IBM 2011 Annual Report Download - page 23

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Management Discussion
International Business Machines Corporation and Subsidiary Companies
Strategy
Despite the volatility of the information technology (IT) industry
over the past decade, IBM has consistently delivered excellent
performance, with a steady track record of sustained earnings per
share growth. The company has shifted its business mix, exiting
certain segments while increasing its presence in higher-value areas
such as services, software and integrated solutions. As part of this
shift, the company has acquired over 120 companies since 2000,
complementing and scaling its portfolio of products and offerings.
IBM’s clear strategy has enabled steady results in core business
areas, while expanding its offerings and addressable markets. The
key tenets of this strategy are:
• Deliver value to enterprise clients through integrated
business and IT innovation;
• Shift the business mix to higher-value areas; and
• Become the premier globally integrated enterprise
These priorities reflect a broad shift in client spending toward
integrated solutions, as companies seek higher levels of business
value from their IT investments. IBM has been able to deliver this
enhanced client value thanks to its industry expertise, understanding
of clients’ businesses and the breadth and depth of the company’s
capabilities.
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 IBM’s vision of a technology-enabled world that
is more instrumented, interconnected, and intelligent than ever before,
enabling people and organizations to tackle significant business
and societal challenges. At the heart of this vision is the opportunity
for meaningful innovation—exploring and extending the boundaries
of businesses, industries and communities. It’s about helping the
company’s clients become better at what they do for their clients.
IBM’s strategy is to accelerate progress towards a “smarter planet”
by equipping its clients with the advanced, integrated capabilities
that they will need to thrive in this exciting new world that is unfolding
before us—capabilities such as business analytics, business process
management, social business and cloud computing.
Over the past year, IBM has steadily deepened its commitment
to understanding and delivering on the promise of a smarter planet
for its line of business and IT clients across a broad range of
industries. An industry-based approach is central to the strategy,
since every industry confronts a distinct set of challenges and
opportunities in today’s constantly transforming world. Whether
“smarter” means helping a hospital group to deliver improved health-
care, a local government to ease traffic congestion, or a retail chain
to execute a successful cross-channel campaign, IBM is aggressively
developing and investing in a portfolio of industry solutions that will
help these clients achieve their goals.
Two recently announced initiatives that are already driving
significant value illustrate IBM’s deep commitment to building a smarter
planet: Smarter Commerce and Smarter Cities. IBM’s Smarter
Commerce model integrates and transforms how companies manage
and adapt their buy, market, sell and service processes, placing the
customer squarely at the center of their business. IBM’s Smarter Cities
initiative enables local governments to make smarter decisions,
anticipate issues and coordinate resources more effectively, and deliver
citizen-centric services that underpin sustainable economic growth.
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 selected industries 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 requirements that exist
in these emerging countries. The company’s efforts in developing
new growth markets within the African continent is a good example
of this focus. Many of these initiatives are leading edge, both in
technologies and business models and are delivering both increased
revenue and margin expansion.
In order to support this growth, IBM is continuing to invest
significantly in these markets to expand capacity, to develop talent
and to deepen its research and development (R&D) capabilities on
the ground. At the same time, IBM continues to leverage talent across
growth markets under its globally integrated enterprise model to the
benefit of both its clients and the company globally.
Business Analytics and Optimization
Business Analytics and Optimization is core to achieving a Smarter
Planet, helping leaders of this new information-centric and insight-
driven world make better and faster business decisions. As the
proliferation of “big data” continues from both structured and
unstructured sources, IBM is helping organizations leverage analytics
in new ways to address market uncertainty, complexity and volatility.
These capabilities allow decision makers to identify patterns and
gain deeper insights in a way that is unimaginable by other means.
These insights give organizations the ability to anticipate and shape
better outcomes so they can grow, retain and satisfy customers.
They can now dynamically plan, forecast and align resources and
manage risk, reduce fraud and ensure compliance. They can also
leverage analytics to increase operational efficiency and agility.
IBM’s approach is to ensure customers have complete end-to-
end solutions across industries and functional focus areas like sales,
finance and risk. These solutions are designed to help organizations:
develop an information and analytics strategy that flows from the
business strategy; establish a strong information foundation; make
analytics skills and capabilities pervasive; and create a culture that
takes action on analytics. IBM continues to invest in its analytics
capabilities to deliver real world solutions that its clients can put to
work today. These ongoing investments in both organic development
and new acquisitions are complemented by IBM’s focus on game-
changing innovations like Watson, which is ushering in a new
generation of probabilistic analytics that can dramatically improve