IBM CORPORATION 1

Company Profile & Analysis

International Business Machines

February 16, 2014

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International Business Machines (IBM) is widely renowned as the worlds largest

information technology company, being incorporated on June 16th, 1911 ("International

business machines," 2014). IBM holds more than 22,000 patents and markets over 100

products and services internationally. Further, in order to clearly demonstrate the vast

impact this company has on a global scale, it is important to state that IBM operates in

over 170 countries and employs a workforce of nearly 400,000 people. The corporation

offers many different services and products; ranging between software, hardware, IT

consulting and even financing for larger systems and corporations. Additionally, IBM has

an enormously large client base, embracing sole proprietorships, large organizations and

government organizations. Successively, it provides services to a plethora of industries;

encompassing the likes of financial, industrial, distribution, communication and public

businesses (Ibm corporation, 2005).

The major operations of IBM entail five main categories. The first is Global

Technology Services (GTS). This operation provides outsourced information technology

infrastructure services and business process services as well. Primarily, this framework is

responsible for creating customized IT solutions. The second classification is Global

Business Services (GBS). GBS delivers professional consulting and application

outsourcing services. The third offering, being widely recognized through the public eye

as the companys most renowned contribution, is Software. Predominantly, the software

category consists of middleware that is utilized to empower businesses with a

standardized operating platform. Middleware enables the complete integration of all

systems, processes and applications. Furthermore, it provides additional operating

programs that assist clients to efficiently manage its operating procedures throughout the
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entire business operation. Subsequently, the fourth category is grouped under Systems

and Technology. Essentially, this sector provides IBMs clients with solutions to various

issues that require advanced computing power and storage capabilities. Subsequently, the

division leads semiconductor technology, products and packaging solutions. Finally, the

fifth operation is categorized as Global Financing. Value is delivered to IBMs clientele

through its sales organization and moreover, through its vast depth of research,

development and intellectual property. Whether it is geographically, culturally, or

ideologically, given the speed and diversity of the international marketplace, IBMs

success as a global enterprise solely relies on its ability to put aside any differences and

work in harmony with other nations ("International business machines," 2014).

To this day, IBM holds strong aspirations to become a globally integrated

enterprise. Senior executive, Sam Palmisano states:

IBM was international before people even thought about international

companies. It was multinational before that was contemporary. Now were taking

it to the next dimension and creating a truly globally integrated company.

Historically, IBM had always maintained a similar strategy in respects to other major

corporations. In other words, companies would essentially replicate the parent company

for its national organizations that were being operated in other countries. It wasnt until

Palmisanos tenure when the corporation realized this type of system was largely

outdated and ineffective. The new plan was to run IBM in a much different manner; that

major changes were necessary in order for the corporation to uphold a competitive edge

and expand rapidly in high-growth markets ("The globally integrated," 2014).

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At this point, IBM was reorganized around a new principle. The company would

perform work for both its clients and own business units in specific locations where the

job could be done most efficiently. The idea was to tap into the most appealing market

segments with the right talent and the best price. A major part of this scheme was to

create a truly global human resources supply chain. Furthermore, the goal was to utilize a

combination of facets to annually drive 10 to 15 percent productivity gains throughout

the companys complete services portfolio. In order to enhance quality and

responsiveness, IBM focused its efforts on business process redesign, technology

upgrades, and re-deployment of global labor ("The globally integrated," 2014).

Moreover, IBM is also transforming vast aspects of its global strategy, operations

and culture. In 2007, the company implemented a suite of programs called The Global

Citizens Portfolio. The primary design of this platform was to globally evolve IBMers

into more effective citizens and leaders. Subsequently, a segment of this program, known

as the Corporate Service Corps, was formed to assist local industries, craft economic

development strategies and improve government services in developing countries. To

emphasize, IBM forecasted these implementations to increase the revenue from those

countries by 18% in the first year and up to 25% by 2015. For example, in the year 2000,

IBM had 10 branch offices in Africa and the Middle East; just one decade later it grew to

23 offices, with further expectations of expanding to 40 by 2015("The globally

integrated," 2014). Additionally, IBM is making significant investments in more than 100

emerging countries; building critical infrastructure, developing strategic industries and

responding to massive demographic shifts (such as rapid urbanization). These emerging

countries are expected to directly equate to more than 60% of global GDP growth by
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2015 (Kaila, 2012). Ultimately, particular schemes and programs similar to these are

directly playing into the companys Smarter Planet strategy; to expand the globally

integrated enterprise vision for a global commons of societal systems and interdependent

business ("The globally integrated," 2014).

In definition, a globally integrated enterprise is an open, modular organization

that is integrated into the fabric of the networked economy and operates under a business

model that makes economic sense in the new global landscape. There are three main

focuses that encompass a GIE: Global supply management, Global production

optimization, and Global demand management. First, supply management efficiently

locates and secures the best global talent and production resources available in the world;

whether it is internally or externally. Next, production optimization creates global scale

efficiency through modular service centers that are integrated via common platforms,

values and governance. Lastly, demand management aggressively pursues high growth

global markets; such as emerging markets, global niche markets, and global solution

requirements.

In addition, Palmisano is gambling on another innovative strategy as a means to

not only help IBM but to also grow the entire industry. He believes that by spreading the

riches around to other major corporations that it will lead to a foundation for new

opportunities; selling high-value products and services that meet the new demands. The

idea is to adopt a scheme of openness by giving away intellectual property in software,

patents and ideas. Primarily, this sharing plan is the collaboration with customers and

rivals to invent new technologies. IBM spends roughly $5.7 billion a year on research and
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development but believes that sharing certain innovations can promote an even faster

advancement of new products (Cravens & Piercy, 2012).

How has IBM evolved from the 20th century to todays day and age? For

starters, the 20th century, known by the company as the international era, focused on

exporting. Being formally established in 1924, IBM had 3,384 employees with sales

operations in Europe, Canada, Latin American and Asia. The next phase of the evolution

was becoming multinational, known as replicating era. It was at this time when mini

IBM sales companies were established in all major countries of operation; each

encompassing total back-office functions such as HR, Finance, Marketing, Procurement,

etc. Subsequently, as the 21st century progresses, IBM has its strategy aimed for a

globally integrated enterprise; business in a connected world. This era entails over

330,000 employees with services across 50 delivery centers amongst 21 countries. It also

contains 12 global shares services units that make up almost two-thirds of revenue

outside the United States (Horan & Rhodes).

IBMs multi-year transition from multinational to GIE has without a doubt

impacted most aspects of the organization. The company sets it current priorities to the

global market place, global support functions, and global culture. Each priority has a

different function in optimizing the complete transition. The global marketplace

prioritizes in capturing the opportunity of a growing global market place, leveraging the

companys scale and expertise to maximize market growth, and to serve the needs of

global clients. Successively, global support functions are focused on taking advantage of

global sources for high-quality skills, rationalizing support functions for greater

efficiency, and creating the flexibility to quickly manage changes in the marketplace.
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Finally, global culture aims to create a culture that reflects IBMs global presence and

priorities, as well as instilling values that promote global collaboration and the

integrations of company partners and clients (Horan & Rhodes).

The following charts display the impact of this transition and its methods

(Horan & Rhodes):

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(Horan & Rhodes)

What challenges does IBM face? Primarily, there are major concerns about the

continuing transformation of IBM. Questions of concern are coming to surface regarding

whether the transition to become a tech services company has stalled due to market

change, aggressive and low-cost competition. Despite the compelling outlook for this

new type of globally integrated enterprise that focuses on new types of service products,

concerns surround the capacity of the company to implement it effectively, globally and

promptly enough to adhere with competitive threats. Additionally, progressing towards a

collaborative business model, sharing R&D with customers, developers and competitors,

raises the risk of exploiting new ideas. Consequently, by open-sourcing software

development and attempting to make open-source sharing the industry standard, there are

fears of potential backfires. Many individuals believe this type of strategy can undermine

the overall strength of IBMs software division; currently, being the main source of

revenue growth for the company. Lastly, another potential downfall is being driven by
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growth acquisition with other corporations. Fundamentally, by not performing these tasks

organically and in-house, there are major concerns that the surrounding collaboration

may undermine the consistency of IBM and its knowledge generation for superior service

offerings (Cravens & Piercy, 2012).

In order to ensure and safeguard the company as a global enterprise, IBM has

developed an Enterprise Risk Management system to help determine risks and to assist in

economic long-term investment. As the company continues to invest heavily in growth

opportunities in emerging countries such as Brazil, China, India and Russia it is essential

that IBM secures an appropriate mix of trained, skilled and experienced personnel.

International expansions of this magnitude can present many other challenges including

potential political, social and economic risks from poor infrastructure, creditworthiness of

business partners, and labor disruption or corruption. IBMs ERM system will definitely

be a helpful strategy in overcoming such risks although the question remains to be seen if

indeed it will be enough ("Ibm corporate responsibilities," 2012).

Ultimately, in my opinion, IBM has made undisputed progress in the transition

from a multinational company to a globally integrated enterprise. I believe IBM has done

it right; not only has the company remained at the forefront of the industry but its

expansion continues to progress in a plethora of other nations as well. Subsequently, by

transforming its human resources chain it has effectively cut production costs while still

honing the consistency for high-quality and innovative products. Moreover, in terms of

its labor force, there is a strong focus on emphasizing its IBMers; relentlessly aspiring to

strive for further education and advancement for all of its personnel.
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In conclusion, it is apparent that IBM has taken both a paramount and superior

approach regarding its expansion. Seemingly, the company has not only stayed ahead of

market trends but it has also taken on the responsibility to effectively advance the

industry as whole. Despite the risk of any further economic hardships, IBM has truly

encompassed its ways of business in creating A Smarter Planet. The company always

seems to be one step ahead of any other corporation and by doing so it has effectively

reinvented the overall process and model of globalization. In addition, pending an

economic catastrophe, there have been no major signs of slowing down for this

enterprise. Ultimately, IBM has successfully entrenched itself as a global leader and will

continue to do so for many more years to come.

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References

Cravens, D., & Piercy, N. (2012). Strategic marketing. (10th ed.). McGraw-Hill.

Retrieved from https://www.inkling.com/read/strategic-marketing-cravens-piercy-

10th/comprehensive-cases/case-6-13-international

Data Monitor. (2005). Ibm corporation.

Horan, J., & Rhodes, D. (n.d.). Ibms transformation to a globally integrated enterprise.

Retrieved from

http://global.sap.com/community/webcast/2008_05_SAPPHIRE_US/2008_05_S

APPHIRE_US_OR4273.pdf

International business machines corp (ibm). (2014). Retrieved from

http://www.reuters.com/finance/stocks/companyProfile?symbol=IBM

Kaila, R. (2012, May 18). Case study: Ibm growth markets strategy 2015 emerging

markets strategic focus. Retrieved from

http://analysiscasestudy.blogspot.com/2012/05/case-study-ibm-growth-markets-

strategy.html

The globally integrated enterprise. (2014). Retrieved from http://www-

03.ibm.com/ibm/history/ibm100/us/en/icons/globalbiz/