Ibm It Transformation

IBM’s IT Delivery Transformation

Submitted By:

Snigdha R Kamath

FT191086

Introduction and Objective:

The objective of this study is to analyze IBM’s strategy of moving from a traditional IT on premise delivery system to a cloud based delivery system and its impact on IBM’s business.

Background of the Company:

The International Business Machines Corporation (IBM) is an American multinational technology company headquartered in Armonk, New York, United States, with operations in over 170 countries. IBM manufactures and markets computer hardware, middleware and software, and provides hosting and consulting services in areas ranging from mainframe computers to nanotechnology.

IBM’s Business Model:

IBM’s business model involves selling of IT hardware, software, and services to businesses across industries all over the globe.

IBM’s Business Segments:

• Global Technology Services (GTS). Its sub segments are: Outsourcing, Integrated Technology Services, and Maintenance.
• Global Business Services (GBS). Its sub segments are: Outsourcing, Consulting and Systems Integration.
• Software.
• Systems Hardware.
• Global Financing.

Revenues, Net Profits, and Net Profit Margins from 2011 To 2015:

• IBM Revenues were on a constant decline for five years.
• Some of the reasons were: Weak global economy, Decreasing demand for IBM products, Increasing competition in the different business segments.
• IBM divestitures of some of its businesses.
• Strong dollar currency environment.

Problem Identified with existing Solution:

IBM’s Traditional IT Delivery System:

• IBM’s traditional data centers consisted of various pieces of hardware, such as a desktop computer, which are connected to a network via a remote server. This server was installed on the client’s premises, and provided IBM the hardware, access to the clients’ stored data and applications.
• Clients with this IT model needed to also purchase additional hardware and upgrades in order to scale up their data storage and services to support more users.
• Mandatory software upgrades were also required with traditional IT infrastructure to ensure fail safe systems are in place to in case a hardware failure occurred.
• For many clients with IT data centers, an in-house IT department was needed to install and maintain the hardware.

Issues Faced:

Why IBM's traditional IT delivery business revenues were declining so rapidly?

 There were several reasons for that:

• IBM’s businesses were facing lot of pressure on the profit margins. A pressure on client’s profitability weakened demand for IBM’s IT products and services.
• Shift of revenues was happening from Traditional IT to Cloud.  IBM’s GBS revenue continued to be impacted by the shift away from traditional large enterprise application implementations.
• Indian IT services companies such as TCS, Infosys, Wipro were giving competition to IBM when the large deals were coming up on the table for renewals and then, there were currency headwinds and divestitures.

Strategy Planned for Increasing IBM Revenues:

• CEO Ginni Rometty’s long-term strategic thinking and client focus changed to cloud computing and analytics and the commercialization of Watson.
• She brought to the role of CEO a unique combination of vision, client focus, unrelenting drive, and passion for IBM’ers and the company’s future.

• IBM announced a number of changes to its organization structure. These changes support the IBM transformation into a cognitive solutions and cloud platform company.

Proposed Solution with valid justification:

The key changes are summarized below:

• The software segment was no longer a stand-alone unit.
• IBM created a cognitive solutions business unit with solutions software in areas such as cloud, analytics, commerce and security.
• Watson became the first commercially available cognitive computing platform that had the ability to interact in natural language, process vast amounts of big data, and learn from its interactions with people and computers.
• Integration software, including Web Sphere were brought together with IBM’s cloud platforms and global technology services business.

Tools Used and Implementation of the new Cloud Based Delivery System:

IBM cloud included 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, in addition to the components that make up those clouds.