Download - rebirth of IBM
INTERNATIONAL BUSINESS MACHINE
BYJ.SUBALAKSHMIS. JAYASRIM. PRAVEEN RAJBALAKUMARAN
Fall of IBMIBM had saturated the international
market.Competition was increasing.Major competitors
Amdahl,Honeywell,Burroughs,Univac,NCR,Control Data.
Changes in technology.
Fall of IBMMINI COMPUTER
MARKET
PERSONAL COMPUTER
WORKSTATIONS
DEPC– launched the PDP-8
DEC’S VAX 9000 – it had same speed and capacity as IBM’s 370 mainframe, but cost only ¼ th.
DEC – 19 to 25% IBM – 24 to 16%
Fall of IBMMINI COMPUTER
MARKET
PERSONAL COMPUTER
WORKSTATIONS
Apple’s sales had grown.
IBM – outsourced.
1984- IBM seized 40%
Rivals – cheaper cost IBM- premium cost
Fall of IBMMINI COMPUTER
MARKET
PERSONAL COMPUTER
WORKSTATIONS
IBM had only 3.9% market share.Competitors
DECSun
ApolloHewlett-
Packard
Fall of IBMSOFT WARE AND SERVICES:
IBM realized the importance of developing proprietary software
It failed to recognize the developing market Revenue from software & services.
In 1981, 33%
In 1993, 50%
Fall of IBMIt found that developing new applications
software was a difficult businessTalented programmers were not attractedThey found that they could make more money if
they were in business for themselves
Sales people are expected to sell the products of software partners as well as IBM products
Fall of IBMSYSTEMS INTEGRATION AND
OUTSOURCINGIBM limited its service activities to providing
support for its own software and hardware.
It didn’t use its skills to systems integration.
It had not recognized the developing market for outsourcing data processing.
Fall of IBMTHE NEW COMPUTER INDUSTRYBy 1990, IBM received gross profit from
Mainframe – 50%Minicomputers – 6%PCs & work stations – 18.5%
IBM has the most to gain from making mainframes.
It was facing stiff competition.Market for mainframe computers was declining.Suppliers of computer components have been the
winners
VINCENT LEARSON
1972
FRANK CARY 1974
JOHN OPEL1984
JOHN AKERS1986
FALL OF IBM
Fall of IBMRESTRUCTURING1985- John Akers became CEO of
IBMProblems - identified
Failure to develop products fast enough
Sales people had become oriented to selling and servicing the mainframe
Highly BUREAUCRATIC organizational culture
In 1988- reorganized IBM into 7 divisions◦ Personal computer systems◦ Mid-range systems◦ Mainframes◦ Information systems and communications◦ Technology development ◦ Programming &◦ software
But the sales force was to remain a separate entity whose job would still be to sell the whole line of IBM products
Fall of IBM
Disadvantages:◦ The timeframe associated with making decision
was so long.◦ Sales forces would not be able to focus on a single
product line.◦ 20000 employees were transferred◦ Akers embarked to downsize the organization◦ Workforce of 405000 was reduced to 389300
through early retirement and attrition◦ Products were still late to market◦ Most decisions still required approval by IBM’s
corporate headquarters managers
FALL OF IBM
1991 RESTRUCTURING Try to decentralize decision-making authority Akers divided IBM into 13 separate divisions
◦ 9- company’s main product lines◦ 4- marketing and service operations
His plan was that each division would be an autonomous operating unit
The heads were responsible for developing annual biz plans
Goal was to free up IBM’s powerful resources and to make it more competitive
FALL OF IBM
NEW MANAGEMENT AND NEW PLANS
1991 - $2.8 billion 1992 - $5 billion Pressure for change at the top
was increasing John Akers resigned in 1993
REBIRTH OF IBM
JOHN AKER’S LAST STAND
IBM corporation future was decided to divided into 13 different companies
1991-93,80000 employees were laid off sought to lowest cost structure
Restructuring causes closing of factories losses up to $15 billions stiff competition from Dell, Gateway,
Sun due to cost advantage
CONTD…
In 1990s- major change in business level strategy• Avoided to rent the software and hardware to
clients for year basis • The implementation of strategy they decided
to sell instead of renting Selling boost the short run but loss of
special relationship with clients Sale of network computers were rocked
but mainframes plunged thinking of switching cost.
Louis Gerstner to take over as CEO
"In order to serve markets, we have to understand them, reflect their diversity and build a workplace in which every individual knows their opportunity to contribute is gated only by the quality of their ideas and job performance, and the integrity of their work."
GERSTNER’S MOVES
Gerstner performed a study on different divisions to implement the steps.
New independent managers for each division of business.
Attractive incentives to the managers to perform well.
Replaced senior executives with managers in low down ranks.
Changed the decision making process and way of meetings.
Centralized hierarchical structure to quick decision making
GERSTNER’S DECISIONS
IBM to remain as a single unit Complete and comprehensive
collection of hardware, software and services
To provide computer packages suited to new computer environment and to survive the competition
Speeding innovations and decision making
NEW BUSINESS MODEL
Provide a complete state-of-art computing solutions
Take advantage of Internet for marketing.
To make IBM as customer-driven company
Low profit margins & to provide unique so that customers pay on premium price
Challenge –How to customize the products according to the needs of the customer?
CHANGES IN HARDWARE
To design the hardware to meet the satisfaction of clients
To customize the mainframe computers to suits to all business units small or big
Smaller mainframes “enterprise servers” to meet the clients of growing companies
Problem solving “ThinkPad devices” Development of new advanced
microprocessor chips Cost advantage over Mainframe Computer. Customize the chip to suit to all computers
needs for OEMs.
CHANGES IN SOFTWARE Rapid change in software proved to
challenge to IBM Mistake is that allowing Microsoft to
provide MS-DOS operating system to IBM pc’s & mainframes
Then they tied up with ERP to increase the value by mainframe to server, server to PCs.
Started to acquire the software companies like lotus –Lotus notes for corporate Intranet.
Developed Middleware software
CHANGES IN CONSULTING AND SERVICES
Gerstner move is to satisfy all the clients and their needs. Computer services contributed to 20% of the revenues. U.S govt to employ the IBM to run the major computing
systems. Establishment of Integrated Systems Solution Corporation
(ISSC)to develop the services.• Electronic Data System and Accenture• Followed Jack Welsh of GE.• Renamed as Global ServicesConsultant
-Design, Plan, Implement, Maintain and Upgrade to reduce client cost structure.
-It increase client loyal on long term
GLOBAL SERVICES DIVISION
Investing large amount to services To compete Accenture and EDS to
provide consulting and services Expertise in middleware Client to Client assessing. All above will give Clear idea on
customer needs.....
Growth of internet and e-commerce would major force in the direction of computing future
Established e-business is to serve internet related value chain transaction before its competitors
Acquisition of lotus enabled competitive advantage
Lotus collaborative software provided a model for making IBM middleware software internet compatible
IBM initiative its e business in 1996
Competitive advantage over competitors growing no of clients
E-BUSINESS AT IBM
IBM showed importance on SMB’s and growing industries to their needs
To manage their databases & functional value chain
1999 two million SMB clients by 2001
Advantage is early move to internet which helped in cost cutting efforts
Saved billion of dollars by selling their products directly to clients
CONTD….
By 2000 IBM replaced EDS as global leader in computer services
Gerstner continued to work to strengthen his new services driven model across all IBM
New pay-for-performance at the all levels of employees
Change of IBM structure to became entrepreneurial, collaborative and customer oriented
Gerstner’s successor Sam Palmisano took charge of global services, he known as “street fighter” in collage
Change in the operating structure as to new service driven organisation
GARNER TO PALMISANO
Sam palmisano corporate headquarter
Global services
hardware
software
Global marketing R & D
Global sales &
distribution
ORGANISATIONAL CHART
Global services
Hardware
Software
Global financing
R & D
Global sales and distribution
DEVELOPMENTS IN OPERATING GROUP
LYNCHPIN most powerful group of operating group
Services surpass hardware revenues
Work to deliver software and hardware to clients
They have to superior software such as PeopleSoft's HRM , SAP’s ERP
$ 3 billion dollar to develop Linux based OS which works on all platform
Major clients in Asia such as India and China which results in lower cost OS
GLOBAL SERVICES
STRATEGIC OUTSOURCING SERVICES provide customer with cost advantage
INTEGRATED TECHNOLOGY SERVICES designs, implementation and
maintenance
BUSINESS CONSULTING SERVICES Business process innovation, application
enabled
THREE LINES OF GLOBAL SERVICES
Acquisition of PriceWaterhouseCoopers for $2.3 billion
Increase in consultants in services
To serve the needs of different industry clients
To offer the same complete IBM solution all over the globe
40% revenues from global services
Improvement in online collaboration and global teleconferencing to promote collaboration
MAJOR COUP OF PALMISANO
Hardware:
In 2003, IBM reorganized the hardware group
- system & technology group
- personal system group
System Group:
•eserver Linux
•Storage products.▫Disk, tape & storage area networks
•40% direct to customers, 20% through Internet.
•Managed Outsourcing operation
Technology Group:
•IBM microelectronics division:
▫Offered: Leading semiconductor technology. Customized solution Sold Engineering technology Services to
Original Equipment manufacturers(OEM) And offered service to other computer
companies.
Microelectronic division:
•Offered 3 services:▫Manufactured & tested Semi-conductor
products for customers.▫IBM provides integrated supply chain services
to deliver the product to Customer and clients. Eg: Sony P3 and Home media centre
• In addition, Technology group launched its new Engineering and Technology services division that provides system and component design service.
Personal System Group:
•Include the companies lines of PCs, printers and Point of Sale terminals used in retail stores and fast food restaurants.
•And include IBM Thinkpad devices
•Intense price Competition Dell, Hitachi and Samsung
Cont...
•Could not match efficient Competitor. So in 2000, sold hardware to Hitachi And in 2002, 3 years Outsourcing to SCI
•Despite outsourcing they plunged in profit (2005).
•Sold Computing business to LENOVO.▫LENOVO can sell under the brand name of
IBM.
IBM
•Analysed the Core competencies and gained through the leadership of new CEO
Hardware Software and services Servers Storage Devices
Leads to more profit and Operating margins are high.
Cont..
•Failed in commodity product bcoz of DELL competitionFailed in commodity product bcoz of DELL competition
•Gerstner insight was to offer complete range of computer products and solutions.
Software Group:
•Offered:▫Open Source middle ware solutions
•IBM once again to strengthen its competencies in application software went for stratergic acquisition.▫Lotus▫Tivoli System▫Rational System
Global Financing divisions
•To provide its clients with the financing to facilitate them to purchase their computer products and services.
•This decision is the major source of profitability.
•IBM is the largest IT financier in the world.
R&D:
•IBM has an operating division devoted to advanced research
•Focused on emerging technologies like nanotechnology and autonomic computing.
E business on Demand:
•Palmisano introduced the “e-business on demand initiative”
•He searched for new IT business Solution•His teams objectives
To further innovation To significantly reduce cost To integrate activitiesIt has developed 17 expert system
Future of IBM:
•By 2005, increased IT budgets IBM was working hard to promotes its
Customized on demand hardware
Software offerings.
Threats to IBM:
•HP- Compaq merger.
•Microsoft-SAP merger.
•IBM eyes on lucrative SMB segments
Thanks to new CEO s.
GERSTNER’S GROWTH
THANK YOU