IBM - Services is the near future

(MIT Technology Review, May 2005)

For IBM, services is the main theme now for all its employee, even for its prestigious R&D department.

Why? According to my evaluation, they are shifting focus from Sales-oriented to Service-oriented. This simply doesn't mean that IBM is no longer selling products, nevertheless it means that those people running in the field would be of stereotyped 'service' people than commission-hungry people. Their performances are judged via KPI than sales figures. The best part of it is, one stone killing two birds.

Most pure services are sold by IBM's 180K consultants and range from wholesale IT outsourcing to training, human-capital management, and On Demand Innovation Services effort (a broad effort to make widely disparate systems communicate more effectively, and in real time) These services don't have profit margin as high as those of IBM's proprietary hardware and software, but services often follow product sales (and sometimes drive more product sales).

The turning point for IBM, like everyone else, exists a commitment to prove its investors about corporate strategies. IBM merged with PricewaterhouseCoopers Consulting in July 2002 and by the end of 2003, the result proved to be very positive; close to half of IBM's revenues were coming from services and on top of that it accounted for less than 15% of total R&D expenditure. In other words, this is a high margin business and is aligned with their older corporate strategies which is to get rid of low-margin division such as the PC division to Levono and Storage division to someone some time ago.

R&D team already felt the heat and the need to wisen up and they are working towards researching of topics involving operations, marketing, and supply chain management. Meaning, they are not just doing researching to produce hard product such as Millipede, a nanomechanical device that can store data at a density of 20 times higher than that of magnetic storage. Instead, they are studying human sciences now and came to conclusion that service is “human business that needed human research”

So, what does all this boils down to ?
--> Part of the group's charge is to devise algorithms to improve how businesses use information technology.

If you wanted to compare apple to apple. Perhaps the following two division would clear your doubts.
WebFountain --> A set of processes for organizing and analyzing huge sets of disparate data. It is like an A.I application which helps people to “read” data.
Business optimization --> Helps clients tighten up operations. Quite similar to business intelligence, with more and more algorithms being developed for business problems which cannot be easily resolved and requires predictive measures such as quantifying the risk of failure at a manufacturing site based on historical data.

In all, services is like on-demand and off-demand consulting. It is hard to divide fair share between these two perspective because it is simply human-oriented.

And most importantly, we are looking at growth potential. The PC and hardware market has reached a saturation point where you don't upgrade PC as often as you changes business strategies since most of the time, end-user computational resources are under-utilized.

So can we start a service oriented company right away ?
This question will make you ponder what service really is. What to sell? who to sell? where to sell?
-->The answer is “knowledge”; you are selling knowledge.

If you sell a web site for 500 bucks, the customer would be much better off if he learn how to create it entirely by himself. In the case if the customer is a keen learner, 500 buck would be too cheap and vice versa.

1. why is IBM focusing on services?
2. what is the computer services industry?
3. why is IBM selling PC division off?
4. what is the future of sales person?
5. what is IBM R & D currently focusing on?


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