Leading IT companies
IBM is one of the World’s most successful enterprises that operate in computer industry. The company is a major supplier of information-processing products and systems, software, communications systems, workstations, and related supplies and services in the United States and around the world. Its products are used in a wide variety of industries, including business, government, science, defense, education, medicine, and space exploration. The company was incorporated in 1911 as Computing-Tabulating-Recording Company in a merger of three smaller companies.
After further acquisitions, it absorbed the International Business Machines Corporation in 1924 and assumed that company’s name. Thomas Watson arrived that same year and began to build the floundering company into an industrial giant. IBM soon became the country’s largest manufacturer of time clocks and developed and marketed the first electric typewriter. In 1951 the company entered the computer field. The development of IBM’s technology was largely funded by contracts with the U. S. government’s Atomic Energy Commission; close parallels existed between products made for government use and those introduced by IBM into the public marketplace.
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During the 1980s and early 1990s, IBM was thrown into turmoil by back-to-back revolutions. The PC revolution placed computers directly in the hands of millions of people. Businesses’ purchasing decisions were put in the hands of individuals and departments – not the places where IBM had long-standing customer relationships. Piece-part technologies took precedence over integrated solutions. The focus was on the desktop and personal productivity, not on business applications across the enterprise. As a result IBM started to lose money for the first time ever.
In 1993, IBM’s annual loss hit $8 billion. One insider, now a top executive at another tech company, says that in its darkest hour IBM had to borrow money to make the payroll. With the resignation of CEO John Akers, IBM brought in Lou Gerstner as CEO. Gerstner had been the CEO of RJR Nabisco, and was a newcomer to the information technology field. A single product design, ridged cost cutting and improved customer relations initiated the rebirth of IBM’s brand image as contemporary, innovative and approachable.
Soon, IBM started selling a product that defied convention, created excitement across the computer industry and was a resounding business success: the ThinkPad 700C notebook computer. Suddenly, a company embroiled in financial and brand image problems was being labeled with characteristics such as pizzazz, speed, beauty, hard-nosed practicality and grace. A new corporate direction initiated the rebirth of IBM’s brand image as contemporary, innovative and approachable. How the power of design helped rebuild trust in the IBM brand is a compelling story.
With its e-sourcing program, a part of its global services division, IBM aims to build all IT services into a utility, delivered like electricity and water. In other words, customers would pay for memory, application use, and computing power as they’re used, and only when they’re used. Perhaps the business world was again ready for integrated IT solutions. Perhaps it was Gerstner’s emphasis on keeping an ear to the ground to detect customer needs or his experience steering a large ship. Most likely, it was a combination of all of the above reasons that fueled what has been called the greatest comeback in corporate history.
By 2000, annual profits were more than $8 billion. Now, after catching up with the rest of the pack and re-establishing a prominent position among leading IT companies, IBM believes it can see where enterprise computing services are heading: IT as a pay-per-use service, delivered over the Internet. And it’s racing to be there first. “IBM has taken a hard look at themselves in the mirror and said, We know we’re not nimble, so let’s go partner with some of these best-of-breed solution providers and products [to] become nimble,’” Chamberlin says.
“Whenever they need to provide a measure of flexibility that they cannot do internally, they do it with some of these service providers. I really give them credit. They see the future of services; they know they have to be nimble; and they’ve taken some pretty good steps towards doing that. ” IBM’s list of partners in e-sourcing-related ventures is a United Nations of companies with an interest in pay-as-you-go IT services. Along with the relationships with Ariba and Net Solve, IBM is building datacenters for next-generation telecom Qwest and is helping to manage some Qwest clients. IBM is providing managed services in Equinox datacenters.
Software companies such as Siebel and i2 Technologies are joined on the partner roster by telecoms such as Telecom Italia. AT&T lets IBM operate out of its hosting centers in several major markets as part of a larger partnership. IBM e-sourcing has its tentacles everywhere, even with companies like AT&T and Qwest who are considered potential e-sourcing rivals. IBM has numerous amounts of suppliers for their laptop computers. A major supplier is Intel, the world’s largest manufacturer of microprocessors. The industry standard for computers runs on Intel’s microprocessor family such as the Pentium series microprocessors.
IBM has little choice but to use an Intel microprocessor for their laptops. Intel currently possesses about 85 percent of the market so they have supplier power over IBM. This puts Intel in a very powerful position in this situation. There are very few substitutes for Intel’s microprocessor, so IBM has little choice but to deal with Intel. Intel has the ability to raise prices to any level that satisfies them. This level would not prevail in a highly competitive market for microprocessors (Hill & Jones, 2001). IBM does set some standards for its suppliers however.
Once suppliers enter into a contract with IBM, they must follow specific instructions given to them. These instructions include document requirements (e. g. : packaging list, billing invoices, etc. ), packaging and labeling requirements, shipping instructions, and even country of origin marking (See Appendix A). IBM also has instructions for exports to IBM corporations in the United States (www. ibm. com). Suppliers to IBM are also instructed to use IBM’s global procurement system. With the use of Electronic Data Interchange (EDI), business transactions can easily flow electronically between IBM and suppliers.
Through IBM’s EDI services, “forms exchange” has now evolved. Suppliers can receive electronic purchase orders from IBM procurement and automatically generate an invoice from it. This method of sending invoices electronically utilizing web technology will speed up the invoicing process while reducing the use of paper at the same time. The forms exchange service translates web data into standard EDI format and transfers these messages to and from IBM Information Exchange mailbox. Communication can be made more efficiently and accurately between IBM and its suppliers (www. ibm. com).