07 June 2012

Transformation: The ubiquitous, synergistic paradigm that IBM got right

Please note the title is intended with some humor... see last post.

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Within the world of IT services, the rampant explanation for HP's struggles to successfully integrate their Enterprise Services organization (EDS) into the corporate mother ship is that hardware companies just don't understand services. (See eWeek: Why Most of HP's layoffs will be on the Services side.) And yet... IBM did it.

IBM... Grumble. Grumble.

They say imitation is the sincerest form of flattery, in which case IBM's head is likely about to burst. When they launched IBM Global Services in the mid-90s, Big Blue completely redefined itself as a global provider of end-to-end IT solutions integrating hardware, software and services. Lickedy split, they were the global leader - and at consistently fat margins. It was a staggering hit for EDS, the company that invented the IT services industry. When HP bought EDS in 2008, bumping into the coveted Top 10 of the Fortune 500, it was seen as a win-win: more push-through of HP products into EDS' services contracts and more resources for the cash-starved EDS. In 2009, Dell followed suit by buying Perot Systems and then Xerox bought ACS.

There's a great scene in the 1988 comedy Funny Farm where Chevy Chase's character asks this hillbilly for directions and the man replies, "If I wanted to go there, I wouldn't start from here." That line epitomizes IBM's relative ease in transforming from a hardware company to a services company: they began in a very different place than everyone else. They didn't buy an IT outsourcing company and brand it IBM Global Services. They bought PriceWaterhouseCoopers whose consultants arrived with strategic skills and experience, clients, contracts and C-suite relationships. As importantly, the consultants arrived without data centers or infrastructure which minimized the complexity of the M&A and required IBM to design a purpose-built global services organization. Better? IBM had the expertise of PWC consultants to help them do it.

A hardware company can redefine itself, as Dell and Xerox are proving. Maybe the real point here is that SAP or Oracle would be smart to buy Accenture. 

Rumors abound...

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