The services game: Will you trust a tech company to solve your business problems?
In the newly launched battle between HP and IBM for your services business--and all the consultants and profit margins that go with it--Big Blue is trying to position itself on higher ground. IBM's argument is that it can solve business problems and transform your company.
In the newly launched battle between HP and IBM for your services business--and all the consultants and profit margins that go with it--Big Blue is trying to position itself on higher ground. IBM's argument is that it can solve business problems and transform your company. As for HP, IBM wants to paint its beefed up rival as just a technology services company running help desks, data centers and the like.
Simply put, IBM wants to be thought of more as the PwC Consulting type of outfit. IBM bought PwC Consulting from PriceWaterhouseCoopers in 2002. The big question here is whether traditional IT companies will be seen as business problem solvers. IBM's Bill Pulleyblank (right), vice president of IBM's Center for Business Process Optimization, acknowledges the perception conundrum. When I asked Pulleyblank if clients thought of IBM as business process gurus he acknowledged that changing perception takes time. "We're trying to get people to think of us that way," says Pulleyblank. "More and more are getting used to thinking about us (as business consultants)."
There's a good reason why Pulleyblank is helping push IBM as a business consultant more than a technology expert: Technology services are becoming a commodity. You have Indian outsourcers and hardware vendors pitching services as a way to sell systems. IBM wants to be in the same league as consultants like Accenture. Is it there yet? Not quite.
Here's a look at the breakdown of IBM's services revenue. For the six months ending June 30, business services revenue was $10 billion, roughly half the size of IBM's technology services.
And for 2008, IBM had business consulting services of $18 billion--again half the size of technology services.
Obviously, IBM sees its secret sauce as combining its research team, business consulting and hardware and software to solve business issues. After repeated conversations with IBM, I've concluded that they want a dashboard to monitor nearly everything in business. Every process, every system and even every worker. That's what the Cognos acquisition was about for Big Blue.
"The real growth in the services business is not around labor based IT. We could either stay in crowded field or enter greenfield space," said Pulleyblank. "We're focused on the business problem not an IT problem. But we draw heavily on our IT capabilities."
Will IBM's secret sauce be enough to have a company consider it over a firm like Accenture or Deloitte?
Thus far, it's hard to argue with IBM's results. As for HP, it appears to be focused on technology services, but it’s not like EDS--CEO Mark Hurd's latest pickup--didn't revamp business processes too. Ultimately, I think you'll see HP digest EDS and then potentially buy another firm like Accenture. Then all the IT giants will be talking about how they solve business process problems more than deliver technology.