IBM 2005 Annual Report Download - page 7

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Healthcare. . . . . . . . . . . . . . . . . . . . . . . 20%
Travel & Transportation . . . . . . . . . . . . . 16%
Consumer Products. . . . . . . . . . . . . . . . 11 %
Small & Medium-sized Business . . . . . . 6%
Emerging Customer Sets
In 2005, excluding PCs, IBM achieved strong growth in such
key sectors as:
Emerging Business
Transformation Opportunities
• Business Performance Transformation Services: an estimated
$500 billion market for transforming operations such as
supply chain management, engineering and design services,
human resource management and customer care.
IBM’s BPTS revenue was $4 billion in 2005, up 28 percent.
• Service-Oriented Architecture (SOA): Based on industry stan-
dards and Web services software, SOA is an important new
way for businesses to share and integrate previously fragmented
data and business processes. IBM is the leading SOA
provider, with nearly 500 certified partners around the world.
Emerging Technology Opportunities
• Technology Collaboration Solutions: This new unit consolidates
many of IBM’s technology strengths and extends them to
clients to accelerate their own product and service R&D.
The Engineering & Technology Services unit grew revenue
39 percent in 2005.
• Advanced Microprocessor Technology: IBM’s revenue from
advanced semiconductors for consumer electronics,
telecommunications, healthcare and other industries grew
by 16 percent in 2005, driven by improved manufacturing
yields for game processors.
6_ Chairman’s Letter
Emerging Countries
IBM continues to extend its reach into high-growth markets around
the world. In 2005, excluding PCs, the company grew in:
IBM is integrating all its capabilities for its clients.
IBM continually identifies and seizes future high-growth opportunities.
Global Integration
IBM is integrating its businesses into a
single global system — increasing flexibility,
creating a more complete view of opera-
tions and identifying new sources of talent
and skills. This system features:
• Global delivery centers: The company
shifted more than 18,000 employees into
these in 2005.
• Globally integrated manufacturing:
Nine plants have been integrated into a
single flexible network capable of sharing
workloads across clients, products
and geographies.
• Globally integrated corporate functions:
These include legal, human resources,
finance, information technology and
real estate site operations.
• Global skills marketplace: IBM’s
Professional Marketplace system lets
IBM consulting partners manage
skills globally. It indexes the skills of
68,000 professionals worldwide.
A Flatter Organization
IBM is pushing decision-making closer
to the client, and lowering the company’s
“center of gravity.”
• Sales support centers: Piloted success-
fully in Europe, these “deal hubs” help
sales teams by coordinating technical
support, pricing, legal and quality
assurance. In 2006 the company will
deploy deal hubs in Asia/Pacific and
North and South America.
• Restructured operations in Europe: IBM
moved most client-facing leaders closer
to their customers in 2005.
• New lead-management process: The
On Target system — which generated
more than $100 million in incremental
revenue as a limited pilot in 2005 —
helps sellers identify and prioritize
potential clients. It will be expanded to
15 countries in 2006.
Greater Organizational
Efficiency
The steps described here have improved
IBM’s cost structure and organizational
efficiency.
• Reduced costs: Areas such as procure-
ment, hardware, IT equipment and
connectivity have contributed to the
overall margin improvement and enabled
greater competitiveness in key markets.
IBM is applying these supply chain
principles to its services business.
• Decreased inventory: Inventory levels
were reduced by more than $250 million
in 2005, adjusted for the sale of the
PC business.
• Speedier procurement: Over the past
decade the time to process a purchase
order has decreased from one month
to a few hours.
Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . 29%
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9%
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59%
Russia . . . . . . . . . . . . . . . . . . . . . . . . . . 29%
Capturing growth opportunities and increasing efficiency