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T EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .

TBR SPECIAL REPORT

Creative thinking and disruptive technologies help IBM attract buyers

Author:

Elitsa Bakalova (elitsa.bakalova@tbri.com), Professional Services Analyst

TBR perspective IBM’s emphasis on shifting away from low-margin businesses and toward higher-value digital front-office solutions is an integral part of IBM Global Business Services (GBS). While this strategy negatively affects IBM’s overall services revenue growth, the company is moving in the right direction to achieve long-term revenue growth and improve profitability. IBM’s aggressive investments in cloud, big data and analytics, mobility, social media, security, and digital solutions, led by GBS’ strategy consulting, are a key component of IBM’s strategy and ability to compete with IT service providers such as Accenture. IBM’s greatest advantage over its key competitors is its ability to integrate GBS’ offerings with other IBM capabilities, such as Global Technology Services (GTS), Software, Systems, Research and Financing to provide differentiated and holistic solutions to clients. IBM’s access to C-Suite buyers beyond CIOs and its ability to address their business needs through IT solutions and transformation position the company to compete effectively for deals in the market.

IBM in action On July 8, 2014, TBR attended the IBM Global Business Services Analyst Briefing, held at the IBM Client Center in London. Through a series of general and breakout sessions, the event highlighted GBS’ brand architecture and its core sources of value, key market trends and how IBM intends to address them, IBM Interactive Experience (IBM iX), IBM’s big data and analytics and cloud capabilities, and its IBM Institute for Business Value studies. A client session and a number of client examples across different industries complemented the IBM sessions, providing a complete view of IBM in action.

Impact and opportunities IBM recently identified three core market shifts:

Digitization of the front office Explosion of data and ability to analyze, especially in real time Cloud and its ability to enable mobility and new business models

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IBM takes into consideration the three core market shifts and adjusts its go-to-market strategy to attract clients before competitors

The company is addressing the shifting market through portfolio developments and go-to-market activities to react ahead of competitors.

Ownership of IT budgets shifts as new CxO buyers emerge. Control over IT buying is changing as CxOs increase their involvement in the process compared with the past 10 years. To cover the entire C-Suite, understand CxO needs and adjust its offerings and go-to-market strategies, IBM expands client relationships through its GBS consultants or by conducting CxO studies through the IBM Institute for Business Value, which is part of GBS.

Clients need projects that combine cloud, mobile, analytics, social media and security. IBM adjusts and expands its offerings through organic investments, alliances and strategic acquisitions to address clients’ emerging technology needs.

Clients demand digital transformation, which IBM addresses through digital consulting services, a key emphasis for the company, by combining business and technology know-how with its design and creativity capabilities.

The number of large transformational deals is lower and they are broken down into smaller pieces. Clients want to test proofs of concepts related to cloud and mobility, driving a reduction in large transformational deals. Despite this emerging trend, IBM says there are still big deals out in the market that tend to revolve around the globally integrated enterprise, ensure all operations across countries are connected and take economies of scale from shared services. IBM has an advantage over competitors to compete for such deals because it is a global player and has the experience to support that sort of play.

The market is crowded, and IBM competes with established players, pure-play cloud, analytics, mobility and social vendors, and industry-niche players, resulting in intense price pressures in Europe and globally in IBM’s markets.

While clients consider shifting their IT to the “as a Service” model, IBM says that clients are at the experimental stage and have yet to initiate the massive shift, which will come in due course and create growth opportunities for IBM in the next few years.

IBM Global Business Services integrates all IBM capabilities to provide better and faster outcomes to clients

GBS aims to create economic value for clients through business insights and technology. GBS, which accounted for 32.3% of IBM’s Services revenue in 2013, covers the design-build-manage services life cycle, including consulting, systems integration and applications outsourcing. GBS integrates all IBM capabilities, including Global Technology Services (GTS), Software, Systems, Research and Financing, to provide clients with better and faster outcomes. GBS has a number of key differentiators that set it apart from competitors and help the business compete effectively for deals.

GBS provides client experience with an industry point of view.

GBS’ customer engagement fuses strategy, design and analytics, and introduces design and creative capabilities and IBM Research into traditional consulting. This is a unique strategy and drives business outcomes for clients.

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GBS’ consulting is linked with implementation, strategies and methodologies built around real implementation experience.

GBS has global, local and on-site expertise that is managed by a common governance framework — onshore consulting presence in each major country in Europe to address language and local regulation requirements.

To address market shifts, IBM’s overall strategy centers around three strategic imperatives

IBM makes markets by transforming industries and professions with data. Data is the world’s new natural resource, and IBM’s point of view is that data can bring a competitive advantage to clients. IBM has invested $24 billion in organic development and 30-plus acquisitions to develop its big data and analytics capabilities and offer clients a wide range of analytics solutions. Offerings cover basic solutions such as single source of truth, standardized and centralized data and descriptive reporting, and basic business intelligence capabilities. More advanced solutions include predictive analytics that drive business decisions and outcomes and prescriptive analytics that enable real-time optimization. IBM reaches the highest level of sophistication in analytics, such as cognitive analytics, or highly automated optimization solutions that become smarter with time, such as the IBM Watson technology. This breadth of capabilities and IBM’s ability to work with clients to craft a business strategy and leverage analytics to convert data into insights sets the company apart from competitors in big data and analytics. IBM is able to create high-value solutions for clients and lead the market in the segment thanks to its ability to consult, implement and run end-to-end offerings such as big data platforms, tools and services; its functional and industry domain expertise in analytics; and its partnership with IBM Research.

IBM remakes enterprise IT for the era of cloud. Cloud is transforming how technology is delivered. It is also transforming IT and business processes into digital services. IBM’s point of view is that cloud is the path to new business models. Hybrid cloud for the enterprise is a core focus for IBM and an outlet for IBM’s cloud growth. While a large number of clients select private cloud options and some choose public cloud, others go for hybrid cloud, which is often a complicated model. The complexity of hybrid clouds necessitates planning services, third-party advisory capabilities, integration and orchestration, and data security management covering all aspects of IBM’s cloud capabilities. SoftLayer, which IBM acquired for $2 billion in July 2013, is at the center of IBM’s cloud services offerings and helps IBM integrate private cloud security, privacy and reliability with public cloud. SoftLayer enables IBM to position and message its cloud portfolio as holistic and provides public cloud storage functionality that complements IBM’s private cloud capabilities.

IBM enables “systems of engagement” for enterprises and leads by example. Social, mobile and data empower people with knowledge and drive expectations for real value in return of people’s information. IBM’s point of view is that enterprises need a systematic approach to engagement. IBM defines systems of engagement as the use of technology to engage with individuals with speed, responsiveness and personal interactions that result in long-term relationships. A key factor for IBM, which helps the company differentiate from competitors, is its Strategy & Analytics practice, which connects “systems of engagement” with “systems of record” such as databases, CRM systems, and back-office and private cloud environments, and creates “systems of insight” through analytics. The main challenge is how to engage with the customer, and IBM has a good solution. IBM uses the power of social and mobile, extends the physical experience with digital capabilities, uses digital to enhance personal interaction, creates experiences that bring people together and lastly, and increasingly important for IBM, manages privacy, security and trust.

IBM Interactive Experience (IBM iX), IBM’s digital agency, enables the company to combine physical interaction with digital through strategy, creative design and analytics

IBM iX is a new global consulting practice and part of GBS that launched in January. It combines strategy consultants, innovation and data expertise, and design capabilities from IBM Interactive, IBM’s digital agency. IBM iX offers solutions bigger and more creative than those from agencies and consultancies, and turns ideas into

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transformation initiatives for clients and employees through the use of technology. IBM iX designs customer strategies, develops creative designs, and provides customer-related analytics and platforms that set IBM apart from competitors. Services are delivered through 10 new IBM Interactive Experience labs that are part of IBM’s $100 million investment in the segment and its plans to add 1,000 employees in 2014 to develop new personalized models of engagement through data and design. A key feature of the labs that helps IBM provide high-value solutions for its clients is the direct participation of its clients in the process and the colocation and integration of IBM Interactive Experience labs with IBM Research, IBM Design, IBM Marketing and IBM MobileFirst.

Conclusion

IBM has a well-developed model to understand buyer needs, often done through its C-Suite studies, and to frame its priorities based on new buyer expectations. This model combined with IBM’s vast and globally integrated expertise across its business units, including GBS, GTS, Software, Systems and Research, enables the company to create market trends and lead in market segments, especially around disruptive technologies such as cloud, big data and analytics, social, and mobile. IBM succeeds through its functional and industry domain expertise, new capabilities, such as IBM iX, its ability to experiment and scale rapidly, and its capacity to integrate capabilities and transform.

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