IBM 2005 Annual Report Download - page 20
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ManagementDiscussion
INTERNATIONALBUSINESSMACHINESCORPORATION ANDSUBSIDIARYCOMPANIES
_19
ONDEMANDINNOVATIONSERVICES(ODIS). IBMResearchscientists
work with BCS consultants to analyze and solve clients’ most
intractablebusinesschallenges.ODISoffersanumberofcross-
industry micropractices with deep expertise including mobile
enablementandinformationmining.
STRATEGICOUTSOURCINGSERVICES(SO). ComprehensiveITserv-
ices integrated with business insight working with clients to
reducecostsandimproveproductivity throughtheoutsourcing
ofprocessesandoperations.
INTEGRATEDTECHNOLOGYSERVICES(ITS). Design,implementation
andmaintenanceofclients’ technologyinfrastructures.
APPLICATION MANAGEMENT SERVICES. Application development,
management,maintenanceandsupportservicesforpackaged
software,aswellascustomandlegacyapplications.
e-BUSINESSHOSTING SERVICES. Solutionsforthemanagement of
clients’ Web-based infrastructure and business applications, as
wellasagrowingportfolioofindustry-specificindependentsoft-
warevendor(ISV)solutionsthataredeliveredasaservice.
BusinessSegments
Organizationally, the company’s major operations comprise a
Global Services segment; a Systems and Technology Group;
a Software segment; a Global Financing segment; and an
EnterpriseInvestmentssegment.
GLOBAL SERVICES is a critical component of the company’s
strategyofprovidinginsightandsolutionstoclients.Whilesolu-
tionsoftenincludeindustry-leadingIBMsoftwareandhardware,
other suppliers’ products are also used if a client solution
requiresit.ContractsforIBMservices—commonlyreferredtoas
“signings”—can range from less than one year to ten years.
Businessesgeneratingshort-termsigningsincludeITS andthe
commercial content of Consulting and Systems Integration
(C&SI).Long-termbusinessesinclude SO,BTO,andthefederal
contentofC&SI.
SYSTEMS AND TECHNOLOGY GROUP providesIBM’sclients
withbusiness solutions requiringadvancedcomputing power
and storage capabilities. Approximately 60 percent of the
Systems and Technology Group’s server and storage sales
transactionsarethroughbusiness partners; approximately 40
percentaredirecttoend-userclients,morethanhalfofwhich
are through the Web at ibm.com. In addition, the group pro-
videsleadingsemiconductortechnologyandproducts,pack-
agingsolutionsandengineeringtechnologyservicestoclients
andforIBM’s own advanced technology needs. While appro-
priately not reported as external revenue, hardware is also
deployedtosupportservicessolutions.
SOFTWARE consistsprimarilyofmiddlewareandoperatingsys-
temssoftware.Middlewaresoftwareenablesclientstointegrate
systems, processes and applications across their enterprises.
Middlewareisdesignedtobetheunderlyingsupportforappli-
cations providedby ISVs,whobuildindustry- orprocess-specific
applicationsaccordingtoopenindustrystandards.Operating
systemsaretheenginesthatruncomputers.Approximately 45
percent of external Software revenue relates to one-time
charge(OTC)arrangements,wherebytheclientpaysoneup-
frontpaymentfora perpetual license.Theremainingannuity-
based revenue consists of both maintenance revenue sold
withOTCarrangements,aswellasrevenuefromsoftwaresold
on a monthly license charge (MLC) arrangement. Typically,
arrangementsforthesaleofOTCsoftwareincludeoneyearof
maintenance. The client can also purchase ongoing mainte-
nance after the first year, which includes product upgrades
andtechnicalsupport.
GLOBAL FINANCING isdescribedonpages 43 through 47.
ENTERPRISE INVESTMENTS developsandprovidesindustry-
specific IT solutions supporting the Hardware, Software and
Global Services segments of the company. Primary product
linesincludeproductlifecyclemanagementsoftwareanddoc-
umentprocessingtechnologies.Productlifecyclemanagement
softwareprimarilyservestheIndustrialsectorandhelpsclients
managethedevelopmentandmanufacturingoftheirproducts.
Document processor products service the Financial Services
sectorandincludeproductsthatenableelectronicbanking.
IBM WorldwideOrganizations
Thefollowingthreecompany-wideorganizationsplaykeyroles
inIBM’sdeliveryofvaluetoitsclients:
• Sales&DistributionOrganizationandrelatedsaleschannels
• Research,DevelopmentandIntellectualProperty
• IntegratedSupplyChain
SALES &DISTRIBUTION ORGANIZATION
With a comprehensive knowledge of IBM’s business and infra-
structure solutions, as well as the products, technologies and
services IBM and its Business Partners offer, the company’s
globalclientteamsgainadeepunderstandingofeachclient’s
organizational, infrastructure and industry-specific needs to
determinethebestapproachforaddressingtheircriticalbusiness
andITchallenges.Theseprofessionalsworkinintegratedteams
withIBMconsultantsandtechnologyrepresentatives,combining
theirdeepskillsandexpertisetodeliverhigh-valuesolutionsthat
addressclients’ painpointsandinnovationalaspirations.
The majority of IBM’s business, excluding the company’s
original equipment manufacturer (OEM) technology business,
occurs in industries that are broadly grouped into six sectors.
Thecompany’sgo-to-marketstrategies andsalesanddistribu-
tionactivitiesareorganized aroundthesesectors:
• FinancialServices:Banking,FinancialMarkets,Insurance
• Public:Education,Government,HealthcareandLifeSciences
• Industrial: Aerospace and Defense, Automotive, Chemical
andPetroleum,Electronics