Business Model of IBM

Introduction

International Business Machines Corporation (IBM) is an american multinational company producing and selling computer hardware, middleware and software, and providing hosting and consulting services in areas ranging from mainframe computers to nanotechnology. The business Model of IBM includes its business plan, revenue model, its competitors, SWOT Analysis and many more.

IBM Russia (IBM Eastern Europe and Asia)

IBM offers a wide range of technology and consulting services; a broad portfolio of middleware for collaboration, predictive analytics, software development, and systems management; and the world’s most advanced servers and supercomputers. Inventions by IBM include the automated tellermachine (ATM), the floppy disk, the hard disk drive, the magnetic stripe card, the relational database, the SQL programming language, the UPC barcode, and dynamic random-access memory (DRAM).

Business Plan

The IBM Company has been providing a lot of services of the clients which make it reliable and dependable at the same time. Ever since its existence, the company has been widely adopted in different countries and has about 175 different branches all over the world.

IBM’s value proposition are-

  • Software to Connect Applications
  • Hardware to deliver specialized business solutions
  • Services to assist companies to deliver IT more efficiently
  • Artificial Intelligence

Some of the other key software of IBM are-

  • WebSphere
  • Rational
  • Information Management
  • Tivoli
  • Mobile
  • Social Workforce

Revenue Model

Business segments of IBM are actually the main players behind the company’s revenue generation. The key sources of through which business model of IBM makes money are-

  • Hardware Sales
  • Hardware installation and Maintenance
  • SaaS or Software as a Service
  • Annual Outsourcing and Maintenance Contracts

Competitors

There are several brands in the market which are competing for the same set of customers. Below are the top 12 competitors of IBM:

1. Accenture

2. HP Hewlett-Packard

3. Oracle

4. Apple

5. Microsoft

6. Salesforce

7. Cognizant

8. Amazon

9. Dell

10. Tata Consultancy Services (TCS)

11. Infosys

12. Wipro Technologies

SWOT Analysis

Strengths

  • Superb Performance in New Markets – IBM has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
  • Strong Free Cash Flow – IBM has strong free cash flows that provide resources in the hand of the company to expand into new projects.
  • Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
  • Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
  • Strong distribution network – Over the years IBM has built a reliable distribution network that can reach majority of its potential market.

Weakness

  • There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
  • Financial planning is not done properly and efficiently –  The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
  • Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
  • Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of IBM
  • Limited success outside core business – Even though IBM is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
  • Not highly successful at integrating firms with different work culture – As mentioned earlier even though IBM is successful at integrating small companies it has its share of failure to merge firms that have different work culture.

Opportunities

  • Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of IBM.
  • New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for IBM to drive home its advantage in new technology and gain market share in the new product category.
  • Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for IBM to capture new customers and increase its market share.
  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as IBM to increase its profitability.
  • New trends in the consumer behavior can open up new market for the IBM . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.

Threats

  • Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
  • No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
  • Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
  • Imitation of the counterfeit and low quality product is also a threat to IBM’s product especially in the emerging markets and low income markets.
  • Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
  • Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.

Conclusion

Being one of the oldest tech companies in the world, IBM for sure comprises a business model that can be quite inspiring for those who want to make their own moves in this field. While IBM still mostly operates in the enterprise space, it managed to innovate in several areas by offering enterprise tools (like IBM Watson and IBM Blockchain) that power up many businesses.