IBM Shuffles Services Pack

IBM Global Services unveiled a reorganization strategy today in a bid to squeeze more revenue from the lucrative services market (see HP to Lay Off 10 Percent).

With Global Services supremo John Joyce moving over to private equity firm Silver Lake Partners, IBM is shuffling its management pack. The division, which is seen as something of a goldmine within the IBM empire, will now be run by two IBM execs -- Ginni Rometty and Mike Daniels.

Rometty, the former managing partner at IBM Consulting Services, becomes vice president of enterprise business services within Global Services. Daniels, the one-time head of sales in the Americas, becomes Global Services vice president of information technology services. A third IBM exec, Bob Moffat, has been appointed vice president of integrated operations, supporting Rometty and Daniels in their new roles.

IBM spokesman Ed Barbini told NDCF that the two new chiefs are responsible for driving specific parts of Global Services. Rometty, for example, will be focused on what Barbini describes as “business value services,” such as consulting and application management. Daniels, however, will be responsible for IT services, which covers outsourcing and hosting.

The reorganization was driven by customer spending patterns, according to the IBM spokesman. “That’s how customers buy now. Some want IT services, but some want business transformation,” says Barbini.He is keen to downplay any suggestion of a schism in how IBM Global Services operates. “It’s not being split,” he says. “It’s an evolution.”

Global Services was one of the areas blamed for IBM’s poor first-quarter performance earlier this year, underlining its importance to the overall performance of the company. But in IBM’s second-quarter results released yesterday, Global Services revenues, including maintenance, increased 6 percent to $12 billion year-on-year (see IBM Reports Q1 Results and IBM Reports Q2).

Nonetheless Nick Mayes, principal analyst for IT services at Datamonitor, believes the company faces a major challenge: It must bolster its presence in emerging outsourcing markets. This entails “building up their headcount in countries like India and China and attracting the best staff out there,” he says.

IBM's second big challenge is to increase its presence in an area known as business process outsourcing (BPO), according to Mayes. With BPO, an IT vendor handles key business functions, such as human resources or even finance.

IBM has already made some moves in this space, thanks to the acquisition of Indian BPO specialist Daksh, and U.S. insurance specialist Liberty Insurance Services (see IBM Acquires Liberty Insurance Services).But Mayes warns that IBM will have its work cut out replicating the success it has enjoyed in traditional IT services. “It’s not necessarily the case that you would hand over your human resources to IBM, because they are known as an IT company,” he says.

Now, IBM must prove itself in the BPO arena, according to the analyst. “It’s about winning deals with big, well known client names and retaining those deals,” Mayes says.

— James Rogers, Site Editor, Next-Gen Data Center Forum