IBM (International Business Machines) is one of the world’s biggest producers of computer hardware and software. It also provides services in the sphere of consulting. The company was founded in the nineteenth century in the United States and was initially engaged in working with population census data. Having achieved significant success in this field, IBM continued its work. In the middle of the twentieth century, it started producing computer details and software.
In recent years, IBM’s new profile has been consulting services. The company’s main attention is now focused on information security. According to Herger, Fonseca, Rippon, and Bodarky (2017), IBM has mostly given up producing hardware and concentrates on such new trends as cloud automation. For this purpose, the IBM cloud platform was invented. Cloud computing is helpful in many business branches as it allows to cut down on information technology infrastructure expenses. That is why, since 2006, this direction has been developing rapidly.
According to Britto, Ribeiro, Araújo, and da Motta e Albuquerque (2017), “in the case of IBM, the strategy shifted dramatically from the early 1990s, reflecting a process of business reorientation and capabilities reconfiguration, in the direction of services, software and digital media” (p. 24). This tendency found its representation in IBM’s selling its hardware businesses to Lenovo and other similar enterprises and purchasing such digital ones as The Weather Company.
It is possible to note that IBM is a vivid example of a business that has gone through the process of servitization (Bickel & Kryvinska, 2018). It means that it has refocused its activity from production to services. Throughout its history, IBM has always been demonstrating the ability and willingness to change its priorities radically. This is among the reasons why the enterprise is one of the most thriving companies in the world.
According to Muzumdar (2013), IBM patents all of its products. It is certainly a strong aspect of the company’s work. On the one hand, patenting requires special staff and other expenses. However, it prevents the company’s unique products from copying. As a result, only IBM has an opportunity to produce and realize what it produces and realizes. It gives an advantage in the modern IT market.
Another strong point of IBM is its openness to innovation. On the website one may find a lot of information about the company’s attitude to creating innovative products. One may argue that such an approach may be risky. It naturally is risky, but the way that IBM has gone throughout its rich history shows that whenever the enterprise takes a radical step to change, it turns out to be a success.
Researchers note that IBM relies on a large group of experts when making decisions (Britto et al., 2017, p. 13). One cannot but agree that it is effective as far as fixing production drawbacks are concerned. However, for such a big multinational company as IBM, it may also be a weak point. To respond to the challenges of the world market, such an enterprise should be more centralized and quick in decision-making. Although the disadvantages of the lack of centralization are not obvious yet, they will be observed if the company decides to be more centralized.
Other researchers point out that IBM’s current products are rather costly (Herger et al., 2017). It means that they may be too expensive for buyers. However, this situation is inevitable as software and digital products require many specialists’ work and a lot of financial resources. That is why it is sometimes hard to compensate for all the company’s expenses via sales. It is a common problem in this field of business.
According to Bickel and Kryvinska (2018), servitization is a global trend nowadays. As IBM is one of its pioneers, it has an opportunity to use outsourcing more. The company and its targets are attractive for highly-qualified specialists all over the world. On the other hand, the company could cut down on expenses by using outsource employees. The Internet allows working from home as effectively as from an office, and it is becoming a trend.
Muzumdar (2013) points out that research is necessary for developing new digital technologies. That is why IBM should apply its capital to scientific studies of IT and various relevant fields. This will enable the company to get more ideas for innovation and invention. The more money they invest in research, the more outcome they receive. Thus, such expenses always justify themselves and return double or triple.
According to Muzumdar (2013), one of the threats that IBM has to face is high competition. Although IBM’s products are patented, there emerge new companies in the market which are also engaged in IT consulting services. They cannot copy the products, but they may learn from IBM’s strategies and use them. Another threat is small local companies. They operate in their local markets, and the quality of their services is lower than that of IBM’s ones, but they are much cheaper. One small firm cannot outplay IBM, but thousands of them can.
Firstly, the company should find ways to reduce its prices. To do this, it needs to find out how to cut down on the initial costs. One of the ways is to use outsource employees more. In this case, there will be no need to build or rent offices and pay for accommodation services. On the one hand, such a measure will enable the enterprise to reduce prices. A part of the remaining capital may be applied to innovations.
Secondly, the company should make an effort to conquer more local markets and introduce its services there. That is what to do with the other part of the remaining capital. IBM should use it to attract local outsource specialists. If this measure is successful, local companies will lose qualified employees, and soon they will be kicked out of the market. It is especially possible if IBM reduces its prices according to the plan represented in the previous paragraph. To take this step, the company needs more centralization and decisiveness. These are radical measures that are deeply in the sphere of market competition, not IT innovation and research.
As for the latter two aspects, they also have to be taken into consideration. IBM’s strategy of making risky changes has proved to be successful. However, technologies develop more and more quickly all the time, that is why the enterprise’s general plan should include gradually growing investments in innovation and research. Where to get capital for this? It was described in the previous two paragraphs. Conquering local markets, IBM will be able to spend more capital on developing the quality of its services and inventing new technologies.
Bickel, L., & Kryvinska, N. (2018). IBM case analysis by servitization in IT industry. In L. Barolli, I. Woungang, & O. K. Hussain (Eds.), Advances in intelligent networking and collaborative systems: The 9th international conference on intelligent networking and collaborative systems (INCoS-2017) (pp. 380-388). Cham, Switzerland: Springer.
Britto, C., Ribeiro, L. C., Araújo, L., & da Motta e Albuquerque, E. (2017). Knowledge flows, firms’ competencies, and patent citations: An analysis of the trajectory of IBM. Texto para Discussão, 561, 3-30.
Herger, L., Fonseca, C., Rippon, B., & Bodarky, M. (2017). IBM research cloud evolution & efficiencies. In 2017 IEEE 8th annual ubiquitous computing, electronics and mobile communication conference (UEMCON) (pp. 352-355). New York, NY. Web.
Muzumdar, P. (2013). Business model development through corporate strategy design: IBM SWOT analysis. Web.