Rise of the Machines

Try telling IBM employees that IT is buoyant and that the epicentre of growth is in services. Having successfully jettisoned its PC division to Lenovo (only after US officials decided that its earlier fears about the Chinese company using IBM’s offices to launch covert attacks on US soil were probably unfounded), IBM is now slashing up to 13,000 jobs across Europe.

The job cuts, designed to appease investors who like nothing more than a job cull to restore their faith in the company after it missed its targets by five per cent, will help make IBM’s service business “less hierarchical and more streamlined”. Bear in mind that this is the same IBM Global Services organisation that has been so successful that IBM (which stands for International Business Machines lest we forget) is now reinventing itself as a services company.

So do the job cuts mean that Global Services is struggling? Even with its competitors desperately trying to catch up, there is no real sign that IBM’s global dominance of IT services is waning. The reason for the job culls and the sale of PC’s is that IBM sees that it is time to change its model completely.

IT services are one of the great intangibles in business today, and trying to put a cost on a service is akin to answering the question about how long a piece of string is with the response ‘as long as it needs to be’.

The global brands such as Nike and Coke worked out long ago you make money by doing the donkey work (actually making or doing things) in cheap overseas locations, dramatically reduce your actual staff numbers and spend all your time marketing your product and honing your image. Although IBM Global Services cannot directly outsource its core business, which is in essence knowledge, there are specialist helpdesk-style centres in places such as India that can deal with the bulk of the low-end client support calls that the self-service offerings fail to deal with. This approach allows companies like IBM Global Services to concentrate is best people on the meaty problems and spend the rest of its time convincing the market that it is the only choice for IT services.

The genius of this model is that because it is able to spend so much time and money on protecting its leading reputation so fiercely, Global Services will be able to charge fabulous fees for its work, by pairing up the ambiguity of IT costs and the perception (real or not) that it is the best company in the business.

This is all made possible because of a legacy in IT to hide behind the jargon and refusing to speak in real business terms. The company that can package IT services in a sensible, tangible and, most importantly, understandable way will win the hearts of the budget holders. There is not an IT department in this country which doesn’t possess a wealth of talent which, if it was visible enough, would probably allow many companies to avoid working with a consultancy on projects. But until IT starts making noise about what it can do, companies such as IBM Global Services and its rivals will continue to win more business.

There is a great opportunity for in-house IT departments to take advantage of the momentum and interest with IT that giants such as IBM are generating. But remember this situation will not last forever, so you need to grab your opportunity to shine. Just remember, even sure fire certainties can lose their lustre. Just ask those working in IBM’s PC division.

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