February 24, 2004 7:33 AM PST

IBM asserts businesses set to spend

NEW YORK--IBM detailed on Monday the results of a survey indicating that CEO priorities have shifted from cutting costs to generating more revenue.

Based on face-to-face interviews with about 450 CEOs and business unit heads of large global companies, the survey showed that corporations would feel comfortable investing in new ventures this year in order to drive new revenue growth.


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IBM's Business Consulting Services performed the survey, called the Global CEO Study 2004, last year with companies internationally that have more than $500 million in revenue. IBM executives shared the results at a press event in New York on Monday.

Asked to prioritize how companies plan to strengthen their financial position, CEOs indicated that revenue growth would take precedence over cutting costs. This is a shift from the priorities in the 2003 study, when most business managers focused more on wringing costs out of existing businesses to weather the economic downturn, IBM said.

In Europe and Japan, however, top executives showed about equal emphasis on cost cutting and revenue growth, the 2004 survey showed.

IBM executives said the survey reinforces its contention that corporate spending on technology and related services is on the upswing. Big Blue exceeded analysts' expectations when it reported fourth-quarter earnings in January, and top executives gave an upbeat assessment of the current spending environment.

Despite the bullish outlook, business leaders surveyed by IBM sounded a cautionary note; a majority of company heads said they do not feel they are skilled enough in changing their businesses quickly enough to seize emerging opportunities.

Eighty percent of CEOs surveyed said their companies were "somewhat capable" of responding to changing business conditions, while 7 percent said they felt their organizations were not capable.

"CEOs generally do not believe their companies are very responsive," said Eric Pelander, senior partner in the change and strategy practice at IBM's business consulting division. "The majority feel they have limited capabilities and (lack) the depth of skills."

Business executives who attended the press event in New York said that their companies were seeking increased flexibility in how they do business.

"Our need to change is pretty overwhelming," said Cathy Palaez, chief operating officer at Liberty Travel, "We are facing competition that we had never to before, (such as) the online distribution channel."

IBM hopes to cash in on the shifting priorities with its on-demand initiative to make companies more nimble. Hewlett-Packard and Sun Microsystems have announced similar utility-computing initiatives.

IBM's business consulting division also sees an opportunity to expand into new business areas, such as business process outsourcing, in which a company will hand off operation of an entire business function, such as finance or customer service, to an outsourcer, said Pelander.

"If we can deliver on the idea of responsiveness with better business 'radars' (to understand customer demands) and more adaptable business process, that's promising," Pelander said.

 

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