IBM Systems And Tecnology Group Growth Strategies
December 08, 2010
At its recent industry analyst event in Rye Brook, N.Y., IBM's Systems and Technology Group (STG) unveiled its five-year growth strategies for 2011 through 2015. As the guardian of the hardware and software that exploits that hardware to maximum benefit, STG is one of the recognized foundations of IBM, with a wide range of servers (including x86, Unix and mainframe systems) and storage products, as well as the IBM Research labs that support those efforts. Understanding what IBM STG is doing is important to understanding not only what the company is doing now and plans to do in the near future, but also to understanding what IBM thinks are the dynamics that will be driving the IT industry in years to come.
Growth in revenues and profits for a good many private enterprises is important, but growth for a huge IT vendor such as IBM is an imperative. There are a number of reasons for this, but chief among them are investors' demands for appreciation in stock price and dividends over time. Yet the bigger you are, the harder it is to grow. Unless a company takes market share from competitors or makes sizable acquisitions that include additional new customers, growth may be limited to mirroring the overall market (where all vendors may be able to benefit from the rising tide). IBM obviously wants to capture these known benefits, but it also is doing more--much more--to make sure that it will meet its ambitious growth objectives.
IBM's efforts focus on three things: vision, strategic planning and execution strategies. Everything starts with a vision--basically, a desired destination. Vision is important, for, as the old saw states, if you don't know where you are going, any road will get you there. And so enters strategic planning, which lays out the roadmap for IBM's route to the destination. But strategic planning only describes the game as a whole; individual plays have to succeed, and that gets into execution strategies.
A simple example may help to clarify the process: Vision is knowing or deciding that you want to travel between Boston and San Francisco. Planning involves selecting the mode of transportation--say, air over train, bus or car. Execution involves booking a flight on a specific date at the best possible price, then actually making the flight and completing the journey.
Not surprisingly, IBM's vision for STG is company-centric. At the Rye Brook event, IBM spelled out a number of key areas for which it is building and continuing strategic development efforts, including growth markets, business analytics, Smarter Planet and cloud. Each of these provides the company notable commercial opportunities:
- Growth markets: Historically, IT infrastructures have been unevenly distributed around the world with major concentrations in North America, Europe and Japan; continuing IT infrastructure development in the so-called BRIC (Brazil, Russia, India and China) countries, as well as ROW (Rest of World) including Africa, provides potentially huge business opportunities for those IT vendors who play their cards right.
- Business analytics: The traditional IT uses of transaction processing, social collaboration applications (including e-mail), the Web and business process management will continue to grow, but the expanding need for business intelligence and business analytics represents a huge new growth potential. Business analytics has been around in some form or other for decades, but never before has it reached a critical mass where it became a requirement or a major focus for IT vendors. The maturity of business processes, the richness of the information that is now available for use within an enterprise and the availability of powerful sets of analytical tools has reached the point where insights can be derived that improve decision-making processes on a continuous and comprehensive basis (not just a niche or ad hoc basis). The latter is so important a development that business analytics will become more and more critical to the success of any enterprise.
- Smarter Planet: This is a drumbeat that IBM has been playing loudly and clearly for some time. (Notice the media ads on TV, radio, and magazines.) To greatly simplify this notion, digital sensors are being used to capture information from objects, devices and locales not typically associated with computing (such as utility/power meters attached to homes). In turn, this can provide information and intelligence that can lead companies and consumers to make better decisions (such as better use of energy through more frequent, automated meter readings).
- Cloud: OK, this is obviously not unique to IBM (nor are the company's other vision areas, though IBM has a stronger, clearer focus on Smarter Planet than anyone else). However, recognize that "cloud" is a code word that covers a lot of IT sins, including data center transformation activities. Although no one IT vendor will dominate this space, all will play here.
Although the word "strategy" was bandied about any number of times at the STG event, the terms "strategic planning" and "corporate planning" were probably never uttered. Still, the fingerprints of a strategic planning process were evident everywhere. Strategic planning has historically had its ups and downs. Nowadays, it may not be an episodic event at the executive level that results in a paper document that simply sits on a shelf and gathers dust, but rather an ongoing iterative process that leads to a living, breathing approach to how to fulfill a business's vision. And that is what it appears that IBM is doing.