IBM 2015 Annual Report Download - page 27

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Management Discussion
International Business Machines Corporation and Subsidiary Companies
The business model is dynamic, adapting to the continuously
changing industry and economic environment, including the
company’s transformation into cloud and -as-a-Service delivery
models. The company continues to strengthen its position through
strategic organic investments and acquisitions in higher-value
areas while divesting certain businesses. In addition, the company
is transforming into a more agile enterprise helping to drive pro-
ductivity, which supports investments for participation in markets
with significant long-term opportunity.
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 Hardware and Global Financing.
In late February 2016, the company plans to meet with investors
to discuss changes in the business, which will result in a change in
the company’s reportable segments beginning in the first quarter
of 2016.
Global Services: is a critical component of the company’s strategy
of providing IT infrastructure and business insight and solutions
to clients. These solutions include industry-leading IBM software
and systems, as well as other suppliers’ products if a solution
requires it. Approximately 60percent of external Global Services
segment revenue is annuity based, coming primarily from out-
sourcing and maintenance arrangements. The Global Services
backlog provides a solid revenue base entering each year. Within
Global Services, there are two reportable segments: Global Tech-
nology Services and Global Business Services.
Global Technology Services (GTS) provides IT infrastructure
services, creating business value for clients through integrated
services, incorporating unique intellectual property within its global
delivery model. By leveraging insights and experience drawn
from IBM’s global scale, skills and technology, with applied inno-
vation from IBM Research, clients gain access to leading-edge,
high-quality services with improved productivity, flexibility, cost
and outcomes.
GTS Capabilities
Strategic Outsourcing: delivers comprehensive IT outsourcing
services focused on clients’ enterprise IT infrastructure environ-
ments to enable digital transformation and consistently deliver
improved quality, flexibility, risk management and financial value.
The company integrates long-standing expertise in service man-
agement and technology with the ability to exploit the power of
new technologies from IBM systems and software, such as cloud
computing, analytics, cognitive computing and virtualization,
to deliver high performance, innovation and improved ability to
achieve business objectives.
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. The portfolio is built around a key set of solutions
addressing systems, mobility, resiliency, networking, cloud and
security. This portfolio includes key assets and intellectual prop-
erty and incorporates best practices and proven methodologies
that ensure high quality delivery, security and compliance.
Cloud: delivers a comprehensive set of hybrid cloud services
including assisting clients with building their own private clouds,
building customized dedicated managed clouds, allowing cli-
ents to leverage standardized cloud infrastructure services from
the SoftLayer and Cloud Managed Services offerings; and cre-
ating environments linking their private and public workloads
together. This portfolio of cloud offerings spans across the GTS
business lines.
Technology Support Services (Maintenance 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:
Consulting and Systems Integration, Application Management Ser-
vices and Process 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 strategic imperatives. As cli-
ents transform themselves in response to market trends like big
data, social and mobile computing, GBS helps clients use these
technologies to reinvent relationships with their customers and
realize new standards of efficacy and efficiency in the internal pro-
cesses, data and applications that they use to run their businesses.
In 2015, GBS announced the industry’s first practice dedicated to
cognitive business, Cognitive Business Solutions.
GBS Capabilities
Consulting and Systems Integration: delivers client value with
solutions in Strategy and Transformation, Application Innovation
Services, Enterprise Applications and Smarter Analytics. Consult-
ing is also focused on bringing to market client solutions that drive
smarter commerce, cloud, mobile and social business.
Application Management Services: delivers application manage-
ment, maintenance and support services for packaged software,
as well as custom and legacy applications. Value is delivered
through advanced capabilities in areas such as application test-
ing and modernization, cloud application services, the company’s
highly differentiated globally integrated capability model, industry
knowledge and the standardization and automation of applica-
tion management.