IBM 2007 Annual Report Download - page 22

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Application Management Services. Application development, manage-
ment, maintenance and support services for packaged software, as well
as custom and legacy applications. Delivering value through the
company’s global resource capabilities, industry knowledge, and the
standardization and automation of application development.
SYSTEMS AND TECHNOLOGY segment provides IBM’s clients
with business solutions requiring advanced computing power and
storage capabilities. Approximately 55 percent of the Systems and
Technology’s server and storage sales transactions are through the
company’s business partners; approximately 45 percent are direct to
end-user clients, more than 40 percent of which are through the
Internet at ibm.com. In addition, Systems and Technology provides
leading semiconductor technology and products, packaging solutions
and engineering technology services to clients and for IBM’s own
advanced technology needs. While not reported as external revenue,
systems hardware is also deployed to support services solutions.
Systems and Technology Capabilities
Servers. IBM systems, which are typically connected to a network and
provide the required infrastructure for business. These systems use
both IBM and non-IBM operating systems and all IBM servers can also
run Linux, a key open source operating system (System z, System i,
System p, System x and BladeCenter).
Storage. Information infrastructure products and solutions, which
address critical client requirements for information retention and
archiving, availability and virtualization, and security and compli-
ance. The portfolio consists of a broad range of disk and tape storage
systems and software.
Microelectronics. Semiconductor design and manufacturing for use in
IBM systems and for sale to external clients.
Engineering and Technology Services. System and component design
services, Blue Gene “supercomputer systems,” outsourcing of clients’
design teams and technology and manufacturing consulting services.
Retail Store Solutions. Point-of-sale retail systems (network connected
cash registers) as well as solutions which connect them to other store
systems (for example, inventory).
SOFTWARE consists primarily of middleware and operating systems
software. Middleware software enables clients to integrate systems,
processes and applications across a standard software platform. IBM
middleware is designed to open standards which allows the efficient
integration of disparate client applications that may have been built
internally, or provided by package software vendors or system integra-
tors. Operating systems are the software engines that run computers.
In addition, Software includes Product Lifecycle Management
software which primarily serves the Industrial sector. Approximately
two-thirds of external Software segment revenue is annuity-based,
coming from recurring license charges and ongoing subscription and
support from one-time charge (OTC) arrangements. The remaining
one-third of external revenue relates to OTC arrangements, in which
the client pays one up-front payment for a perpetual license. Typically,
arrangements for the sale of OTC software include one year of main-
tenance. The client can also purchase ongoing maintenance after the
first year, which includes product upgrades and technical support.
While not reported as external revenue, software is also deployed to
support services solutions.
Software Capabilities
WebSphere Software. Management of a wide variety of business
processes using open standards to interconnect applications, data and
operating systems. Provides the foundation for Web-enabled appli-
cations and is a key product set in deploying a SOA.
Information Management Software. Advanced database, content man-
agement and information integration software that helps companies
integrate, manage and gain value from their business information.
Tivoli Software. Software for infrastructure management, including
security and storage management that will help organizations better
manage their IT infrastructure to more effectively deliver IT services.
Lotus Software. Collaboration, messaging and social networking
software that enables businesses to communicate, collaborate and
increase productivity.
Rational Software. Software tools that help clients manage their soft-
ware development processes and capabilities.
Operating Systems. Software engines that manage the fundamental
processes that make computers run.
GLOBAL FINANCING is described on pages 50 and 51.
Global Financing Capabilities
Commercial Financing. Short-term inventory and accounts receivable
financing to dealers and remarketers of IT products.
Client Financing. Lease and loan financing to external and internal
clients for terms generally between two and seven years.
Remarketing. The sale and lease of used equipment (primarily sourced
from the conclusion of lease transactions) to new or existing clients.
Management Discussion
International Business Machines Corporation and Subsidiary Companies
Management Discussion ............................ 14
Road Map .........................................................14
Forward-Looking and
Cautionary Statements .....................................15
Management Discussion Snapshot ..................16
Description of Business ............................. 17
Year in Review ..................................................23
Prior Year in Review ........................................37
Discontinued Operations .................................42
Other Information ............................................42
Global Financing ..............................................50
Report of Management ....................................56
Report of Independent Registered
Public Accounting Firm ...................................57
Consolidated Statements ..................................58
Notes .................................................................64