Businesses set to spend, says IBM survey

commentary A survey of CEOs among IBM's top customers shows a shift from a cost cutting to revenue growth as the primary business objective. That finding isn't much of a surprise, given the global easing of economic pain among corporations.
Written by Dan Farber, Inactive
commentary A survey of CEOs among IBM's top customers shows a shift from a cost cutting to revenue growth as the primary business objective. That finding isn't much of a surprise, given the global easing of economic pain among corporations.

Conducted by IBM Business Consulting Services, the survey measured the responses of 456 CEOs across the globe. The majority of the survey interviews were face-to-face meetings between the CEO and the ranking IBM representative.

While the CEOs cited revenue growth, and certainly profitability, as the first priority, cost containment was a strong second imperative. As one CEO expressed the two priorities, "Companies are seeking managed growth with an eye on costs."

Again, that's not a surprising finding. And, as you might expect, market factors--such as competition, changing markets, new distribution channels and newly found customer empowerment-were cited as the external forces that will have the greatest impact on organisations in the next three years.

Other factors that the survey indicated would impact success in the next few years included retaining good people, the economy, regulatory barriers, globalisation and the impact of new technologies.

Clearly, the last few years have tested the mettle and survival skills of corporations. The best of breed have typically undergone major restructuring, but learned how to operate more efficiently and with more discipline. Those that entered this year less intact will fall further behind competitors, with the CEOs getting replaced unless they can pull a rabbit out of the hat.

Where will growth and profit come from in the next three years, according to the CEOs surveyed? The primary driver cited was new products and services, with improving product and service quality as the leading competitive differentiator. Among the other stimulants for growth were opening new markets and capturing customer preferences and data for rapid decisions.

Most of the study surfaced what could be considered conventional wisdom in regards to the attitudes and priorities of CEOs among IBM's customer base. But one particular finding struck me as emblematic of the underlying problem inhibiting growth-- a lack of leadership.

Sixty percent of the respondents said that the most significant barrier to making changes was limited internal capabilities and leadership resources to manage change related projects. The CEOs don't believe that they have the organisational structure and capabilities to meet their number one goals, said Kris Pederson, Americas leader of IBM's strategy and change practice.

Combine the revenue growth priority with the lack of leadership throughout the ranks, and you have a recipe for disaster.

In the study, IBM quoted a public sector CEO: "Our style has been based on industrial relations, not human relations. We are currently managing people poorly. Our workforce is aging and we are not attracting new blood. Our government business mentality is 10 years behind the private sector."

Another CEO in the survey said, "There are hyper growth requirements and there is a war for talent." Other CEOs noted a shortage of specialised expertise within companies and the need for more education and qualified candidates. In some cases jobs are going offshore because of qualified candidates in countries such as India.

Like sports teams, enterprises are dependent on talent to manage growth and chalk up more wins. If you lose your stars, especially the franchise players or those who can galvanise the team, you are in for a long, disappointing season.

A postal services CEO said, "We require traditional business skills needed in process reengineering and maintaining good relationships with the unions. We have the financial muscle to expend into new markets, develop new products and make acquisitions, but our management skills to execute these are limited."

The CEO's comments sound like a perfect segue to IBM's pitch for on demand computing and business consulting services. Throughout the study, IBM assiduously avoids the "on demand" moniker, but the subtext is that revenue growth is intimately tied to IT, which must provide real-time infrastructure and be responsive to changes such as competitive challenges, cost pressures or customer demand.

IBM hopes to grow its revenue and outsourced business by exposing the data from the survey to current and potential customers. But, if IBM is anything like the majority of customers who participated in the survey, the lack of know how and leadership will doom both IBM and its clients to failure.

However, IBM must be confident that it has the answers and talent within its own organisation and deployed at client engagements to remake organisations lacking those leadership resources in its own image. With billions of dollars in outsourcing and consulting contracts under its belt, Big Blue has a lot riding on its ability to lead and execute and transfer that capability to clients. If the company falters in meeting its various goals for client engagements, it can point to its own lack of leadership and talent throughout the ranks as the primary cause.

For years, people blamed IT or poorly designed products for failing to deliver tangible ROI. Minimally, IBM's survey helps to shift some of the blame where it belongs-a lack of talent and management skills to deliver on the promises of IT to serve a business and drive revenue and profits. Identifying the problem is half the battle, but finding the talent will continue to be a tough assignment.

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