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rebirth of IBM

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INTERNATIONAL BUSINESS MACHINE BY J.SUBALAKSHMI S. JAYASRI M. PRAVEEN RAJ BALAKUMARAN
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Page 1: rebirth  of IBM

INTERNATIONAL BUSINESS MACHINE

BYJ.SUBALAKSHMIS. JAYASRIM. PRAVEEN RAJBALAKUMARAN

Page 2: rebirth  of IBM

Fall of IBMIBM had saturated the international

market.Competition was increasing.Major competitors

Amdahl,Honeywell,Burroughs,Univac,NCR,Control Data.

Changes in technology.

Page 3: rebirth  of IBM

Fall of IBMMINI COMPUTER

MARKET

PERSONAL COMPUTER

WORKSTATIONS

DEPC– launched the PDP-8

DEC’S VAX 9000 – it had same speed and capacity as IBM’s 370 mainframe, but cost only ¼ th.

DEC – 19 to 25% IBM – 24 to 16%

Page 4: rebirth  of IBM

Fall of IBMMINI COMPUTER

MARKET

PERSONAL COMPUTER

WORKSTATIONS

Apple’s sales had grown.

IBM – outsourced.

1984- IBM seized 40%

Rivals – cheaper cost IBM- premium cost

Page 5: rebirth  of IBM

Fall of IBMMINI COMPUTER

MARKET

PERSONAL COMPUTER

WORKSTATIONS

IBM had only 3.9% market share.Competitors

DECSun

ApolloHewlett-

Packard

Page 6: rebirth  of IBM

Fall of IBMSOFT WARE AND SERVICES:

IBM realized the importance of developing proprietary software

It failed to recognize the developing market Revenue from software & services.

In 1981, 33%

In 1993, 50%

Page 7: rebirth  of IBM

Fall of IBMIt found that developing new applications

software was a difficult businessTalented programmers were not attractedThey found that they could make more money if

they were in business for themselves

Sales people are expected to sell the products of software partners as well as IBM products

Page 8: rebirth  of IBM

Fall of IBMSYSTEMS INTEGRATION AND

OUTSOURCINGIBM limited its service activities to providing

support for its own software and hardware.

It didn’t use its skills to systems integration.

It had not recognized the developing market for outsourcing data processing.

Page 9: rebirth  of IBM

Fall of IBMTHE NEW COMPUTER INDUSTRYBy 1990, IBM received gross profit from

Mainframe – 50%Minicomputers – 6%PCs & work stations – 18.5%

IBM has the most to gain from making mainframes.

It was facing stiff competition.Market for mainframe computers was declining.Suppliers of computer components have been the

winners

Page 10: rebirth  of IBM

VINCENT LEARSON

1972

FRANK CARY 1974

JOHN OPEL1984

JOHN AKERS1986

FALL OF IBM

Page 11: rebirth  of IBM

Fall of IBMRESTRUCTURING1985- John Akers became CEO of

IBMProblems - identified

Failure to develop products fast enough

Sales people had become oriented to selling and servicing the mainframe

Highly BUREAUCRATIC organizational culture

Page 12: rebirth  of IBM

In 1988- reorganized IBM into 7 divisions◦ Personal computer systems◦ Mid-range systems◦ Mainframes◦ Information systems and communications◦ Technology development ◦ Programming &◦ software

But the sales force was to remain a separate entity whose job would still be to sell the whole line of IBM products

Fall of IBM

Page 13: rebirth  of IBM

Disadvantages:◦ The timeframe associated with making decision

was so long.◦ Sales forces would not be able to focus on a single

product line.◦ 20000 employees were transferred◦ Akers embarked to downsize the organization◦ Workforce of 405000 was reduced to 389300

through early retirement and attrition◦ Products were still late to market◦ Most decisions still required approval by IBM’s

corporate headquarters managers

FALL OF IBM

Page 14: rebirth  of IBM

1991 RESTRUCTURING Try to decentralize decision-making authority Akers divided IBM into 13 separate divisions

◦ 9- company’s main product lines◦ 4- marketing and service operations

His plan was that each division would be an autonomous operating unit

The heads were responsible for developing annual biz plans

Goal was to free up IBM’s powerful resources and to make it more competitive

FALL OF IBM

Page 15: rebirth  of IBM

NEW MANAGEMENT AND NEW PLANS

1991 - $2.8 billion 1992 - $5 billion Pressure for change at the top

was increasing John Akers resigned in 1993

Page 16: rebirth  of IBM

REBIRTH OF IBM

Page 17: rebirth  of IBM

JOHN AKER’S LAST STAND

IBM corporation future was decided to divided into 13 different companies

1991-93,80000 employees were laid off sought to lowest cost structure

Restructuring causes closing of factories losses up to $15 billions stiff competition from Dell, Gateway,

Sun due to cost advantage

Page 18: rebirth  of IBM

CONTD…

In 1990s- major change in business level strategy• Avoided to rent the software and hardware to

clients for year basis • The implementation of strategy they decided

to sell instead of renting Selling boost the short run but loss of

special relationship with clients Sale of network computers were rocked

but mainframes plunged thinking of switching cost.

Page 19: rebirth  of IBM

Louis Gerstner to take over as CEO

"In order to serve markets, we have to understand them, reflect their diversity and build a workplace in which every individual knows their opportunity to contribute is gated only by the quality of their ideas and job performance, and the integrity of their work."

Page 20: rebirth  of IBM

GERSTNER’S MOVES

Gerstner performed a study on different divisions to implement the steps.

New independent managers for each division of business.

Attractive incentives to the managers to perform well.

Replaced senior executives with managers in low down ranks.

Changed the decision making process and way of meetings.

Centralized hierarchical structure to quick decision making

Page 21: rebirth  of IBM

GERSTNER’S DECISIONS

IBM to remain as a single unit Complete and comprehensive

collection of hardware, software and services

To provide computer packages suited to new computer environment and to survive the competition

Speeding innovations and decision making

Page 22: rebirth  of IBM

NEW BUSINESS MODEL

Provide a complete state-of-art computing solutions

Take advantage of Internet for marketing.

To make IBM as customer-driven company

Low profit margins & to provide unique so that customers pay on premium price

Challenge –How to customize the products according to the needs of the customer?

Page 23: rebirth  of IBM

CHANGES IN HARDWARE

To design the hardware to meet the satisfaction of clients

To customize the mainframe computers to suits to all business units small or big

Smaller mainframes “enterprise servers” to meet the clients of growing companies

Problem solving “ThinkPad devices” Development of new advanced

microprocessor chips Cost advantage over Mainframe Computer. Customize the chip to suit to all computers

needs for OEMs.

Page 24: rebirth  of IBM

CHANGES IN SOFTWARE Rapid change in software proved to

challenge to IBM Mistake is that allowing Microsoft to

provide MS-DOS operating system to IBM pc’s & mainframes

Then they tied up with ERP to increase the value by mainframe to server, server to PCs.

Started to acquire the software companies like lotus –Lotus notes for corporate Intranet.

Developed Middleware software

Page 25: rebirth  of IBM

CHANGES IN CONSULTING AND SERVICES

Gerstner move is to satisfy all the clients and their needs. Computer services contributed to 20% of the revenues. U.S govt to employ the IBM to run the major computing

systems. Establishment of Integrated Systems Solution Corporation

(ISSC)to develop the services.• Electronic Data System and Accenture• Followed Jack Welsh of GE.• Renamed as Global ServicesConsultant

-Design, Plan, Implement, Maintain and Upgrade to reduce client cost structure.

-It increase client loyal on long term

Page 26: rebirth  of IBM

GLOBAL SERVICES DIVISION

Investing large amount to services To compete Accenture and EDS to

provide consulting and services Expertise in middleware Client to Client assessing. All above will give Clear idea on

customer needs.....

Page 27: rebirth  of IBM

Growth of internet and e-commerce would major force in the direction of computing future

Established e-business is to serve internet related value chain transaction before its competitors

Acquisition of lotus enabled competitive advantage

Lotus collaborative software provided a model for making IBM middleware software internet compatible

IBM initiative its e business in 1996

Competitive advantage over competitors growing no of clients

E-BUSINESS AT IBM

Page 28: rebirth  of IBM

IBM showed importance on SMB’s and growing industries to their needs

To manage their databases & functional value chain

1999 two million SMB clients by 2001

Advantage is early move to internet which helped in cost cutting efforts

Saved billion of dollars by selling their products directly to clients

CONTD….

Page 29: rebirth  of IBM

By 2000 IBM replaced EDS as global leader in computer services

Gerstner continued to work to strengthen his new services driven model across all IBM

New pay-for-performance at the all levels of employees

Change of IBM structure to became entrepreneurial, collaborative and customer oriented

Gerstner’s successor Sam Palmisano took charge of global services, he known as “street fighter” in collage

Change in the operating structure as to new service driven organisation

GARNER TO PALMISANO

Page 30: rebirth  of IBM

Sam palmisano corporate headquarter

Global services

hardware

software

Global marketing R & D

Global sales &

distribution

ORGANISATIONAL CHART

Page 31: rebirth  of IBM

Global services

Hardware

Software

Global financing

R & D

Global sales and distribution

DEVELOPMENTS IN OPERATING GROUP

Page 32: rebirth  of IBM

LYNCHPIN most powerful group of operating group

Services surpass hardware revenues

Work to deliver software and hardware to clients

They have to superior software such as PeopleSoft's HRM , SAP’s ERP

$ 3 billion dollar to develop Linux based OS which works on all platform

Major clients in Asia such as India and China which results in lower cost OS

GLOBAL SERVICES

Page 33: rebirth  of IBM

STRATEGIC OUTSOURCING SERVICES provide customer with cost advantage

INTEGRATED TECHNOLOGY SERVICES designs, implementation and

maintenance

BUSINESS CONSULTING SERVICES Business process innovation, application

enabled

THREE LINES OF GLOBAL SERVICES

Page 34: rebirth  of IBM

Acquisition of PriceWaterhouseCoopers for $2.3 billion

Increase in consultants in services

To serve the needs of different industry clients

To offer the same complete IBM solution all over the globe

40% revenues from global services

Improvement in online collaboration and global teleconferencing to promote collaboration

MAJOR COUP OF PALMISANO

Page 35: rebirth  of IBM

Hardware:

In 2003, IBM reorganized the hardware group

- system & technology group

- personal system group

Page 36: rebirth  of IBM

System Group:

•eserver Linux

•Storage products.▫Disk, tape & storage area networks

•40% direct to customers, 20% through Internet.

•Managed Outsourcing operation

Page 37: rebirth  of IBM

Technology Group:

•IBM microelectronics division:

▫Offered: Leading semiconductor technology. Customized solution Sold Engineering technology Services to

Original Equipment manufacturers(OEM) And offered service to other computer

companies.

Page 38: rebirth  of IBM

Microelectronic division:

•Offered 3 services:▫Manufactured & tested Semi-conductor

products for customers.▫IBM provides integrated supply chain services

to deliver the product to Customer and clients. Eg: Sony P3 and Home media centre

• In addition, Technology group launched its new Engineering and Technology services division that provides system and component design service.

Page 39: rebirth  of IBM

Personal System Group:

•Include the companies lines of PCs, printers and Point of Sale terminals used in retail stores and fast food restaurants.

•And include IBM Thinkpad devices

•Intense price Competition Dell, Hitachi and Samsung

Page 40: rebirth  of IBM

Cont...

•Could not match efficient Competitor. So in 2000, sold hardware to Hitachi And in 2002, 3 years Outsourcing to SCI

•Despite outsourcing they plunged in profit (2005).

•Sold Computing business to LENOVO.▫LENOVO can sell under the brand name of

IBM.

Page 41: rebirth  of IBM

IBM

•Analysed the Core competencies and gained through the leadership of new CEO

Hardware Software and services Servers Storage Devices

Leads to more profit and Operating margins are high.

Page 42: rebirth  of IBM

Cont..

•Failed in commodity product bcoz of DELL competitionFailed in commodity product bcoz of DELL competition

•Gerstner insight was to offer complete range of computer products and solutions.

Page 43: rebirth  of IBM

Software Group:

•Offered:▫Open Source middle ware solutions

•IBM once again to strengthen its competencies in application software went for stratergic acquisition.▫Lotus▫Tivoli System▫Rational System

Page 44: rebirth  of IBM

Global Financing divisions

•To provide its clients with the financing to facilitate them to purchase their computer products and services.

•This decision is the major source of profitability.

•IBM is the largest IT financier in the world.

Page 45: rebirth  of IBM

R&D:

•IBM has an operating division devoted to advanced research

•Focused on emerging technologies like nanotechnology and autonomic computing.

Page 46: rebirth  of IBM

E business on Demand:

•Palmisano introduced the “e-business on demand initiative”

•He searched for new IT business Solution•His teams objectives

To further innovation To significantly reduce cost To integrate activitiesIt has developed 17 expert system

Page 47: rebirth  of IBM

Future of IBM:

•By 2005, increased IT budgets IBM was working hard to promotes its

Customized on demand hardware

Software offerings.

Page 48: rebirth  of IBM

Threats to IBM:

•HP- Compaq merger.

•Microsoft-SAP merger.

•IBM eyes on lucrative SMB segments

Page 49: rebirth  of IBM

Thanks to new CEO s.

Page 50: rebirth  of IBM

GERSTNER’S GROWTH

Page 51: rebirth  of IBM

THANK YOU

Page 52: rebirth  of IBM

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