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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?'"
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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.
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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.
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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".
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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.
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".
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."
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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.
And, in other news, the 3M (Minnesota Mining and Manufacturing) Corporation announces that it doesn't really do much mining these days either.
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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.
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.)
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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.
a) Produce Nothing.
If we could only get rid of farm subsidies we would be doing this already.
b) Consume Everything.
Except the services we sell to all the other countries who have no clue how to efficiently produce their goods., build their power plants, feed their ever growing populations, and cure their sick. We currently have the best university system available (with the exception of possibly England - but theirs is not as widely avaliable) and that translates into the best educated country in the world. Which translates into valuable services. And I would much rather live in a country full of doctors and biologists and engineers than a country of assembly line workers and farmers. The aforementioned jobs all translate to a higher quality of life.
c) Print lots and lots of worthless dollar bills.
Is a dollar bill worth anything right now anyway? It is just good faith and the accepted exchangable value.
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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...
Except the services we sell to all the other countries who have no clue how to efficiently produce their goods., build their power plants, feed their ever growing populations, and cure their sick.
/. stories on this.
And once they learn how to do all that stuff, what will they need us for? Or do you think they'll never catch up?
We currently have the best university system available
That depends on government funding for research, funding which is being cut across the board left and right these days. DARPA, NSF, etc, are all cutting funding, especially for pure university-based research which is the most crucial in maintaining America's long-term technological leadership, academic quality, and even tax base that is required for additional funding. Without pure research, technological advancement and the steady stream of neato gadgets we take for granted will dry up.
and that translates into the best educated country in the world.
Sure, that's why American students are always at the top of every published academic ranking and consistently win international contests. I won't bother to link to the recent
Which translates into valuable services.
An economy can't survive on services alone. There is only one way of creating wealth, and that is by taking raw materials and applying work and ingenuity to turn them into something worth more than the sum of their parts. We used to do take wood and iron and turn it into ships and trains; now we take sand, aluminum, and copper and turn it into microchips. Voila, wealth is created. At best services allow you to ween a little more value out of the products you've created, especially if you see custom software (eg IT consulting) as an enabler of hardware, or something that helps you get more value out of your hardware. At worst, services are simply a wealth transfer, with no additional wealth created at all.
Don't buy into the malarky that America can prosper as we have without actually making anything. As funding is diverted from pure research to military expeditions and whatnot we undermine our base of future product innovation and development, while China learns our manufacturing techniques through outsourcing and educates hundreds of thousands of engineers and scientists in our universities, who are capable of bringing their education, research, and innovativeness home and away from the US.
As American CEO's sometimes cannibalize their companies' future for immediate stock price gains and golden parachutes, so our recent presidents, CEO's, and financiers seem to be doing to our entire country.
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