IBM 2011 Annual Report Download - page 27

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Management Discussion
International Business Machines Corporation and Subsidiary Companies
IBM Worldwide Organizations
The following worldwide organizations play key roles in IBM’s delivery
of value to its clients:
• Sales and Distribution
• Research, Development and Intellectual Property
• Enterprise Transformation
• Integrated Supply Chain
Sales and Distribution
IBM has a significant global presence, operating in more than
170 countries, with an increasingly broad-based geographic distribution
of revenue. The company’s Sales and Distribution organization
manages a strong global footprint, with dedicated country-based
operating units focused on delivering client value. Within these units,
client relationship professionals work with integrated teams of
consultants, product specialists and delivery fulfillment teams to
improve clients’ business performance. These teams deliver value
by understanding the clients’ businesses and needs, and then bring
together capabilities from across IBM and an extensive network of
Business Partners to develop and implement solutions.
By combining global expertise with local experience, IBM’s
geographic structure enables dedicated management focus for local
clients, speed in addressing new market opportunities and timely
investments in emerging opportunities. The geographic units align
industry-skilled resources to serve clients’ agendas. IBM extends
capabilities to mid-market client segments by leveraging industry
skills with marketing, ibm.com and local Business Partner resources.
Through its growth markets organization, the company continues
to increase its focus on the emerging markets around the world that
have market growth rates greater than the global average—countries
within Southeast Asia, Eastern Europe, the Middle East and Latin
America. The company’s major markets include the G7 countries of
Canada, France, Germany, Italy, Japan, the United States (U.S.) and
the United Kingdom (U.K.) plus Austria, the Bahamas, Belgium, the
Caribbean region, Cyprus, Denmark, Finland, Greece, Iceland, Ireland,
Israel, Malta, the Netherlands, Norway, Portugal, Spain, Sweden and
Switzerland.
The majority of IBM’s revenue, excluding the company’s original
equipment manufacturer (OEM) technology business, occurs in
industries that are broadly grouped into six sectors:
• Financial Services: Banking, Financial Markets, Insurance
• Public: Education, Government, Healthcare, Life Sciences
• Industrial: Aerospace and Defense, Automotive,
Chemical and Petroleum, Electronics
• Distribution: Consumer Products, Retail,
Travel and Trans portation
• Communications: Telecommunications,
Media and Entertain ment, Energy and Utilities
• General Business: Mainly companies with fewer than
1,000 employees
Research, Development and Intellectual Property
IBM’s R&D operations differentiate the company from its competitors.
IBM annually invests approximately $6 billion for R&D, focusing on
high-growth, high-value opportunities.
IBM Research works with clients and IBM business units
on near-term and mid-term innovations and solutions and, in
many cases, qualifies new technologies to be transferred to IBM
development organizations. It also explores the boundaries of science
and technology—from nanotechnology, to systems, to analytics, to
cloud, to IBM Watson, a computer system that applied advanced
analytics to defeat the all-time champions on the television quiz
show, Jeopardy!
In addition to producing world-class systems, software and
technology products, IBM innovations also are a major differentiator
in providing solutions for the company’s clients through its services
businesses. IBM Research has the world’s largest mathematics
department of any public company. This unit is actively involved with
many of the company’s business analytics client engagements.
In 2011, the company once again was awarded more U.S. patents
than any other company, the 19th consecutive year IBM has been
the patent leader. IBM’s 6,180 patents in 2011 were the most U.S.
patents ever awarded to one company in a single year; more than
70 percent of the patents IBM was issued in 2011 were for software
and services.
The company continues to actively seek intellectual property
protection for its innovations, while increasing emphasis on other
initiatives designed to leverage its intellectual property leadership.
The company’s investments in R&D also result in intellectual property
(IP) income of approximately $1 billion annually. Some of IBM’s
technological breakthroughs are used exclusively in IBM products,
while others are licensed and may be used in either/both IBM
products and/or the products of the licensee. While the company’s
various proprietary intellectual property rights are important to its
success, IBM believes its business as a whole is not materially
dependent on any particular patent or license, or any particular
group of patents or licenses. IBM owns or is licensed under a number
of patents, which vary in duration, relating to its products. Licenses
under many of the patents owned by IBM have been and are being
granted to others under reasonable terms and conditions.
Enterprise Transformation
A key element of the company’s strategy has been focused on
becoming the premier globally integrated enterprise. The company
has implemented a consistent set of processes and standards
worldwide to reduce inefficiencies and improve collaboration.
With its processes fully integrated, the company implemented
a new operating model with work shared in global resource
centers of excellence located where it made the most business
sense. Since 2005, global integration has enabled the company to
deliver over $6 billion in productivity and improve service quality,
speed and risk management. The company has shifted resources
toward building client relationships and employees skills, while
positioning the company for new market opportunities. During this
transformation, IBM pioneered this new operating model, changing
from a classic “multinational,” with smaller versions of the parent