IBM’s Services Business re-organisation – and related thoughts.

Yahoo! News reports a major restructuring at IBM Global Services. The overwhelming message that IBM is sending out over the past quarter (perhaps longer) is that it is no longer “just a products company”. IBM views the service business – over $50 billion last year – as the growth area for the future. Indeed, speaking about IBM’s Q2 earnings report,

The report showed solid growth in services revenue and a surge in new contracts, marking a rebound from a sudden downturn in its services business in the first quarter.

The services business already accounts for over half of IBM’s revenue. And we’re not talking simply technology services, but “professional services” too. For instance, recall the “The Other IBM” ads that made their appearance everywhere earlier this year. Those were for IBM’s Business Consulting Services business. In keeping with this vision,

In a memo to employees, IBM said it plans to reorganize its services business into two arms.
One, called “technology services,” includes information technology services, outsourcing and security, and a second, entitled “business value services,” is made up of consulting, business strategy and asset management services, it said.

The company also acquired PricewaterhouseCoopers for $3.5 billion in three years ago, creating IBM Business Consulting Services.

Transforming the face of IBM:
That’s the way IBM seems to be going over the past few months. And it is serious. There is a concious effort to project a “new face” of IBM; an attempt to get rid of the “big iron” stereotype that still persists. Just a year ago, the company was making grandiose statements about not making products for small and medium-sized businesses, only for the truly large ones. That is probably true even today, but there’re no statements like that any more. In fact, at least in India, there hasn’t been a single IBM product-related advertising campaign for quite a while now. Where have those “Middleware is Everywhere” ads gone? The only ones now are the ones about “On Demand Business – from IBM” and the recent Business Consulting ones. There was even this quip about the acronym “IBM” now expanding to “International Business Models” or “International Business Methods”!

One IBM:
This move also gives you an idea of the sheer scale of this institution – on the one hand, you have IBM Research, probably the only large-scale corporate-run research lab left standing (with only GE Research as a peer). Then you have its vast product line offering – in hardware, storage, collaboration, asset management, systems, and dozens other niche areas. Finally, this new foray into “professional services”. The amazing part about this is that IBM still looks like a cohesive whole. No matter who you are at IBM, there is one direction that the company is following. For sure, we have a wonderful strategy team in place. Contrast this with HP. I wrote an article this April about HP’s future strategy, just after Carly Fiorina’s exit. The common theme throughout the article was that HP has spread itself too wide, and ended up with multiple smaller “HPs”, each pursuing its own agenda. That has never happened to IBM. It’s always been “One IBM”.