A Report on IBM Operation Strategy

IBM
Company Background
International Business Machines Corporation (commonly referred to as IBM) is an
American multinational technology company headquartered in Armonk, New York, United
States, with operations in over 170 countries. The company originated in 1911 as
the Computing-Tabulating-Recording Company (CTR) and was renamed "International Business
Machines"
in
1924.
IBM
manufactures
and
markets
computer hardware, middleware and software, and offers hosting and consulting services in
areas ranging from mainframe computers to nanotechnology. IBM is also a major research
organization, holding the record for most patents generated by a business (as of 2016) for 23
consecutive years. Inventions by IBM include the automated teller machine (ATM), the floppy
disk, the hard disk drive, the magnetic stripe card, the relational database, the SQL
programming language, the UPC barcode, and dynamic random-access memory (DRAM).The
Company was founded by Charles Flint the current President and CEO is Ginni Rometty. The
total revenue of the company is US$ 81.741 billion (2015), and net income US$ 13.190 billion
(2015) with number of employees 377,757 (2015).

IBM Organizational Structure

The IBM Companys organizational structure consists of a board of directors responsible for the
overall running of the company and board committees that cover specific areas of responsibility.
In addition, executive officers take care of hands-on operations and are the voice of the
company. The board of directors ideally has between 10 to 14 members, though the certificate
of incorporation specifies no fewer than 9 or more than 25. The number varies depending on the
availability of suitable candidates and other circumstances. The board of directors is responsible
for annual self-evaluation and evaluation of the CEO. Other executive officers handle various
aspects of the international business including sales and distribution, strategic partnerships,
global technology services, human resources, marketing and communications, research,
software and systems, and other specific aspects of organization and function.

Product and Services

IBM has a large and diverse portfolio of products and services. As of 2016, these offerings fall
into the categories of cloud computing, cognitive, computing, commerce, data and analytics,
Internet of things, IT infrastructure, mobile, and security.
IBM Cloud includes infrastructure as a service (IaaS), software as a service (SaaS) and platform
as a service (PaaS) offered through public, private and hybrid cloud delivery models. For
instance, the IBM Bluemix PaaS enables developers to quickly create complex websites on a
pay-as-you-go model. IBM Soft Layer is a dedicated server, managed hosting and cloud

computing provider, which in 2011 reported hosting more than 81,000 servers for more than
26,000 customers.
IBM also offers Cloud Data Encryption Services (ICDES), using cryptographic splitting to
secure customer data. IT outsourcing also a major service offered by IBM.

Competitors Profile
IBM Software and services are diversified and they compete with many companies. Just to
name a few areas are given below:IBM analytics competes with SAS Oracle SAP Microsoft.
IBM compete with Adobe and others in commerce and marketing software.
IBM competes with Microsoft, Amazon and Google on Cloud Computing
IBM competes with oracle on database and high end servers
IBM competes with Google, Facebook, and Microsoft on social software in enterprise and
certain area of artificial intelligence and machine learning (IBM Watson).
IBM complete with large consultancy companies like Accenture, Infosys, TCS.

SWOT Analysis
Strengths:1. First mover in cloud computing solutions for enterprises. IBM has moved to cloud
computing in 2007 with its Blue Cloud program, which was designed to offer hardware
and software solutions for enterprises that were willing to have their own private cloud.
Since then the company has become the first reference point for enterprise cloud
solutions in the cloud market. Unlike many other companies in the cloud market, the
company has been offering the broadest range of software and services in one place.
2. Brand reputation. IBM has a significant market reach all over the world in all of the
markets it operates. This has resulted in a very positive and strong brand reputation.
Brand reputation significantly influences consumers decision to buy the product and IBM
clearly benefits from that.
3. Diversified business. IBM segments its business into 4 divisions: Hardware, Software,
Services and Financing. In 2000, the company was earning 35% of its income from
hardware sales, where profit margins are low and future market growth is slow or
negative. IBM has diversified from hardware to software business, which is expected to
generate 50% of companys income. This shift will result in lower impact of the negative

trends in hardware market and higher profitability from sales of software and services.
The company has also diversified geographically and now earns more than 60% of its
income from outside US. IBM heavily invests into China and the rest of Asia to increase
the geographic diversity of its income.
4. Strong competency in acquisitions. Over the some last IBM has acquired more than
140 companies in strategic areas including analytics, cloud, security and commerce.
This has led to substantial growth in software and consulting offerings from IBM and
established the company as a leading software and consulting provider for enterprises.
Companys competence in successful acquisitions is the key advantage over other
companies, like HP, currently lack.
5. Integration of products and services. IBM offers hardware (servers, storages),
software (enterprise content, service and information management) and services (cloud,
software, data centers) all related to each other, which enable the company to provide
one stop solution for enterprises and integrated product for the customers.

Weakness:1. Expensive service and software solutions. IBM offers expensive integrated custom
solutions for enterprises that want to build reliable IT infrastructure in their companies.
This often involves buying hardware, software and services from IBM at the same time,
which is very costly expenditure for any size of enterprise. Such an infrastructure
investment is often postponed in times of uncertainty or slowing economy growth. This
weakness was evident over the last few years, when IBM struggled to cross sell its
products and saw decreasing revenues in the same period.
2. Focus mainly on customized products. IBM focuses on providing customized
solutions for large and medium enterprises. This is a very profitable business model but
captures only a small share of the market. The rest of the market is often satisfied with
off-the-shelf software products and services. The lack of these products makes IBM less
approachable by the rest of the market, where competitors like Oracle and SalesForce
thrive.

Opportunities:1. Expand services and software divisions. IBM provides various services (cloud,
security and infrastructure) and enterprise solutions (servers, networking and storage),
which are the most profitable IBMs businesses at the moment. The company should
focus on growing these divisions as they promise better growth opportunities and higher
profit margins.

2. Increasing demand of cloud based services. The cloud computing market is

expected to grow by an average of 22% each year to 2020. By 2020, the market
is expected to reach $240 billion value. Currently, IBM is offering many services

related with cloud computing and is well positioned to benefit from the growing
market.

Threats:1. Increasing competition in cloud computing market. Cloud computing market is new
and lucrative market that has a lot of growth potential. The possible profits attract many
newcomers and startups and threaten to take the market share from the incumbent IBM.
2. Slowing growth of world economy. As mentioned earlier, IBM sales heavily depend on
the enterprises willingness to make huge investments into IT infrastructure, which is far
from the first option during the times of slow economy growth.

IBM Operation Strategy and Frameworks

Drawing on the strength of the full strategy and change practice
Operations Strategy is one of the four competencies within IBMs larger Strategy and Change
team. The three parallel competencies are Business Strategy, Organization Change Strategy
and Technology Strategy.
Operations Strategy helps client resolve a variety of critical issues from strategy and planning
to day-today operational improvements.
IBM Helping clients with critical business issues:Clients look to Operations Strategy for help with these critical business issues:

Cost efficiency and performance improvement

Focus on companys core business
Increasing shareholder value
Continuous process improvement
Maintaining competitive edge
Improving customer service quality
Migration to new technology
Product innovation management
Merger synergy realization.

IBM successfully formulating and implementing operations strategies lie in three main areas:

Helping clients formulate operations strategies that align corporate and business
strategy with organization, technology and process strategy
Providing process expertise for business process change, reengineering and operational
improvement, cost reduction, Six Sigma, innovation management, and post-merger
integration.
Assisting clients with outsourcing strategies and their execution, including
make/buy/partner decision strategies, domestic and global outsourcing, and creating
scalable operations.
All Operations Strategy engagements incorporate the following key elements:

Mobilization Utilizes preparation and planning to help increase the odds of successful
and timely project completion.
Situation assessment Establishes a shared assessment of the current and future
situation.
Strategy development Defines strategic options and specifies strategic initiatives
which are designed to create significant value for the client.
Implementation planningDetermines critical success factors and establishes change
programs to implement the strategic initiatives.
Learning Measures and adapts the strategic management process in real-time utilizing
key performance indicators.

Providing a full suite of offerings

Operations Strategy has a diverse range of capabilities, including:
Rapid process change:

A solution for rapidly identifying and delivering a step change in process, organizational
and systems performance. Rapid process change focuses on achieving tangible
operating improvement results in an accelerated time frame.
Six Sigma/Lean Sigma:

Strives to create both operational excellence and a strategic change in the culture of a
corporation, division or business unit. These engagements are designed to increase
customer satisfaction and drive out costs by helping to improve processes linked to
company strategy and key performance indicators. Six Sigma also helps build an
enduring capability within the organization that can create and sustain competitive
advantage over the long term.

Design for Six Sigma:

Extends Six Sigma principles to the development of new products, services,
processes, and plants that are designed to precisely meet client current and future
needs.

Strategic profit improvement:

A framework designed to deliver improved financial performance, including:
increasing revenues and margin, reducing costs and assets, strengthening
infrastructure, and positioning for future growth.

Service after the sale:

Helps clients lower their customer service costs and find new sources of revenue and
value-added differentiation.

Product innovation management:

Supports the business decision making component of product development. These

engagements are designed to reduce time-to market and product development costs
and they help increase the pace of innovation.
Enterprise focus:

Determines which components of a business are strategic and critical to success of the
enterprise and which are not. Then identifies opportunities for improvement and
transformation by comparing critical business requirements and operational capabilities.
Shared services implementation:

IBM team builds a business case for the transition to a shared services operational
model, designs a custom shared services solution, and then works with the client to
successfully implement the change.
Outsourcing governance:

Helps organizations establish a program management office capable of supporting

outsourcing Initiatives throughout their lifecycle, from qualification and assessment to
development and operation.
Demonstrating success at numerous clients:-

Reduction of overhead costs due to redundant / inefficient overhead services and

infrastructure in Corporate HQ and five worldwide product divisions.
Annual savings of over $400 million, including: agreements in infrastructure sharing and
governance, shared services and elimination of cost drivers and redundant resources,

and establishment of a project management office for active savings tracking and
reinforcement.
At a large manufacturer of aluminum products, IBM developed and implemented a new
operating model. The scope and results included are below:-

Analyzed operations for 15 business units in 10 countries

Creation of global process models
Over $300 million in annual savings, including improved processes, continued focus on
cost controls, and adoption of best practices across business units.

Finally, we developed an outsourcing strategy for a leading manufacturer of semiconductor

equipment. The scope included:

Working with client executive team to develop a vision and operating model
Implemented the model, focusing new investment in core business processes and
developing and implementing the roadmap to outsource all non-core processes to save
client significant cost and increase competitive advantage.
Recommendation: Generally, IBM serves B2B, so they can go for B2C for more clientele.
They should improve communication either with the client or within the organization itself
so that sometimes the tracking could be done easily to resolve the issues.
Employee should be trained for cross-functional activity so that they should not be on
bench and if someone is there on the bench they can be depoted to others works.
They should keep motivated to the employee through some bonus etc for the
performance when they are lacking.