IBM 2013 Annual Report Download - page 33

32 Management Discussion
International Business Machines Corporation and Subsidiary Companies
This business model, supported by the company’s financial
model, has enabled the company to deliver strong earnings, cash
flows and returns to shareholders over the long term.
Business Segments and Capabilities
The company’s major operations consists of five business seg-
ments: Global Technology Services and Global Business Services,
which the company collectively calls Global Services, Software,
Systems and Technology and Global Financing.
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 systems, other suppliers’ products are also used if a client solu-
tion requires it. Approximately 60 percent of external Global Services
segment revenue is annuity based, coming primarily from outsourc-
ing and maintenance arrangements. The Global Services backlog
provides a solid revenue base entering each year. Within Global
Services, there are two reportable segments: Global Technology
Services and Global Business Services.
Global Technology Services (GTS) primarily provides IT infra-
structure and business process services, creating business value
for clients through unique technology and IP integrated services
within its global delivery model. By leveraging insights and experi-
ence drawn from IBM’s global scale, skills and technology, with
applied innovation from IBM Research, clients gain access to leading-
edge, high-quality services with improved productivity, flexibility,
cost and outcomes.
GTS Capabilities
Strategic Outsourcing Services: delivers comprehensive IT out-
sourcing services dedicated to transforming clients’ existing
infrastructures to consistently deliver improved quality, flexibility, risk
management and financial value. The company integrates long-
standing expertise in service management and technology with the
ability to exploit the power of new technologies from IBM systems
and software, such as cloud computing, analytics and virtualization,
to deliver high performance, innovation and improved ability to
achieve business objectives.
Global Process Services: delivers a range of offerings consisting of
standardized through transformational solutions including process-
ing platforms and business process outsourcing. These services
deliver improved business results to clients through the strategic
change and/or operation of the client’s business processes, applica-
tions and infrastructure.
Integrated Technology Services: delivers a portfolio of project-
based and managed services that enable clients to transform and
optimize their IT environments by driving efficiency, flexibility and
productivity, while reducing costs. The standardized portfolio is built
around key assets and patented software, and incorporates best
practices and proven methodologies that ensure predictive quality
of delivery, security and compliance.
Cloud Services: delivers a comprehensive set of cloud services rang-
ing from assisting clients with building their own private clouds, to
building customized dedicated managed clouds, to allowing clients
to leverage standardized cloud infrastructure services from the Soft-
Layer and SmartCloud Enterprise+ offerings, to creating hybrid
environments linking their private and public workloads together. This
portfolio of cloud offerings spans across the GTS business lines.
Technology Support Services: delivers a complete line of support
services from product maintenance through solution support to
maintain and improve the availability of clients’ IT infrastructures.
Global Business Services (GBS) has the mission to deliver pre-
dictable business outcomes to the company’s clients across two
primary business areas: Consulting and Application Management
Services. These professional services deliver business value and
innovation to clients through solutions which leverage industry and
business process expertise. The role of GBS is to drive initiatives
that integrate IBM content and solutions and drive the progress of
the company’s four primary growth initiatives. As clients transform
themselves in response to market trends like big data, social and
mobile computing, GBS is aligning its expertise and capabilities to
address two interdependent categories of opportunity: Front Office
Digitization, which describes the markets forming around new
models of engagement with all audiences; and the Globally Inte-
grated Enterprise, which describes the mandate to integrate data
and processes in support of the new front-office programs, and
build far more flexible information applications.
GBS Capabilities
Consulting: delivering client value with solutions in Strategy and
Transformation, Application Innovation Services, Enterprise Applica-
tions and Smarter Analytics. Consulting is also focused on bringing
to market client solutions that drive Front Office Digitization in
Smarter Commerce, Cloud, Mobile and Social Business.
Application Management Services: application management, main-
tenance and support services for packaged software, as well as
custom and legacy applications. Value is delivered through advanced
capabilities in areas such as application testing and modernization,
cloud application services, the company’s highly differentiated globally
integrated capability model, industry knowledge and the standardiza-
tion and automation of application management.
Software consists primarily of middleware and operating systems
software. Middleware software enables clients to integrate systems,
processes and applications across a standard software platform to
improve their business results, solve critical problems and gain com-
petitive advantage within their industries. IBM middleware is designed
on open standards, making it easier to integrate disparate business
applications, developed by different methods and implemented at
different times. Operating systems are the software engines that run
computers. Approximately two-thirds of external Software segment
revenue is annuity based, coming from recurring license charges and
ongoing post-contract support. The remaining one-third relates
to one-time charge (OTC) arrangements in which clients pay one,
up-front payment for a perpetual license. Typically, the sale of OTC
software includes one year of post-contract support. Clients can
also purchase ongoing post-contract support after the first year,
which includes unspecified product upgrades and technical support.