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IBM Says its Future is in Services, Not Goods
TFGeditor writes "An article at Technology Review quotes IBM exec Paul Horn saying that the company's business model is shifting from goods and products to software and services. From the article: 'Horn's challenge, then, has been to take a $6 billion research organization dedicated to work that advances technology products and get it to do work that benefits service businesses. IBM is thus in the process of answering an important question for all technology companies: can corporations perform useful research in the services arena?'"
Service Unavailable
As products mature, it becomes more and more difficult to diferentiate yourself from your competitors. That translates to lower profit margins. IBM is simply recognizing that. The question becomes, will their services fall into the same trap? Or can they continue to specialize and keep profit margins up.
See my journal for slashdot ID's by year. Mine created in 2005. http://slashdot.org/journal/289875/slashdot-ids-by-year
I got a "Service Unavailable" message. Doesn't bode well for their future.
If you don't want crime to pay, let the government run it.
They do have a valuable point but the reason services will be so big in the future is because right now they haven't truly been explored. Most natural service markets can't exist without a goods market to back them up so in this regard they're worng. There will still be a strong goods market, it just won't be as fast growing as the services market.
I feel that in IT, in most cases, services are the goods.
Who's going to do R&D and develop new products? Seems like everyone is getting out of the development business and going into the patent holding/suing one.
Coder's Stone: The programming language quick ref for iPad
Unless IBM wants to focus on competing with the ever growing chinense and other low cost manufactures they have no choice but to get out of hardware. Hardware is becoming increasingly commoditized and that means it will become a very difficult business to carve out a living in.
Not to mention IBM has some incredible hardware and software people on staff that would be far better employed helping those with problems in a consulting role.
Is this really new information? Those IBM ads for their consulting services have been on for a long time now, and the more recent commercials even tout these services as the new (side of) IBM.
Hasn't IBM been earning more than half its revenues from services for over a decade? And they're just getting around to announcing it now?
More news: Microsoft has announced they're going to be a software company. GM is showing some interest in making cars. Walmart is going to start selling stuff.
Why doesn't Slashdot ever get slashdotted?
With billions invested in chip fabrication, they're not going to be abandoning that business anytime soon. With their name recognition in other hardware sectors, they're not going to abandon those markets anytime soon. Maybe I'm out of the loop, but when someone says "software," is IBM one of the first things you think of? I could imagine EXPANDING into software and services alongside hardware, but then we're back in the 90s selling "solutions".
Quid festinatio swallonis est aetherfuga inonusti?
Africus aut Europaeus?
Of course, if IBM has decided to full-on push their consultants, it might help them to find a few who aren't complete morons. Based on my experience, IBM is well on their way to becoming the new Anderson.
Every year during my review, I just pray the words "slashdot.org" aren't mentioned.
Gotta love the spyware contained in the article.
Avenue, A Inc. Whatever that is.
..only beat IBM to this decision by about 25 years.
-- Jinsaku
Google has been conducting its research extensively in the services area. Google labs contains a plethora of useful services Google's researching, with new ones coming almost every month. A few ones that interested me: Google sets allows users to enter a few items (apple, banana, orange) and Google will find more from that set (pear, kiwi). Google ride finder allows you to find taxis and limousines by tracking their positions in realtime. All of these services are available to the public so Google can get feedback on their "research".
IBM is fast becoming a company that doesn't actually make anything, and this pretty much confirms that. And that's pretty sad, being that this company pretty much invented computing for the the business sector, and brought personal computing to the general public.
They're making lots of cash right now, but one day, perhaps sooner than they think, this approach is going to come back and bite them in the ass. And then there might not be an IBM.
Life is hard, and the world is cruel
Also, if anyone watched the Masters golf tournament they saw at least 10 commercials for IBMs consulting services. After seeing them buy up all of that expensive advertising time the conclusion is simple: IBM believes that services are the future and they are getting a jump on the competiton with advertising dollars, marketing generalizations and dare I say "slashvertising."
I don't keep a lid on my coffee so when I walk around I look busy -me
I recall been told some years back (around 2000 give or take) that for a long time IBM Global Services was the only division that was profitable on a consistent basis. Even back then the writing was on the wall for the PC group (which had not shown *ANY* profit for years before, and up till its sale was still unprofitable.)
http://www.financialsense.com/editorials/reality/2 004/november.html
It seems that they should consider changing their name to IBSS - International Business Software Services
As much as U.S. IT folks hate outsourcing (actually it's offshoring that they dislike), it is a way for Linux to penetrate those mid-sized business that don't have the IT to handle OSS themselves. If a mid-sized company outsources customer care, finance & accounting, HR, etc. , then they don't care about the "source" of the underlying software at the provider as long as the service provider does a good job at a decent price. I would suspect that some outsourcing service providers -- IBM certainly -- leverage Linux for its low-cost per seat and economies once you have the scale to support it. The rapidly growing outsourcing providers also offer a greenfield opportunity for Linux -- if you are starting an outsourcing company from scratch then you have the opportunity to pick whichever OS works best without as much an issue of retraining and entrenched workforce.
Once Linux builds up a competent portfolio of business software (some outsourcing service providers also sell their software), that software will attract non-outsourcing businesses to Linux
Two wrongs don't make a right, but three lefts do.
"IBM is fast becoming a company that doesn't actually make anything, and this pretty much confirms that."
Welcome to Alan Toffler's "Idea Economy". Forseen over twenty years ago. The only problem is that the nature of the "commodity" means that people respect "Knowledge"* and the products of knowledge (IP)*1 even less than they do physical goods.
*See previous "/." stories on universities, and the glorification of not knowing the subject matter.
*1 See stories on copyright and patents, let alone trade secrets (Apple).
One day, America will be a big 'service economy' where we:
a) Produce Nothing.
b) Consume Everything.
c) Print lots and lots of worthless dollar bills.
For IBM slightly higher Short term profits are indeed in services. since much hardware these days is commoditized.
The only reason IBM could get away with just repackaging commondity software and hardware is because they have no competition for innovation. They can just innovate in services and not worry.
But what is IBM going to do when some other company say toshiba decides to sell goods_services and some toshiba engineer invents a holographic terrabyte on a chip memory and they wont sell it to IBM. IBM is giving up its 100 year formula for why people by IBM. IBM means you have an assured path to the best service and hardware. Long term profits are in goods+services.
as the parent poster implied. This sounds like what happened to ATT and HP.
Some drink at the fountain of knowledge. Others just gargle.
The cost of building custom applications needs to drop dramatically. Standardizing how they are built is one step towards this goal. Further research into this can also reduce the cost.
Very competitive bids can be made by a service organization when their cost to produce the service is low, whether that service is network maintenance, custom application design, or what have you.
At least that works on the small scale of our consulting company with a few million in revenue. I should imagine such a thing would scale to a larger company and make them even more competitive.
I wish them luck, but they have a ways to go. This Information Week survey ranked IBM last among the top 12 big outsourcing service providers. The article suggests that IBM's customers are not that happy with the service yet.
With IBMs large resources and historical expertise in service, they may be able to turn it around. We shall see.
Two wrongs don't make a right, but three lefts do.
Why do you claim service markets can't exist without a goods market? More and more, people have all the technology they need to have pretty much every type of content (interactive or not) delivered to their home without the need for physical goods. This means that education, news, entertainment, communication, and most business can be done over the internet.
But honestly, I'm asking, why does there need to be a substantial goods market to back up these services (given that many people already have the technology to do all these things)?
Open-Source may help drive even the biggest software company toward a service model, by putting downward pressure on the market-determined price of software licenses.
A Seattle Times review of Microsoft's Linux lab boss ends with a comment by IDC's Al Gillen: "...open-source software is going to help drive the acquisition cost of software down toward zero," he [Gillen] said, a shift that will require software companies to move "over to a maintenance and support model."
"Pluged in to Microsoft's biggest rival" - Seattle Times (May require no-cost signup to view.)
--- Attorneys Assisting Citizen-Soldiers & Families -
Meanwhile, Maglio began to investigate what systems administrators actually do. He found that they spent between 60 and 90 percent of their time communicating with other systems administrators about systems issues.
Whew! I am glad that they equate reading Slashdot with communicating.
They can expand their R&D and with no real axe to grind they can secure that new and needed standards gets approvel quicker. Their interest is the quality of the standard that they can then offer their clients as a new service.
Take a look here and you will get a good feel for the Future IBM
Help fight continental drift.
An excerpt from A Nation of Salesmen, by Earl Shorris:
I saw that selling, in all its forms, has achieved dominion over the world in our time, not only determining the economic spirit of the nation but deeply affecting its social, political, cultural, and moral life. I saw that America has become the land of the salesman, Homo vendens, who is both dangerous and afflicted.
Under the dominion of Homo vendens, we are no longer free to know the world. The salesman now informs us. In the mix of mind and matter that is perception, the information comes not from our senses encountering reality but from the salesman. Thus we have lost the world.
-- -pjk Perry Kundert perry@kundert.ca http://kundert.2y.net
TRANSLATION: We've fired so many of our development team in order to increase compensation for our highest level execs that we can no longer be innovative so we're going to "market" bullsh*t ideas as "value added services".
Pax Requiem IBM
----- In Your Cubicle No One Can Hear You Scream...
Does anyone remember Control Data Corporation? Used to be, a long time ago, there were two main players in computers: IBM handled business and CDC handled scientific computing, with some gnats flying around, though DEC was more of a dragonfly ;-). The world changed, however, and CDC waned in the 80's. Their spin: "We're going to go into services, not hardware". I think they're a vague memory in the absorption history of another company now (Hmmm. I guess not quite so vague, but I've not heard them mentioned anywhere in ages: CDC Wikipedia entry)
Amusingly, COBOL programming on a CDC Cyber put me through college. When I was about to graduate (81) and doing the interview thing, I'd been put in touch with a head hunter that specialized in finding positions for Cyber programmers. I went to an interview in Dallas, TX, and although it went well, when I came back, I said "no, I want to work with microcomputers, not mainframes." I got the classic "there's no future there" response. I've always wondered what became of her...