IBM Global Services

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In 1991 IBM was a $64. 8 billion company, of which less than $6 billion was derived from non-maintenance services. Ten short years later, the business of information technology (IT) services alone generated more than 40 percent of IBM. s $86 billion in sales and had become the single largest source of revenue in IBM. s portfolio. How did that happen? It was partly the result of old-fashioned hard work and serious commitment: growing customer by customer; building disciplined management and financial systems; and investing to hire and train experts in everything from IT consulting to systems architecture and Web services.

IBM used its financial strength to fund the expensive push into outsourcing, and the company placed informed bets on the future in areas such as IT utility services (. e-business on demand. ) and hosted storage. But most important, the success of IBM Global Services came from something very simple: a clear understanding of customers. needs. IBM saw that technology and business were converging to create something new and challenging for every kind of enterprise. And IBM had the deep experience in both areas to help its customers bring them together most effectively.

The following pages offer a brief look at the history and growth of the organization that is today IBM. s top revenue generator. Definitions What are . services? In the IT world, that broad term has encompassed dozens of offerings and meanings, including consulting, custom programming, systems integration (designing, building and installing complex information systems), systems operations (in which a vendor runs part or all of a company. s information systems), business innovation services (such as supply chain management), strategic outsourcing, application management services, integrated technology services (such as business recovery), networking services, learning services, security services,storage services and wireless services.

(For a full list of IBM. s various services, visit Http://www. ibm. com/services/fullservice. html) Origins The beginning of IBM. s involvement in IT services can be traced back at least to 1989 when Eastman Kodak Company and IBM completed an agreement by which IBM designed, built and managed a new state-of-the-art data center for Kodak in Rochester, N. Y.

That experience –which was beneficial for both companies — encouraged IBM to provide additional outsourcingservices by exploiting the excess capacity in its own data centers. Also in 1989, IBM introduced Business Recovery Services, an offering that enables a business to continue operations in the event of an unplanned outage or disaster. In the spring of 1991, IBM. s Corporate Management Board approved a new worldwide services strategy. Its goal: to make IBM . a world-class services company. by 1994.

That same year, IBM2 2405SH01 restructured its Systems Services Division as the Integrated Systems Solutions Corporation (ISSC), a wholly-owned subsidiary to provide a broad range of outsourcing services to customers. Strategies & Tactics Three different stages characterize IBM. s evolution into a services-led business. The Early-1990s When Louis V. Gerstner, Jr. , became chairman of IBM in 1993, he found some 20 largely independent business units — each with their own strategies and some in the process of moving toward spin-off or sale.

As IBM. 2001 annual report put it: . We were on a fast track [in 1993] to being dismantled, from within.. But that spring, the new leadership decided IBM would stay together. .We believed niche players weren. t the future,. stated the annual report. .In fact, breaking up the company would have been the end of everything IBM stood for. We made a big bet that customers needed a partner who could both create technologies and integrate them — with each other, and with the customer. s business processes. At the time it was a gutsy call.

They always are when you. re alone. But we decided that we should be true to ourselves. It all started with that.. The 1993 decision not to break up the company became the foundation of an . integrator. business model for IBM. And IBM Global Services has become the focal point of this model, bringing together hardware, software and services. A second strategy devised in the early-nineties built on the client/server phenomenon of the late-1980s and predated the explosion of the Internet for commercial uses.

IBM initially called it .network centric computing.. Harnessing the company. s substantial networking capabilities, IBM brought together multiple internal networks under a single organization to form the IBM Global Network in 1994, the mainstay of which was electronic data interchange services.

Thirdly, IBM made some key investment and disinvestment decisions to shift the balance of its skills and capabilities toward higher revenue growth. For example, the company put additional funding into its consulting group, which had been unveiled in 1992.

This buildup reflected a shift in IBM. s services philosophy from merely an after-sales activity, such as maintenance, to a broader approach of assisting customers in every facet of their ongoing business operations. In sum, during the early-nineties, IBM kept itself whole (to act as an integrator), established its future around networks, and acquired resources to better position the company in a world in which services was becoming more important for growth and success.

The Mid-1990s In the middle of the last decade, IBM formed a unified organization to develop and deliver services. This new unit — IBM Global Services (IGS) — was formed in 1995 to provide customers with worldwide reach and more consistent service levels. As a result, Global Services rationalized its offerings by shrinking from an ungainly 2,500 offerings worldwide down to about 100 solution categories that were consistent globally.

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