Thursday, August 17, 2006

Tech: Just what does IBM do?

It might surprise you to know that IBM is the largest I.T. company in the world - by revenue. Global sales in 2005: IBM: US$91 billion; Microsoft: about $40 billion.

Of course, it used to be the hardware giant: in the 1960s and 70s, IBM simply defined the mainframe computers that once formed the backbone of large enterprises. Then the mainframe market was slowly crippled over the 1980s and 90s by the rise of micro computers: they were effectively a victim of the success of... IBM-format PCs. And the Dells of this world have demonstrated that the PC sector is a dangerously low-margin market.

Over time, IBM turned to technical/business services and software. Some of that software is its own technology, like DB2 (the new release is discussed here: it includes native XML support and autonomic memory management).

But IBM has also been buying up software companies left right and centre, specifically to give it a full vertical business software offering.  In effect, it is seeking to lock in large enterprises by providing a full range of software/services across business needs.  This is a common trend in the larger software companies which is why, for example, Microsoft and Oracle have equally been on the takeover warpath for several years.

Like Apple, IBM deserves credit for successfully re-inventing themselves more than once. Whereas they once exploited their hegemonic dominance in the mainframe computer market to extract monopolistic profits (hence the epithet Incapacitating Business for Megabucks), they now operate much more competitively across a range of markets, leveraging off their brand name rather than their monolithic presence - something Microsoft is taking note of, as its own dominant position is being eroded by Linux, Open Office, and other open source offerings.

2009 update: Q2 2009 revenue reports at $23.6 billion - that's just the one quarter.  This is made up of:
  • 57% services - made up of technical services (39%) and business services (18%)
  • 22% software
  • 17% hardware
The remainder is revenue from financing businesses to buy their upscale hardware.  More complete press reports on IBM's second quarter financial figures can be found here and here.

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