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Business Policy
Company Analysis - IBM

Presented by:
Abhishek Bagga
Poornima Choudhary
Bhawani Shankar Das
Rahul Atrishi
Parijat Sinha
 Flow of presentation
 External Analysis
INDUSTRY ANALYSIS
– Market Size (Growth Rate trends)
– Industry Potential
– Untapped Potential
– Concentration of Competitors
– Suppliers/New entrants/Complementers/Substitutes
– Buyers Need
– Government presence in Industry
– Industry Standards
– Degree of integration

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 The IT Industry

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 Global IT Industry

2007

2002 2007

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 Global IT Industry

2007 2007

2007 2007

2007 2007

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 Indian IT Industry

2007

2002 2007

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 Indian IT Industry

2007 2007

2007 2007

2007 2007

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 Software Exports (Rs.Crore)

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 Growth of IT Industry and Share in GDP

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 Growth in Exports

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 Destination of Exports by Region and Country

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 IT Exports and Forex Reserves (US$billion)

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 SWOT – Indian IT Industry

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 India’s key strength is the availability of a large pool of English
speaking and technically qualified professionals at low costs…

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 …but, cumbersome legal and bureaucratic procedures may hamper
India’s prospects in the global IT industry

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 While opportunities have evolved due to increased outsourcing and off-
shoring by companies…

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 …development of other low cost regions for off-shoring can act as a
threat to the Indian IT and ITES industries

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 Initiatives by Government in IT sector
 E-Governance
E-Governance is the use of Information Technology and Communication Technologies to
improve efficiency, convenience, accessibility and transparency in Government.
 National e-Governance Plan
A National e-Governance Plan (NEGP) has earlier been drawn which seeks to implement
a number of Mission Mode Projects (MMPs) at the Centre, State and integrated
service levels so as to create a citizencentric and business-centric environment for
governance
 State Wide Area Network
The Cabinet Committee on Economic Affairs (CCEA) has approved the scheme for
establishing State Wide Area Networks (SWANs) across the country in 29 States/ 6
UTs at a total outlay of Rs.3, 334 crore with Central Assistance component of Rs.
2,005 crore over a period of five years

A number of steps have been taken to meet the challenge of zero duty regime in
2005 under the Information Technology Agreement (ITA-1). Tariffs on raw
materials, parts, other inputs and capital goods have been rationalized to make
domestic manufacturing viable and competitive.

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 Firing the growth of the domestic IT market: the key factors

 Matters had to be viewed in a non-IT way to enable the delivery of

technology across the length and breadth of the country.

 Government and industry had to work together and take risks to

transform India into an IT-centric economy.

 IT products and services needed to be created especially for the rural

markets.

 Innovative business models needed to be adopted to increase IT

deployment within organizations

 IT absorption among SMEs had to be improved through special,

affordable, product, service and delivery solutions

 IT has to be harnessed for the broader aspects of community service

(social work) to narrow the digital, gender and rural-urban divides

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What is IBM?
 An innovator?

 A sales force?

 A collection of vertically integrated

multibillion-dollar global businesses?

 A global brand?

 A blue-chip stock?

 A turnaround story?

 A really big company?

 All of the above…

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 The IBM Company

IBM focuses on the high-value

intersection of business insight and
technological innovation for
enterprise clients.

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IBM History

 Incorporated in 1911 as the Computing-Tabulating-Recording

Company (C-T-R)

 In 1924, C-T-R became International Business Machines

Corporation

 1910s-60s:
– From punch-card tabulating machines to room-sized calculators
to mainframe computing systems for large enterprises
– Changed the nature of accounting, calculation, and basic
back-office business processes

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IBM History

 1970s-80s
– IBM product line broadens from mainframes to
minicomputers and personal computers
– Applications move beyond back-office enterprise to
departmental operations and personal productivity

 1990s
– With the Internet and open standards, the network
computing model is embraced and advanced
– Coined “e-business” to describe how network computing
can transform core business functions and transactions

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IBM Today

 The world’s largest information technology company

 The 9th largest corporation in the U.S.

 Year end 2003, IBM reported:

– $89.1 billion in revenue

– $7.6 billion in net income

– More than 319,000 employees worldwide

– More than 670,000 stockholders of record

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A Global Company
 Corporate headquarters: Armonk, NY

 Serving clients in 160 countries worldwide

 More than 60 percent of revenue generated outside the United

States

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 Leading in the world’s rapidly emerging markets…

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Senior Management

Samuel J. Palmisano
Chairman, President and CEO

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Board of Directors
Samuel J. Palmisano
Chairman, President and CEO, IBM
Cathleen Black
President, Hearst Magazines John B. Slaughter
President and CEO, National
Kenneth I. Chenault Action Council for Minorities in
Chairman and CEO, American Express Co. Engineering, Inc.

Carlos Ghosn Joan E. Spero

Co-Chairman, President and CEO President, Doris Duke
Nissan Motor Co. Ltd. Charitable Foundation

Nannerl O. Keohane Sidney Taurel

President, Duke University Chairman of the Board,
President & CEO, Eli Lilly and Co.
Charles F. Knight
Chairman of the Board, Emerson Electric Co. Charles M. Vest
President, MIT
Lucio A. Noto Lorenzo H. Zambrano
Managing Partner Chairman and CEO
Midstream Partners LLC CEMEX, S.A. de C.V.

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The IT Industry: Eras of Computing

12 Network Era
Integration

Client/Server Era
8 Departmental
Automation
Mainframe Era
Back Office Automation;
4 Transaction Processing

0
1960 1970 1980 1990 2000
Source: U.S. Department of Commerce, Sept. 2000
2000/2001/1H02 Estimates

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IBM and the IT Industry Today

High-value,
innovation,
integration

High-volume,
undifferentiated
products or
services

Consumer Enterprise

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Moving into Areas of Higher Value
• Business Process
Transformation
Services
• Engineering & • Middleware • Business Consulting
Technology Services
• High-
Services Performance • Life Sciences
• Custom Logic Servers/Storage • Strategic
• Power Systems Outsourcing

Component Infrastructure Business

Value Value Value

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On Demand: A Path to Growth

Bu
Operating

s
ine
Environment
ENTRY

ss
Pro
ENTRY
ce
Business

sse
Transformation
s

Flexible Financial & Delivery

Offerings

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Business Operations

 Services

 Financing

 Hardware

 Software

 Technology

 Research

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 Business Operations

 Services  World’s largest business and technology services provider

 Financing $42.6 billion in revenue

 Hardware More than 175,000 employees

 Software  Helps clients:

 Technology
Transform their business into an on demand enterprise
 Research
Capitalize on IT to improve business performance
Manage IT, HR, accounting and other operations and resources of their
business

 Principal lines of business:

Business Consulting Services
Integrated Technology Services
Strategic Outsourcing Services
Application Management Services
e-business Hosting Services
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 Business Operations

 Services  World’s leading provider of financing and asset management

 Financing services to companies selling or acquiring IT
 Hardware More than $35 billion in assets in 2003
 Software
 Technology
Operations in more than 40 countries
 Research
 Offers flexible leasing and financing solutions to clients and
business partners
Client Financing

Channel Financing

Global Asset Recovery Services

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 Business Operations
Servers

 Services  #1 server vendor in the world

 Financing
 Offers the broadest range of servers in the industry
 Hardware
 Software Mainframes
 Technology Integrated application servers
 Research
UNIX systems
Intel processor-based servers
Opteron processor-based servers
Blade servers

 Strong supporter of open standards

More than 6300 clients running Linux

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 Business Operations
Enterprise Storage

 Services  Most comprehensive spectrum of storage offerings for companies of all

sizes
 Financing
Disk, Tape, Open Management Software, Database, Services and Financing
 Hardware
 Complete solutions for today’s critical storage needs
 Software
 Technology Regulatory Compliance, Global Disaster Recovery, Tiered storage
management/ILM, Optimized Storage Networks
 Research
 Largest review share gains and highest year-to-year revenue growth of top
five external disk vendors in 2003 (IDC)

Enterprise Storage Server installed in 74 percent of Fortune 100

IBM beat HP to become #1 in tape storage factory revenue, according to

Gartner

 Creating foundation for Information on Demand

SAN File System, SAN Volume Controller for Virtualization, Policy-based
management and provisioning tools

 #1 Storage Services provider in the industry

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 Business Operations
Personal Systems
 Personal Computing
 Services
 Financing ThinkVantage Technologies, ThinkPad notebook PC’s, ThinkCentre desktop
PC’s, displays, accessories, and service offerings
 Hardware
 Software More than 20 million ThinkPads sold; world’s best-selling notebook brand

 Technology
 Printing Systems
 Research
Printers, print management software, consulting, systems integration,
supplies, service and support

#1 in transaction statements; 100 billion pages printed annually

 Retail Store Solutions

Point-of-sale systems, kiosks and peripheral devices

#1 worldwide in point-of-sale systems for retailing

Clients include 60 of the world’s top 100 retailers

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 Business Operations

 Develops, markets and supports a diverse set of software

 Services
 Provides foundation for the world’s critical business
 Financing
applications
 Hardware
 World’s second largest software provider
 Software
$14.3 billion in revenue
 Technology
 Research More than 38,000 employees
 Largest supplier of Internet infrastructure software –
“middleware”
Systems integration and transaction processing
Data management
Collaboration and “dynamic workplaces”
Systems management and security
Software development tools

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 Business Operations

 Delivers leadership technologies for IBM systems

 Services
 Financing Provides microprocessors and custom chips to keep IBM the
leader in server and storage systems
 Hardware
 Software  Maintains a strategic OEM business for scale, innovation
 Technology and profit

 Research Supplies chip products to leading original equipment

manufacturers to generate revenue and to fund
development and manufacturing investment

 Technology focus segments

Power technology and products (Power PC)
Custom Chips (Application-Specific Integrated Circuits –
ASICs)
Foundry manufacturing
Engineering and Technology Services

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 Business Operations

 World’s largest IT research organization

 Services
Over 3,000 scientists and engineers
 Financing
 Hardware 8 research laboratories and 24 development laboratories
worldwide
 Software
 Technology  Produces historic accomplishments that lead in innovation
 Research Drove development and advances in the relational database,
DRAM, storage technology and fractal geometry

Contributes to IBM’s 11 years of patent leadership, yielding

more than 25,000 U.S. patents

Boasts numerous awards, including 5 Nobel Laureates, 5

National Medals of Technology, 4 National Medals of
Science, and membership in high-profile technical
organizations

Launched premiere research consulting unit, On Demand

Innovation Services, creating new services practices for
clients
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Business Operations
Percent of IBM’s Total Revenue in 2003

16% 3%
Services
1%

Hardware

Software
32%
Financing
48%

Enterprise
Investments/Other

Source: 2003 IBM Annual Report

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 One-chart diagram of the various IBM divisions

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 Porter’s five forces diagram

Threat of New
Entrants

Bargaining Bargaining
Industry
Power Power
of Suppliers Rivalry of Buyers

Threat of
Substitutes

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 Value addition at different levels

Value addition from thinking for

the customer Consulting
Skills in Industry & Technology
Directions

Value addition from evaluating

Integration and integrating solution
Value addition from one stop shop
Business and Solutioning Skills

Projects Value addition from reduction of Management Risks

Technology & Project Management Skills

Staff Value addition from ability to ramp up

Augmentation Technology Skills

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 Framework for Delivering Customer-Focused Experiences

Competitive  Law &  Human  Customer 

Advantages: Compliance Resources Experiences:
• Reputation  Investment  • Solutions/ 
based on  Management offerings 
principles and  Finance  tailored to 
values Actuarial  Public  meet clients’ 
• Long­standing  and  Affairs needs
affinity with  Facilities • Interactions 
institutions and  Solutions characterized 
participants by trust, 
• Information  Product  Client  respect and 
about our  Management Services objectivity
markets and  • Performance 
customers consistent with 
expectations
Risk  Information 
Management Technology
Strategy & 
Implementation

Organizational  Source: TIAA­CREF 
Capabilities Strategy Presentation 
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 SWOT of IBM India

 Brand name  Pricing

 Domain knowledge  Long Response Time
 Relationships with clients  Marketing
 Conservatism- (suits banks)  Delivery
 Solutions driven deals

 Geographical know-how of Parent  Competition

Company
 Dynamic Market Place
 Talented Pool
 Growing Domestic Market

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 Strengths
 Biggest strength which opens door to almost
all organizations
 Its sheer size and the fact that we are leaders across
Brand Name several categories worldwide is a major positive

S  Tremendous domain expertise and capabilities

T Domain
Knowledge
 They are in a position to be -
advisors to clients- not mere sellers
R
E  Strong relationships with clients who are already
N Relationships
with clients
using IBM products (i.e. installed base) and makes
them manage to get the deal in spite of higher prices
G
T Conservatism
 Suits bank (especially the Public sector banks)
H because they also like paperwork
 Confident that IBM is doing its homework since IBM
S Solutions
driven deals  Strong in Solution driven deals, where IBM works
partners, packages.

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 Weakness

 A problem, especially in services and PCs

Pricing  Price its products and services very highly

W
E Long Response
 Their time to respond is very high

A Time
 They often ask customer to delay negotiation
because they have not yet worked out their best price
K
N  While IBM has very good products,
E Marketing
it rarely market them
 Services – and in particular consulting has been not
S marketed well
 Not aggressive in marketing
S
 Very poor in delivery of products
Delivery  Sometimes when the partner has decided not to
supply services to the client and the customer
is left on hold.

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 Opportunity

 Under-penetrated regions such as Canada,

Geographical Germany, France, Japan, Korea are big potential markets
O know-how are better known by the parent company
P of Parent Company
 Under penetrated verticals –telecom services, retail
Healthcare are taken care of by IBM Global Services
P
O  India has one of the largest pool of technically qualified
people with low wages
R  The number of IT professionals in India
T Talented Pool
reached 520,000 by 2002

U  A large proportion of Indian graduates are proficient

in English ideally suited to the growth of ITES industry
N
I  A CAGR of about 30% in total market
T Growing Domestic
Market  Government allowing FDI and taking initiatives to help
Y IT sector to grow

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 Threats

 Competition from companies which have large

Competition human capital and qiute agile.
T  Cost effective small players which offer lower prices.
H
R
E
A
T  India presently is a very large market small to
very large IT players are present here.
S Dynamic
Market Place  Price variations are more and hence negotiations
at fixed corporate price which IBM offers

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 Three major dimensions

Geographies

Business
lines

Sectors

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 Geographies

 IGS America

 IGS Asia-Pacific (AP)

 IGS Europe, Middle East, Asia (EMEA)

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 Sectors

 Communications
– Media, entertainment, telecommunication
 Distribution
– Retail, travel, transportation
 Financial
– Banking, Financial markets and insurance industries
 Industrial
– Automotive, electronics, aerospace and defence
 Public
– Healthcare and education industries, government
 SMB
– Small and Medium Business comprises companies form many different
industries that have more than 1000 employees

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 Business lines

 Application Management Services (AMS)

 Business Consulting Services (BCS)

 e-business Services (e-BHS)

 Integrated Technology Services (ITS)

 Networking Services (NS)

 Strategic Outsourcing (SO)

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 IBM Strategic Group line of business (today)

Client Client Client

facing facing facing

Offering Offering Offering

Delivery Delivery Delivery

BCS SO ITS, etc.

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 Client Client Client
facing facing facing

IGS sector (future) Offering Offering Offering

Delivery Delivery Delivery

BCS SO ITS, etc.

Selector
(client facing) Focus on market and manage
P & L within region

Business Business Business Focus on business models,

lines lines lines Offerings, competencies and tools

Delivery Focus on skill capacity

and capability

Define industry
 Understand or SMB
business line Strategy
market (for example targets and value proposition)
dynamics
  Ensure
Ensureskill
Develop capacity
industry
business based or requirements
solutions
model that pull
discipline and from defined
multipleby
consistency sectors line;
business
globally and business
customizelines.
 Optimize
offeringscenters
for and
sector pools
or for
industry efficiencies, in
 Develop competencies and tools for the business line line with client delivery preferences.
  Deliver services
Manage
Develop
with
sector
offerings or excellence
industry
that sectorsportfolio
can of solution
tailor, as and offerings
required, by industry solutions.
Manage client relationships, sell and close opportunities

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 What value and opportunity does IGS offer its people ?

 IBM is consistently highly ranked as an employer of choice

Company in surveys and recognized for its integrity, innovation and
leadership in defining the industry agenda.

Leadership  Recognized for the of its leadership programs, IGS offers

cultivation of leadership potential, as well as a variety of
opportunity to lead.
Teamwork
 By working together as a team, IGS employees can deliver
distinctive value to client.
Career
 At IGS, employees engaged in a product that break new
ground and provide them with a challenge to grow.

Rewards  Individuals who contribute to a job well done are rewarded

and recognized when IBM succeed.

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 What is the Strategic intent ?
IBM’s Strategic intent is:

 To grow revenue and profit by creating real business value for our clients
– anticipating and exceeding our clients’ expectations. Our hallmark will be
delivering the value we promise.

Business IT
Value Value

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 Who competes with IGS

Commodities plays Hybrid approach Value plays

Major competitors
 CSC  Accenture
 Dell  Capgemini  Unisys
 ACS  HP  General Electric
 WIpro  EDS  UPS
 Infosys
Value proposition for clients

Industry leadership through Hybrid offerings that Industry leadership through

Cost Control, standardization Incorporate some cost control Value creation and new
Offerings asset optimization And some value creation investment

IGS Strengths
 Extensive Business partner  ON Demand Leadership  Breadth of offerings
Ecosystem  Financial stability  Depth of IT skills
 Global presence  Cost competitiveness Financing capabilities
 Flexible Universal Mgmt  Global delivery competency Business and IT fusion
Infrastructure (UMI)  Portfolio scale and scope

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 Competitive difference
A key source of competitive differentiation in ON Demand business is IBM’s full equation. It is the
ability to understand the business of the clients, help them shape their ON Demand Business
strategies and integrate the broad array of technology and services to unleash new business
value for them.

To solve a client’s problem they bring together capabilities and expertise of the entire IBM
company – IBM Global Services, Systems and Technology Group, IBM Research, Personal
Systems Group, Sales and Distribution, Software group and IBM Business Partners. The values
lies in the integration of these assets.

BETTER, MORE LASTING

DEEPER FASTER ACCOUNTABILITY ECONOMIC
INNOVATION VALUE FOR
EXECUTION FOR RESULTS CLIENTS

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 Service Market Environment
Together SMB sector, public sector and financial services sector account for almost three-
fourth of the total market opportunity growth.

Distribution, Communications,
11.1, 8%
Industrial, 15.3, 8.4, 6%
11%
Computer
Services
Industry, 4.3, 3%
Financial
Services, 19.6,
13%
Home, 0.3, 0.2%

Public, 28, 19% SMB, 58.4, 40%

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64
 The company has steadily shifted its business mix toward more profitable,
innovation based segments

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 Financial Projections

 Divesture of the PC business in May 2005

 Erosion of sales by about 4% in Q1’05

 Demand for middleware software strong

 Microelectronics segment performing well due to demand for chips

 Services signings rose

 Signed contracts worth $11.4 billion (Q1)

Source: Thomson Financials, Bloomberg, WSJ

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 Contd…..

 Refreshed product lines should boost sales and deter margin pressures

 Divestiture of the unprofitable PC business helping margins

 Faster growth of less profitable products

 Cost cutting efforts initiated last year helping to increase profitability.

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 Outlook

 Revenues to remain range bound due to macro-economic pressures

 Entering into faster growing areas

 Aims to grow in emerging countries

 Building towards small to mid-sized business market

 Targets cost cutting measures

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