IBM 2008 Annual Report Download - page 24

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Management Discussion
INTERNATIONAL BUSINESS MACHINES CORPORATION and Subsidiary Companies
Management Discussion ................................................................................................18
ROAD MAP ............................................................................................................ 18
FORWARD-LOOKING AND CAUTIONARY STATEMENTS ...................................... 18
MANAGEMENT DISCUSSION SNAPSHOT ............................................................ 19
DESCRIPTION OF BUSINESS ...............................................................................20
YEAR IN REVIEW ...................................................................................................25
PRIOR YEAR IN REVIEW .......................................................................................39
DISCONTINUED OPERATIONS ..............................................................................44
OTHER INFORMATION ..........................................................................................44
GLOBAL FINANCING .............................................................................................53
Report Of Management ............................................................................................... 58
Report Of Independent Registered Public Accounting Firm ................................. 59
Consolidated Statements ............................................................................................ 60
Notes ............................................................................................................................... 66
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The company’s major operations are comprised of: a Global Tech-
nology Services segment; a Global Business Services segment; a
Software segment; a Systems and Technology segment; and a Global
Finan cing segment.
Global Services is a critical component of the company’s strategy
of providing IT infrastructure and business insight and solutions to
clients. While solutions often include industry-leading IBM software
and hardware, other suppliers’ products are also used if a client solu-
tion requires it. Within Global Services there are two reportable
segments: Global Technology Services and Global Business Services.
Global Technology Services (GTS) primarily provides IT
infra structure services and business process services, delivering busi-
ness value through the company’s global scale, standardization and
automation.
GTS CAPABILITIES
Strategic Outsourcing Services. Comprehensive IT services integrated
with business insight working with clients to reduce costs and improve
productivity through the outsourcing of processes and operations.
Integrated Technology Services. Services offerings that help clients
access, manage and support their technology infrastructures through
a combination of skilled resources, software and IBM’s knowledge of
business processes. The portfolio includes Service Product Lines which
complement hardware from Systems and Technology and software
offerings from the Software business.
Business Transformation Outsourcing. A range of offerings from stan-
dardized processing platforms and Business Process Outsourcing
through transformational offerings that deliver improved business
results to clients through the strategic change and/or operation of the
client’s business processes, applications and infrastructure.
Maintenance. A number of support services from product maintenance
through solution support to maintain and improve the availability of
clients’ IT infrastructure.
Global Business Services (GBS) primarily provides professional
services and application outsourcing services, delivering business
value and innovation to clients through solutions which leverage
industry- and business-process expertise.
GBS CAPABILITIES
Consulting and Systems Integration. Delivery of value to clients through
consulting services for client-relationship management, financial man-
agement, human-capital management, business strategy and change,
and supply-chain management.
Application Management Services. Application development, manage-
ment, maintenance and support services for packaged software, as well
as custom and legacy applications. Value is delivered through the
company’s global resource capabilities, industry knowledge and the
standardization and automation of application development.
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 packaged software vendors or system
integrators. Operating systems are the software engines that run com-
puters. 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) arrange-
ments. 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 soft-
ware include one year of maintenance. The client can also purchase
ongoing maintenance after the first year, which includes product
upgrades and technical support.
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 applications and
is a key product set in deploying an SOA.
Information Management Software . Advanced database, content man-
agement, information integration and business intelligence 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 soft-
ware that enables businesses to communicate, collaborate and increase
productivity.