December 4, 2003 4:06 PM PST

IBM takes aim at more corporate spending

IBM is accelerating its strategy of using industry-specific business expertise to get a larger portion of corporate spending, IBM executives said at a briefing for financial analysts Thursday.

IBM's chief financial officer, John Joyce, said that Big Blue has positioned itself to take advantage of a "dramatic and significant shift" in the information technology industry. Corporate customers are increasingly seeking packaged solutions to specific business problems rather than making technology purchases in a piecemeal fashion, he said.

"The boundaries of IT (are) shifting, and we are well positioned to take advantage of that," Joyce said. "To win in this marketplace, you need to have the ability to bring together business process expertise and information technology expertise."

While not commenting specifically on its view on corporate technology spending, IBM executives said a recent survey of 300 CEOs found that corporate managers are showing a growing interest in boosting company revenue rather than just cutting costs. "Businesses are starting to take some risks," Joyce said.

Reflecting IBM's broad on-demand initiative, IBM's survey also indicated that CEOs are eager to make their companies' computing systems more flexible and better connected.

To take advantage of the shift in spending patterns toward bundled technology purchases, IBM is selling more of its products in combination. It is also boosting the vertical industry expertise of its sales force, executives said.

"There is a profound shift from generic industry applications like (enterprise resource planning) or (customer relationship management) to very industry-specific (applications)," said Bruce Harreld, senior vice president of strategy at IBM.

IBM's focus on selling its infrastructure technology along with industry-specific consulting services will open up new kinds of opportunities, the company said.

For example, IBM expects 12 percent to 13 percent growth in business process, or transformation, outsourcing services, in which IBM takes over business processes such as human resources or financial administration for a corporation. Big Blue, which has a handful of "anchor customers" in different processes, sees that kind of outsourcing as a $150 billion market.

"We really do believe that there is a fundamental shift in the market so that there is no longer a meaningful distinction between business and IT strategy," said Ginni Rometty, managing partner of IBM's business consulting services. "This combination, this capability is unlocking opportunities that we wouldn't have had before, and business transformation is one of them."

IBM's Joyce said IBM is better positioned than its competitors to capitalize on changes in technology spending, because the company has been shifting its strategy toward packaged solutions for several years.

"The IT industry's not the same old industry we've been used to in the last 10 or 15 years...This is a customer-driven industry, not an IT-driven industry based on what (the industry) think(s) is right," Joyce said. "What will happen to the rest of the market (is that) many will have to transform or continue to consolidate."

 

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