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Products: International Business Machines Corporation (IBM)

Cognitive Solutions(Cognitive Solutions)
Technology, Cloud Revenues(Technology, Cloud Revenues)
Financing and Others(Financing and Others)
Business Services(Business Services)
Operating Systems and Others(Operating Systems and Others)
Servers(Servers)
Storage and Others(Storage and Others)

Cognitive Solutions

What is being offered?

Cognitive solutions software provides the basis for many of the company’s strategic areas including analytics, security and social. IBM has established the world’s deepest portfolio of data and analytics solutions, including analytics and data management platforms, cloud data services, enterprise social software, talent management solutions, and solutions tailored by industry. Watson Platform, Watson Health and Watson Internet of Things capabilities are included in Solutions Software. IBM’s world-class security platform delivers integrated security intelligence across clients’ entire operations, including their cloud, applications, networks and data, helping them to prevent, detect and remediate potential threats.

Who are its clients?

Firms across industries

Who are its competitors?

Alphabet, Microsoft are IBM's key competitors. Others include vendors such as Adobe etc.

What do the buyers care about?

  1. Efficiency in terms of speed, relevancy and accuracy of the data analyzed by the software
  2. Seamless integration into a firm's existing IT infrastructure with the cogntive solutions and cloud services.
  3. User friendly software requiring less training
  4. Price of the service
  5. Excellent software support for updates and troubleshooting

IBM's strengths and weaknesses

  1. Experience and Expertise - IBM is one of the first companies to offer artificial intelligence based cognitive solution software. Consequently, with being a pioneer in the technology space, it has years of industry experience and know-how in software development and evolving IT infrastructure to help the clients with its latest cognitive solutions offering.
  2. Long term relationships with clients - Being a pioneer in this field and being present in most industry sectors, it has built long-term relationships with its clients and it leverages that to drive sales and market leadership

No apparent weakness as IBM has first movers advantage in the domain.

NOTE:- The revenues before 2016 are not comparable as the company has reorganized its reporting structure. The erstwhile Branded middleware, the revenue for which are stated here till 2015, is not been reported. The company is breaking down revenues for its Cognitive solutions software.

Cognitive Solutions Revenue

IBM's Watson was introduced in 2011. Since then, the company has been developing a new generation of cognitive systems that can discover and analyze the massive amounts of data that have previously been invisible to computers and enterprises. These cognitive solutions now have a portfolio of solutions for Healthcare, Finance, IoT etc.

Cognitive Solutions Revenues has grown to $18.5 billion in 2017 FROM $18.2 billion in 2016, the first time it was reported as a separate division.

Note: The numbers before 2016 are the reported numbers for middleware division, revenues of which have been spread across cognitive software and solutions, cloud and other division of IBM.

Chart: Cognitive Solutions Revenue

Technology, Cloud Revenues

What is being offered?

Infrastructure and cloud Services are IBM's offerings that support a company's IT infrastructure with the use of IBM software and cloud resources. The portfolio includes a comprehensive set of hybrid cloud services and solutions to assist clients in building and running enterprise IT environments that utilize public and private clouds and traditional IT. The IBM Cloud Platform offers leading edge services to developers and IBM's Cloud Infrastructure-as-a-Service covers a wide variety of workloads with unprecedented performance.The company's capabilities, including IBM Cloud, cognitive computing and hybrid cloud implementation, can help to deliver high-performance, end-to-end innovation and an improved ability to achieve business objectives.

Who are its clients?

Firms across industries, especially technology intensive firms

Who are its competitors?

Accenture, HP, Microsoft, Alphabet are its top competitors.

What do the buyers care about?

  1. Industry Expertise - Handling of the project by experts who understand the business and know how best to integrate IT seamlessly into that particular business
  2. Extensive Scope - Ability to work across applications and technology platforms and to offer end-to-end solutions
  3. Availability of Resources - IBM's extensive geographic presence with its huge offshore strength
  4. Ability of the IBM employees to work in sync with the company
  5. Excellent execution
  6. Overall cost of the project

IBM's strengths

  1. Resources available - IBM has more than 200,000 people offshore worldwide to give a 24/7 service. This makes it one of the most competitive firms in this aspect
  2. Industry Expertise - Accenture is able to leverage its wide industry knowledge through its experts in Business consulting who are experts at various business processes
  3. Technology Expertise - As a leading software and hardware vendor, it has the technical know-how of the entire IT spectrum making it one of the leaders in these services
  4. Scope - IBM services range from basic help desk services to network management services to desktop management and data management services.
  5. Bundling - IBM is able to bundle its Technology Services with Strategic Outsourcing, BPO and Application Outsourcing offering the complete IT solution to its clients, and vice versa.

IBM's weaknesses

No apparent weakness as it is a market leader in the domain.

Note: The company is now reporting the combined infrastructure services and outsourcing revenues. Therefore, the revenues reported before 2016 are not comparable.

Technology and Cloud Revenues

The Technology And Cloud consists of :Infrastructure Services that delivers a portfolio of cloud, project-based, outsourcing and other managed services focused on clients' enterprise IT infrastructure environments. The portfolio includes a comprehensive set of hybrid cloud services and solutions to assist clients in building and running enterprise IT environments that utilize public and private clouds and traditional IT. The IBM Cloud Platform offers IBM's Cloud Infrastructure-as-a-Service covers a wide variety of workloads built around a key set of predictive and proactive solutions addressing systems, mobility, resiliency, networking, cloud, and security. The services also include Technical Support Services, which delivers a comprehensive line of support services to maintain and improve clients' IT infrastructures. These offerings include maintenance for IBM products and other technology platforms, as well as software and solution support.

In 2017, the technology and cloud revenues declined to $34.3 billion.

Note: The company restructured its business by clubbing Infrastructure, cloud, Integration software and maintenance services into one division in 2016. As a result, numbers prior to 2016 are not comparable.

Chart: Technology and Cloud Revenues

Financing and Others

What is being offered?

IBM's global financing segment is used to finance IBM clients in order to facilitate sale of IBM products to them.

Global Financing comprises three lines of business:

  1. Client financing provides lease and loan financing to end users and internal clients for terms generally between two and seven years. Internal financing is predominantly in support of Global Services' long-term client service contracts
  2. Commercial financing provides primarily short-term inventory and accounts receivable financing to dealers and remarketers of IT products. This financing is primarily short term and ranges from 30 – 90 days
  3. Sale of used equipment of segments such as Services and System and Technology

The key drivers of this segment are interest rates and originations.

Client and Commercial loan originations depend on two factors

  1. IBM non finance revenues; the better they are, the more clients IBM has and IBM would have a larger pool to extend financing to
  2. Participation rates; this is the percentage of IBM non finance revenues that opt in for financing from IBM in lieu of paying up cash upfront

The company also reports other revenues, which are significantly less and combined in this division.

Who are its clients?

All IBM clients buying IBM hardware or software

Who are its competitors?

Banks which might give cheaper financing options

What do the buyers care about?

  1. Cheap financing options - i.e. low interest rates on borrowings
  2. Good payback terms to help manage their financing better

IBM's strengths and weaknesses

Given that this division helps its clients fund their purchases better, there is no primary strength and weakness associated with this segment.

The advantage of having this segment is that it encourages its clients to buy more from IBM given that they have an option of various financing options instead of paying upfront for the products they are purchasing.

Hence, this division drives more clients to buy from IBM.

GFS and Other Revenues

GFS & Other Revenues refers to the sales from financing division of the company. IBM finances its clients in order to facilitate the sale of IBM products to them.

We have clubbed other revenues, which is significantly less, with this division to arrive at the number.

GFS & Other Revenues was at $4.3 billion for both internal and external clients in 2013. The revenues from external clients, which is reported in 10-Q and 8-k fillings, were at $2.02 billion in 2013. This decreased to $2 billion and $1.8 billion in 2014 and 2015 respectively.In 2017, revenues from external clients declined to $1.87 billion.

Chart: GFS and Other Revenues

Business Services

What is being offered?

Global Business Services specializes at a more generic business level rather than IT infrastructure. The division provides business consulting and systems integration services along with providing applications management services.

Consulting and Systems Integration cover services like client relationship management, business strategy, supply chain management and also solutions to streamline the IT infrastructure and software into the business.

Business process services delivers finance, procurement, HR, and industry-specific business processes to IBM's clients.

Application Management Outsourcing helps corporate clients reduce IT costs by outsourcing the steps of developing and maintaining software applications used in the client’s business.

Application Management Outsourcing essentially entails outsourcing processes such as:

  1. Software application development
  2. Software application testing
  3. Software upgrades, enhancements, and maintenance

A typical example of Business Consulting & Application Management Services is IBM implementing and supporting SAP for Sony Latin America. Sony Latin America engaged IBM Business Consulting Services for the SAP implementation and to act as a change agent and facilitator for the business model transformation. The solution consisted of a single SAP instance for all 14 countries in three languages. Ongoing production support (managed through a five-year contract) is provided by IBM Application Management Services.

Who are its clients?

Firms across industries

Who are its competitors?

Accenture is IBM's leading competitor along with HP and Indian IT Players like Wipro, TCS and Infosys

What do the buyers care about?

  1. Industry Expertise - Handling of the project by experts who understand the business and have years of experience of projects in that industry and know how best to integrate IT seamlessly into that particular business
  2. Extensive Scope - Ability to work across applications and technology platforms and to offer end-to-end solution
  3. Availability of Resources - IBM's strong offshore strength operating from low cost geographies
  4. Ability of the IBM employees to work in sync with the company
  5. Excellent execution
  6. Overall cost of the project

IBM's strengths

  1. IBM has been a pioneer in the technology services space and hence its business consulting and systems integration business is able to leverage years of technology expertise to execute projects
  2. As a leading hardware and software vendor, it has the deep know-how of all spectrums of an IT infrastructure making it best positioned to execute a project in the technology space

IBM is a market leader in the Application Outsourcing field followed by Accenture. Market leadership can be measured in terms of

  1. Resources available - IBM has more than 100,000 employees offshore across low-cost geographies
  2. Industry Expertise - IBM has years of experience in making enterprise software and is able to leverage its wide industry knowledge through its experts in Business Consulting
  3. Scope - IBM offers a breadth of services from the management of a single application to application portfolios and specializes in Middleware such as Websphere, Information Management etc.
  4. Breadth of Services - IBM covers the breadth of services from development to testing to maintenance to enhancements/upgrades

IBM's weakness

No apparent weakness given its market leadership in the space

Operating Systems and Others

What is being offered?

OS - IBM is one of the lesser players in the operating systems market with Windows, Linux, Unix etc holding centre stage. Its product offerings include z/OS, z/VM, TPF, z/VSE.

Rest of IBM's software portfolio includes Product lifecycle Management and other software (mainly used in the field of consulting and education). Product lifecycle management software helps companies improve their product development processes and their ability to use product-related information across businesses.

Who are its clients?

OS - Mostly firms, especially those using its mainframe computers

PLM and Others - Firms across industries

Who are its competitors?

OS - Microsoft Windows, Linux, UNIX etc

PLM & Others - Oracle, Microsoft, Siemens etc

What do the buyers care about?

  1. Pricing
  2. Use of latest technology
  3. User friendly features
  4. Compatibility with various platforms

IBM's strengths and weaknesses

Given its technological know-how, it is one of the leaders in product lifecycle management software.

With regards to operating systems, IBM does not compete in the consumer category with someone like Microsoft. Its system-z OS is compatible with its mainframe computers which are used by big enterprises for complex applications.

Since it does not reach out to the mass audience of consumers like Microsoft Windows, it is very small in the OS industry with a niche audience.

Servers

What is being offered?

Servers, which usually have multiple microprocessors or cores working together, manage large amounts of data, direct data traffic, perform complex transactions, and control central functions in local and wide area networks and on the Internet.

IBM's servers have 2 major lines -

  1. System z - System z is the brand name for IBM Mainframe computers where z stands for zero downtime as the systems are built with spare components for hot failovers to ensure continuous operations. Mainframe computers are typically used by organizations for critical application such as ERP, industry and consumer statistics, financial transaction processing etc. System z servers are used by IBM customers for business-critical installations in medium and large organizations which need high availability, where scheduled and unscheduled downtime costs are high, and at traditional mainframe shops such as banks and insurance companies which already have mainframe applications at the center of their business processes.
  2. System P - Before Converged System p, IBM had system i and system p separately. The two converged in April 2008 to give IBM POWER systems. Converged system p consists of the old system p, POWER system with AIX and POWER system with IBM i (system i previously). POWER stands for Performance Optimization with Enhanced RISC. Basically, it is a RISC-based instruction set architecture. RISC or Reduced Instruction Set Computing represents a CPU design strategy emphasizing the insight that simplified instructions that "do less" may still provide for higher performance if this simplicity can be utilized to make instructions execute very quickly. System p is IBM’s RSIC/Unix based server and workstation product line.

Who are its clients?

Firms across industries especially in need for huge space for carrying out complex applications

Who are its competitors?

System z - mainframe - HP high-end servers

What do the buyers care about?

  1. Price
  2. Reliability of performance
  3. Scalability - ability to handle more and more data and complex transactions
  4. Processing speed
  5. Power consumption

IBM's strengths

System z - They are the original pioneers of mainframe systems and hence have leveraged it to keep growing. IBM System z was the only platform outside of Linux and Windows to experience positive revenue growth in Q1'13

IBM has been successful in disinvesting its System x business which was operating in commoditised market.

Storage and Others

What is being offered?

IBM sells high-performance hard drives and tapes to help manage more data, more efficiently, and keep the information available and secure. The disks are used for large, data-intensive applications like e-mail, inventory, supply chain, backups and regulatory and compliance information.

Storage hardware provides permanent storage of information and programs for retrieval by the computer. The two main types of storage devices are disk drives and memory. There are several types of disk drives: hard, floppy, magneto-optical, magnetic tape and compact.

We have also included left over revenues from Microelectronics division in this segment.

Who are its buyers?

Data centers which need to maintain back-ups for data and information residing on servers. Large businesses that need high-end data storage solutions.

Who are its competitors?

IBM's competitors include EMC, Hewlett-Packard, Dell, NetApp and Hitachi Data Systems

What do Buyers Care About?

  1. Price
  2. Scalability and ability to handle growing amounts of data
  3. Time the data can be stored
  4. Speed of data storage and retrieval
  5. Data portability (example from expensive storage to cheaper storage as value of data diminishes over time)
  6. Search capability (ability to search relevant data)
  7. Interoperability and compatibility of storage with different types of servers, operating systems and applications
  8. Power consumption and efficiency
  9. Security and protection of information
  10. Reliability and Quality – Failure rate, Malfunctions

IBM's strengths and weaknesses

Strengths

  1. Technology know-how as they were the pioneers in this field
  2. Wide range of products from disks to tapes suited for both small as well as large businesses
  3. Advanced customized solutions for large companies to handle complex data processing
  4. Excellent support service for its hardware - both deployment and after sales service

No apparent weakness given its market leadership in the space