I.B.M. ReOrg Efforts Prove to be Helping the Giant to again Compete
Two years ago, I.B.M. was stumbling. Its financial performance in the first quarter of 2005 was well below expectations and the culprit was its big technology services unit, a business under increasing pressure from lower-cost Indian outsourcing companies.
“It wasn’t just the miss, it was that revenues were slowing in services,” Samuel J. Palmisano, I.B.M.’s chief executive, recalled in an interview.
Since then, I.B.M. has made impressive progress. It has increasingly moved up the ladder to offer higher value corporate packages of research, software and services. This is also higher-margin business, where specialized skills matter more than price.
In addition, I.B.M. has hired aggressively in India to narrow the cost advantage of its offshore rivals in traditional technology services like operating data centers for customers and upgrading and maintaining their software.
I.B.M. has been reorganized from a classic multinational company with country-by-country operations, working in isolation, to a more seamless global enterprise with centers of expertise in industries and technical skills, scattered around the world, each a hub in a global network for delivering services.
The changes, according to Mr. Palmisano, amount to “a huge reinvention” of the company.
Its experience offers a textbook case of a company successfully navigating the twin challenges of globalization and rapid technological change, at least for a two-year stretch.
