IBM 2010 Annual Report Download - page 23

21
Management Discussion
International Business Machines Corporation and Subsidiary Companies
Consistent with this strategy IBM is leveraging its capabilities
to build and expand strong positions in targeted growth areas.
IBM’s growth initiatives include Smarter Planet, Growth Markets,
Business Analytics and Optimization, and Cloud Computing. Each
initiative represents a significant growth opportunity with attractive
profit margins for IBM.
Smarter Planet
Smarter Planet is an overarching strategy that highlights IBM’s
differentiated capabilities and generates broad-based demand
for the company’s products and services. Smarter Planet encap-
sulates IBM’s view of enterprise IT’s next major revolution: the
instrumentation and integration of the world’s processes and
infrastructures—from energy grids and pipelines to supply chains
and traffic systems. The amount of data these systems can generate
can now be captured and analyzed. This infusion of intelligence
enables more efficiency, productivity and responsiveness.
Clients seeking these “smart’’ solutions value IBM’s deep
industry and process expertise, powerful back-end systems and
data analytics, complex systems integration capability and unique
research capacity. IBM has built a series of horizontal solutions
through organic development and strategic acquisitions including
smarter commerce and smarter physical infrastructure. IBM’s
Industry Frameworks provide a flexible software foundation for
developing, acquiring and deploying these smart industry solutions.
Each framework supports multiple solutions, enabling fast, efficient
and tailored capabilities in support of clients’ business needs.
These frameworks represent a proven technique for the company
to engage with its clients, driving sustained growth and high
business value in support of our Smarter Planet strategy.
Growth Markets
The company has benefited from its investments over the past
several years in growth markets. The focus now is on geographic
expansion of IBM’s presence; on specific industry verticals of
the highest impact and opportunity; on countries’ build-out of
infrastructure aligned with their national agendas; and on creating
markets and new business models to serve the different require-
ments that exist in these emerging countries.
In order to support this growth, IBM is continuing to invest sig-
nificantly in these markets to expand capacity and develop talent.
At the same time, IBM is expanding and benefiting from large teams
of talent with global missions of delivery. The company continues
to deepen its research and development (R&D) teams to design
for the unique challenges and rapid growth facing these markets.
Business Analytics and Optimization
Business optimization through the application of analytics across
the business has emerged as another major category of business
value. It succeeds earlier generations of back-office automation,
basic enterprise resource planning and traditional business intel-
ligence. Business analytics allows clients to see patterns in data
they could not see before, understand their exposure to risk, and
predict the outcomes of business decisions with greater certainty.
IBM’s approach is end-to-end, providing cross-enterprise as
well as industry-based analytics solutions. IBM has established
the Business Analytics and Optimization practice, leveraging IBM
consulting capabilities and software products, along with systems
and research assets. IBM’s breadth of expertise uniquely positions
the company for revenue and profit growth.
Cloud Computing
Cloud is a new model for consuming and delivering IT and business
services. It can deliver significant economies of scale, higher qual-
ities of service and a new platform for business model innovation.
The power of the model comes from harnessing vast stores of
under-utilized technology with highly efficient virtualization and
management, consumer-style user interfaces and the ubiquitous
broadband.
IBM has helped thousands of clients adopt aspects of cloud
computing. IBM is helping them build their own cloud-based infra-
structures, provide security and integration services or offering
infrastructure and business services from the IBM Cloud, including
advanced analytics, collaboration, and IT infrastructure including
virtual servers and storage or access to tools for testing software.
IBM brings expert consulting, breakthrough technologies and a
portfolio of cloud services squarely focused on the requirements of
the enterprise. IBM has also implemented the cloud model within
IBM in areas as diverse as sales analytics and research collaboration.
Business Model
The company’s business model is built to support two principal
goals: helping clients succeed in delivering business value by
becoming more innovative, efficient and competitive through the
use of business insight and IT solutions; and providing long-term
value to shareholders. The business model has been developed
over time through strategic investments in capabilities and tech-
nologies that have the best long-term growth and profitability
prospects based on the value they deliver to clients.
The company’s global capabilities include services, software,
systems, fundamental research and related financing. The broad mix
of businesses and capabilities are combined to provide business
insight and solutions for the company’s clients.
The business model is resilient, adapting to the continuously
changing market and economic environment. The company con-
tinues to divest commoditizing businesses and strengthen its
position through strategic organic investments and acquisitions in
higher-value segments like business analytics, smarter planet and
cloud computing. In addition, the company has transformed itself
into a globally integrated enterprise which has improved overall
productivity and is driving investment and expanding participation
in the world’s fastest growing markets. As a result, the company is
a higher performing enterprise today than it was several years ago.
This business model, supported by the company’s long-term
financial model, has enabled the company to deliver consistently
strong earnings, cash flows and returns to shareholders in changing
economic environments.