concentrated in networked computing used by corporate professionals. OS/2 failed to develop much penetration in the consumer and stand-alone desktop PC segments; there were reports that it could not be installed properly on IBM's own Aptiva

IBM's own Aptiva series of home PCs. Microsoft made an offer in 1994 where if IBM ended development of OS/2 completely, then it would receive the same terms as Compaq for a license of Windows 95. IBM however refused and instead went with an "IBM First" strategy of promoting OS/2 Warp and disparaging Windows, as IBM aimed to drive sales of its own software as well as hardware. IBM designed chips are currently used in PlayStation 3, Xbox 360, and Wii game consoles. IBM also regained the lead in supercomputing with high end machines based upon scalable parallel processor technology.

Company’s internal strength and weakness

Strength:• Development of new advanced microprocessor

chips which other company was not having.• IBM focused on customer based product.• IBM had been the largest seller of computer

software in the world.• IBM was that the company would build such a

broad and sophisticated range of computer hardware and software,backed by the best consulting and service competencies in the industry,that it would overwhelm it’s competitors in the future.for ex:think pad

• Gerstner’s strong focus on being close to clients had the additional advantage of occurring innovation throughout the organization.

• IBM coined the term e-business and Gerstner established an internet division in IBM in 1995 before most other computer companies.

• IBM’s early move to the internet was that it also helped with its own cost cutting efforts.

Weakness:• IBM just focussed on their Mainframe product• Low range PC’s and low range servers that be

sold under the IBM name which was sold to lenovo

• There were in its slow moving culture based on consensus decision making.

• They do not adapt new technologies soon to face competitors like HP, Dell

SWOT ANALYSIS

IBM SWOT ANALYSIS COMPARE WITH DELL Strengths of IBM IBM leads the world in technological success with patents in the

United States for 17 straight years. In 2008 IBM earned 4186 patents and in 2009 they increased that amount to 4,914. It published almost 4,000 technical inventions and products without patent protection in 2009; this is a valuable intellectual property.

IBM is one of the largest and most profitable companies in the world, with a value of $155 billion. They have over 319,000 employees worldwide.

IBM strength is the weakness of dell and its vice versa .

StrengthsDell is the World's largest PC maker. Profits for the 3 months to July 2005 were in excess of $1 billion US, representing a growth of around 28%. For the last couple of years it has held its position as market leader (it took it from rivals Hewlett-Packard). The Dell brand is one of the best known and renowned computer brands in the World.

Dellof

Weaknessesof IBM

• IBM’s size is also its weakness. IBM’s goliath size can make it slower to react to customer’s needs and wants as well as to the industry’s fluctuations. And it’s more than 400,000 employees can make it difficult to find the support and services needed.

• Transferring jobs oversees has been an option IBM is using more and more. At the end of 2009, IBM USA had a workforce of 105,000 down 30,000 in just a few years. In 2009, there were rumors that IBM wants to get the US workforce down to 70,000. This is not a weakness for other countries that are absorbing many of these US jobs.

WEAKNESS OF DELL• The company has such a huge range of products and

components from many suppliers from a plethora of countries, that there is the occasional product recall that can cause Dell some embarrassment. In 2004 Dell had to recall 4.4 million laptop adapters because of a fear that they could overheat, causing electric shocks or fires.

• Dell is a computer maker, not a compute manufacturer. It buys from a group of concentrated hi-tech components and its weakness is the strength of the IBM.

Opportunities.OF IBM

• Increased globalization is an important opportunity that can be exploited by IBM in order to balance the fluctuations in different economies.

• Their brand image is synonymous with “big” and “old” they need to create products appealing to a younger generation and reposition their company.

• IBM needs to maintain a competitive edge in the marketplace and innovation is key and working with IT-related companies to create new products in the ever changing market; use patents to generate revenue.

• There business sector is expanding with many future opportunity for success.

• Now it is customer oriented .

• Customized on demand hardware .

• Soft ware offering .

•

Threats OF IBM• The fact that they are completely dependent on Microsoft (in their computer

services division) could be a huge problem if anything ever happened to them.• HP, Sun Microsystems are all competitors and are all threats to IBM’s bottom

line. Their competitors are able to create cheaper products and make more a considerable profit. Smaller companies that can move faster and provide less expensive products and services than IBM can become very costly to IBM’s more lucrative bundles focusing more on larger companies with big budgets.

• The supply chain has very few suppliers, leaving IBM very little to negotiate with or switch to

• Its Threats side IBM realized that competitors are infoysis , cap geimini , EDS, Accenture, HP had stronger brand name , which puts IBM weaker position in dealers.

• HP COMPAQ merger.• Microsoft- SAP merger .

IBM-BUSINESS &CORPORATE LEVEL STRATEGY

• In 1994 LOU GERSTNER became chief executive of IBM and he reviewed all past strategies and the reason for their failure. The top executive brought about many strategic changes, which

are discussed below: Corporate level Strategy- Corporate goals and objectives:- The new corporate level strategy of IBM was to become one of

the leading e-business service providers and to develop new-commerce engineering, software and consulting services.

Steps taken for the development of corporate level strategy:• Following are the steps that were taken at corporate level.• Re-focus on the mission.

• De-emphasizing the manufacture of high tech hardware.• Increasing emphasis on providing customer with e-business

engineering, design and service.

• Converting old data bases into new online system.

• Improving efficiency by introducing web technology into their internal business.

• Corporate expanded scope of its new service as well as old hardware business to serve smaller customer that were previously neglected.

• They focussed on services and software packages tailoring unique needs of specific industries i.e., banks and hospital.

• Results of steps taken by corporate level• New corporate level strategy helped to c up

to 14%

Business level strategiesPrevious business unit objective:Previously firm differentiate itself from competitors on basis of superior quality and charging premium price for its quality. New business unit objective: Re-organized and re-allocated the internal resourcesHalf of the company budget was allocated to solve business problems rather than improving technical performance of hardware. For this team was created involving: • Sales executive in charge of account• Representative from service division• Person in software unit• Someone from research lab

Results of new Business level strategies

• Helped IBM to ride out the storm in good way.

• Firms revenues increased more than 7 % over previous years.

• Able to gain market share against competitors like ORACLE ,SUN, in nearly every service and software package.

• Earnings per share increased in 2003 which was less profitable year for other.

Strengths of new business strategy

• Knowledge and expertise of its personnel.

• Ability to develop beneficial relationship with customers.

• Training of their sale person by utilizing sufficient resources.

• Formation of price water house Coopers consulting , helped IBM focus more on executive level business problems.

NATURE OF CORPORATE STRATEGIES

• Louis Gerstern made strategies for reengineering the way of business.

• He decided not to break up IBM into 13 different divisions. He favoured centralization

• He focused on providing customized pc to its clients to gain competitive advantage.

• To manage IBM’s expenses he laid off many employees whom he felt unfit for the company

• He create the new leadership team and searched employees within organization who had unique expertise.

• He introduced report based meeting and decision making which reduced lots of wastage of time and money which used to happen earlier.

• He brought into autocratic leadership into the company to develop better strategies

• Witnessing the changing IT needs Gerstern instructed all his divisional managers to make flexible and updated initiatives towards the demand

• IBM bought many companies that possessed unique network software that could provide the clients with valuable new applications

• To encourage managers, consultants and salespeople to focus on the customers, Gerstern introduced a new pay for performance evaluation system that rewarded employees at all level

• Gerstern along with his new co partner Palmisano decided to divide the company into six major groups to cater better to the industry specific needs. These groups were financial services, public, industrial, distribution, communication and small and medium size business.

Company Structure

Company structures• International Business Machines Corporation (IBM, or, colloquially,

Big Blue; NYSE: IBM) is a multinational computer technology corporation headquartered in Armonk, New York, USA. The company is one of the few information technology companies with a continuous history dating back to the 19th century; it was founded in 1888 and incorporated (as Computing-Tabulating-Recording Company (C-T-R)) on June 15, 1911, and listed on the New York Stock Exchange in 1916. IBM manufactures and sells computer hardware, software, infrastructure services, hosting services, and consulting services in areas ranging from mainframe computers to Nano technology.With almost 330,000 employees worldwide and revenues of $US91 billion annually (figures from 2005), IBM is the largest information technology company in the world, and holds more patents than any other technology company.

Cont……….

• The WebSphere Commerce organization structure provides a framework for the actors, or entities, in your business scenario. This framework is organized in a hierarchical structure, which mimics typical organizational hierarchies with entries for organizations and organizational units and users. The organizations and organizational units in the framework act as owners for the parts of your business. All parts of your business, including customers, administrators, stores, catalogs and distributors, must be owned by an organization or organizational unit.

ORGANIZATIONAL STRUCTURE

• IBM Global Business Services is organized into six service lines:

• Strategy & Transformation• Enterprise Applications - SAP• Enterprise Applications - Oracle• Business Analytics and Optimization• Application Innovation Services• Application Management Services• Enterprise Resource Planning

Cont……..

• In order to allow customers or buyers to access your site, browse your catalog, and place orders; or to allow employees to administer the site, including updating the catalog, creating new promotions, or managing orders; or to allow resellers or other business partners to complete transactions on your site, all actors in your business scenario must be assigned a position in the Web Sphere Commerce organization structure.

Cont……….

• The company established the integrated system solution corporation (issc), which was a self- contained division separate from ibm corporate headquarters and whose employee were service and customer oriented.

• IBM quickly succeeded in lowering the cost of mainframe computing and had a clear cost advantage over competitors in the market.

• Another bright spot in its PC division was popularity of IBM sophisticated problem- solving Thinkpad computing devices among corporate customer .

Cont………….

• WebSphere Commerce provides sample organizations structures for each supported business model. These sample organization structures are available on their own (as component store archives) allowing you to use the sample organization structure as starting point for your own site, or as part of the sample business.

• IBM coined the term e- business and Rerstner established an internet division in IBM in 1995 before most other computer companies.

• His business model was the that IBM should provide a complete package of state of art computing solution ( hardware, software ,service and consultancy) that could be customized to a particular clients need and to take advantage of the possibilities created by the internet to create by the internet to create new market for IBM products and services.

Recommendation

•“You have to know (and love) your business”.•“Steely-eyed strategies” at the end a successful enterprise is one that has developed deep understanding of it’s customer’s.•“Proper implementation of strategy”.•“Intelligence wins wars”.•“Good strategy can change the whole scenario”.•“Allocating Resources properly”.•“Survival of the fittest”.

• First of all it can be recommended that u have to understand the know how of the business , so effected strategies can be formulated.

• To run a business efficiently in the market you have to keep in mind the needs and wants of the customers , it would be suggestive for the company to keep a deep understanding with the customers that will help them to achieve their objectives

• Proper utilization of time and resources will help the company to do their work quickly , as result it would be advisable to the company to make their plants which will arrange the resources quickly.

• Continuous up gradation of the technology is very much essential because where “Change Stops Stagnation Starts”.

• In this competitive market the main concept is “ Survival Of The Fittest “ so to compete in this market continuous innovation and change is required.

• Company should have market driven and customer oriented strategy, not only having proper strategy is enough, the proper implementation of the strategy is also equally important.