Mid term

Midterm IBM case study

Name: Truong Minh Hoang

Class: F-UOB 12E
 INTRODUCTION
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The International Business Machines Corporation or IBM was founded in 1888 as "Herman
Hollerith and the Tabulating Machine Company." It was used by the U.S. government in its war
efforts in the early days of World War II, and obtained 1% of the profits to fund war victims and
orphans.

IBM is one of the leading brands in the IT industry. It is basically related to all dimensions of
computing technology weather. It is about gadgets or software. It has developed products
ranging from punch card tabulation machines to room-sized calculators and mainframe
computers.

In 1980, the company launched the IBM Personal Computer (PC), where the processor came
from Intel and the operating system came from Microsoft. IBM introduced cost-effective
technologies. For example, they introduced a mixture of silicon and germanium instead of pure
silicon chips. IBM provides on-demand innovation services, in which different teams provide
business transformation and technical consulting services.

Today, IBM is the world's largest information technology company and the eighth largest
company with operations in more than 170 countries.
 ABSTRACT
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- About IBM:
Headquartered in Armonk, New York, IBM has over 430,000 employees worldwide that provide
information technology (IT) products and services. It is very unusual for any firm (in this case
IBM) to pay another firm to acquire a division of your own firm. IBM plans to combine data and
images from Merge Healthcare’s medical imaging management platform with Watson’s cloud-
based computing platform that analyzes high volumes of data, understands complex questions
posed in natural language, and proposes evidence-based answers. A huge partner with Apple,
IBM in July 2015 launched a new service that will help other corporations make the same leap
from Windows to the MacBook and iPad that it has done over the last several years. The new
service takes the lessons IBM just learned by installing more than 110,000 Apple devices,
including iPads, MacBooks, and iPhones, across its own company, helping corporate clients
make the same kind of wide-reaching tech turnover.

- History:
IBM began business in the 1800s with the Tabulating Machine Company, the International Time
Recording Company, and the Computing Scale Company of America, all independently
operating separately as distinct corporations. IBM plans to keep its high-end server business,
which is less prone to commoditization by other firms’ products. In 2013 IBM acquired
SoftLayer Technologies, a web hosting service, for about $2 billion. IBM executives accepted no
bonuses in 2014 for fiscal year 2013, because the firm reported a 5 percent drop in sales and a
1 percent decline in net profit for 2013. Also in late 2014, IBM introduced a new email service
called IBM Verse to complement its IBM Notes software suite. For the second quarter of 2015
that ended June 30, IBM’s revenues fell 13 percent year-over-year to $20.8 billion, and
company earnings also declined 13 percent from the year-ago period. In IBM’s Asia Pacific
segment, revenues declined 19 percent, and in the Europe/Middle East/Africa segment,
revenues dropped 17 percent, also in Q2 IBM’s business and technology services segment
revenues declined 11 percent year-over-year, while the company’s software sales decreased 10
percent. 32 percent and now comprises only 9.6 percent of Big Blue’s revenues, as the
company has almost totally transitioned away from hardware. Similarly, business analytics
revenues at IBM grew more than 20 percent, mobile services sales quadrupled, and the
company’s social revenues jumped 30 percent.

Internal Issues
No actual chart could be obtained, but a depiction of IBM’s probable structure is given in Exhibit 1.
Strategy
Over 60 percent of IBM employees in R&D are working in fields such as “big data,” cloud
computing, and other key growth initiatives. The new IBM wants to “own the cloud,” but
ironically and unfortunately for IBM, the cloud will kill profit margins on mainframes, and those
profit margins are still the mainstay at IBM. The first of three key initiatives to focus on the area
of big data, which IBM estimates will be a $187 billion industry by year-end 2015. The launch of
IBM Watson Group in January 2014 promises to grow IBM revenues. IBM’s second key initiative
focuses on cloud computing, which IBM estimates will be a $250 billion industry by year-end
2015. Roughly 80 percent of all Fortune 500 companies today use IBM’s cloud services and IBM
remains a leader in this area. Reeling from 8 consecutive year-over-year revenue declines, IBM
is betting on Apple’s popularity and simplicity to help please the IBM customer base.

- Segment Data:
IBM competes in five main business segments:
1. Global Technology Services (GTS) consists of delivering outsourcing services to help improve
clients’ existing IT infrastructures to aid in risk management, flexibility, and financial value.
2. Global Business Services (GBS) focuses on consulting and application management services.
GBS aids businesses with new technologies—such as smarter commerce, mobile, and cloud—
and provides support and maintenance for software and other products IBM offers.
3. They include WebSphere Software (support cloud, mobile, social), Information Management
Software (data analytics software, among others), Tivoli Software (security software), Lotus
Software (social networking software), and Rational Software (supports software development).
4. Many of IBM’s clients who use products such as IBM Pure Systems, IBM Smart Analytics, and
IBM Smart Cloud also need to purchase services from the Systems Technology segment to help
run these programs.
5. Global Finance involves mainly leasing agreements for IBM products; this is not a major
contributor to IBM’s overall business portfolio, as evidenced in Exhibit 2. The 2014 numbers for
GTS and Systems Technology reflect the divesture of Customer Care BPO and System x
businesses.
- Finance:

In 2014 IBM's net income decreased significantly compared to 2013 was 4461
In 2014 IBM's assets decreased by $8691 compared to 2013. Therefore, IBM's liabilities also
increased by 2224 compared to 2013. IBM's taxes in 2014 also decreased significantly
compared to 2013 at 10915
External Audit:
Industry Growth Rate
Some analysts in fact predict over 80 percent of all IT growth between 2012 and 2017 will be
cloud related. As per IT growth by geographic region, Asia has experienced the best growth
rates of late, with China up 7.7 percent, Indonesia up 6.2 percent, Vietnam up 5.0 percent, and
India up 3.2 percent in 2012.
Computers and Servers
The desktop computer, laptop computer, and server industry has declined in the United States
on average 17 percent per year from 2009 to 2014, and is expected to decline another 5
percent per year into 2019, despite a slight increase in demand.
Software
The business of data analytics, data storage, and security are growing. Legal and Ethical Big
Data Considerations In the last 5 years, the general public has become especially aware and
suspicious of data usage. Complicating legal issues further, will negligence attorneys use data to
prosecute corporations and governments for not using data to predict and foresee potential
problems?

- Future:
In early 2015, Marriott and IBM announced a deal to move 80 percent of Marriott’s old-school
technology to what’s known as a “hybrid” cloud built by IBM. This deal was similar to the $500
million, 6-year deal IBM signed a year ago with insurance giant The Hartford. the firm’s stock
price fell 17 percent over the same time frame while the S&P 500 increased 60 percent.
 VISION AND MISSION
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At the 2003 meeting, IBM abandoned its existing more formal mission statement. As of 2015,
there is still no formal mission or vision statement provided on any literature published on
IBM’s website. Lacking written vision and mission statements to guide strategy and direction, it
is unclear whether IBM has the necessary foundation to make clear strategy decisions moving
forward.

- Vision:
In future, IBM’s corporate vision is "to be the most successful and important information
technology company in the world. It is important because we will continue to be the basic
resource for most of the investments in this industry." The status of one of the top players is
the development path.

1. World’s most successful and important information technology company

2. Helping customers apply technology to solve their problems

3. Introducing extraordinary technology to new customers

4. Continue to be the basic resource of much of what is invested in this industry

- Mission:
In future, IBM’s corporate mission is “to lead the creation, development, and manufacturing of
the most advanced information technology in the industry, including computer systems,
software, network systems, storage devices and microelectronics. Through our global
professional solutions, services and consulting businesses, we will These advanced technologies
translate into customer value.” This mission statement shows what IBM’s business does.

1. Leadership in creating, developing and manufacturing the most advanced information

technologies

2. Worldwide network that translates advanced technologies into business value for customers

3. Professional solutions, services and consulting businesses worldwide

- IBM’s Corporate Vision & Corporate Mission – Recommendations

IBM's mission statement is very detailed, providing specific content of the business. However, it
is recommended that IBM adjust the report to account for organizational changes, including
selling some of the company's business and refocusing on core competitiveness. As one of the
largest technology companies in the global market, International Business Machines
Corporation’s vision statement shows that it is in a leading position in the information
technology industry and the market.
 SWOT MATRIX
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- Strengths in the SWOT Analysis of IBM:

+ IBM has held the record for most patents generated by a company.

+ IBM has more than a dozen research laboratories worldwide.

+ MBA outsourcing mission: a new service that will help other corporations make the same leap
from Windows to MacBooks and iPads.

+ Operational software tailored and focused on improving and managing the core processes
used by the company: big data, “cognitive computing” in areas like education and health care.

+ Provide support and maintenance for the software and other products IBM offers.

+ IBM announced an alliance with Apple to work in tandem to create business apps for mobile
devices for IBM's corporate customers.

- Weaknesses in the SWOT Analysis of IBM:

+ Imitation of products: This threat is based on the weakness of product imitability, which is
due to the company’s focus on cost leadership with minimal product uniqueness.

+ Competition: The threat of competition is significant because of the degree of differentiation

and aggressiveness of firms in the information technology industry.

+ Low degree of diversification: This weakness pertains to the company’s operations in only a
limited number of markets within the information technology industry, leading to high risks
based on these markets.

- Opportunities in the SWOT analysis of IBM:

+ IBM established a new Internet of Things (IoT) unit, pledging to invest $3 billion in the
business over the next four years.
+ IBM also invested $1.2 billion in bolstering its cloud-based businesses. New partnerships, like
ones with Microsoft and Apple, could also strengthen that business with co-developed cloud-
based middleware and apps.
+ It invested $1 billion to launch a dedicated business unit for Watson, its data-processing AI
platform.

- Threats in the SWOT Analysis of IBM:

+ High standardization of products makes differentiating product lines difficult, resulting in
reduced prices for manufacturers. Compounding problems, new competitors are able to enter
the industry fairly easily, creating downward pressure on prices.
+ Privacy concerns have arisen and even rights to who owns the data presents a problem
moving forward for corporations in the data business.
+ The threat of competition is significant because of the degree of differentiation and
aggressiveness of firms in the information technology industry.
 TOWS MATRIX
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- Strengths / Opportunities:
+ Tapping into potential market segments around the globe that highly demanded on cloud
computing
+ Heighten marketing activities of cloud computing to business companies.
+ Increase innovation on apps development through R&D, especially on business mobile app
and mobile software.
+ Conduct a market survey on demand on IT in Asia and focus on highly profitable and highly
demanded product/service segment.

- Weakness / Opportunities:
+ In exploiting this opportunity, the company can use its strengths to penetrate other markets
+ This external factor is based on the trend of technological integration in industries and
markets
+ Research and development expertise and the strength of having an extensive intellectual
property portfolio

- Strengths / Threats:
+ Forge partnership with Apple to further provide system and business app to the company
+ Strictly follow legal procedures when receiving big data from Twitter through the cooperative
agreement

- Weakness / Threats:
+ Company’s focus on cost leadership with minimal product uniqueness
+ The degree of differentiation and aggressiveness of firms in the information technology
industry
 STRATEGIC PLANNING
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- The work directly carried out by the Vermont digital economy project staff and partners has
been strengthened by targeted strategic assistance from IBM, and matching funds have been
provided for the project through the deployment of IBM service grants. IBM Services Grants
was launched in 2010 to enable aided non-profit organizations to strengthen their IT
infrastructure, leadership and technical skills. The project uses IBM's consulting expertise in
strategic planning and other areas to advance key Internet solutions to address statewide
challenges. Some of the ways we use this important resource include: Using social media, the
focus is on organizing volunteers and using local resources for key organizations.
- IBM should transform through acquisitions. Although some business units -
cloud/Watson/analysis - have experienced organic growth, relying on organic growth across the
company has proven difficult. But it is not enough to offset the losses elsewhere or keep up
with their cloud/artificial intelligence/analytics competitors, which is the key to strategy. IBM is
fighting two wars. The first is between growing and stagnant business lines, and the second is in
the wider market. So IBM's new acquisition strategy should not be traditional. It should not
represent a double blow to the existing "island" market. This will be the biggest temptation that
the next leadership team should resist. For example, buying Splunk, Rackspace, FireEye and
Tableau, although the traditional measures are good, but will not change IBM. This will make
them bigger and meet the needs of IBM to catch up but not exceed its competitors. A bunch of
traditional acquisition targets were identified not long ago, and while many of them are still
valid, IBM should adopt another strategy.
 CONCLUSION
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Research on IBM and its status quo shows that with the current situation and strategy, it will be
forced into the lane of defense strategy. In order to maintain its competitive advantage, IBM is
committed to R&D and diversified operations. Research shows that IBM has a lot of room for
improvement in its internal and external environments. In the long run, the company needs to
further strengthen its brand image, which can be achieved by exploring potential markets. In
addition, IBM has some loss-making departments, which is a burden for the company. The
company has not yet proposed any strategy to spin off these departments. IBM needs to revive
its brand line through effective advertising around the global market, and there is room for
improvement.