IBM 2005 Annual Report Download - page 20
Download and view the complete annual report
Please find page 20 of the 2005 IBM annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.ManagementDiscussion
INTERNATIONALBUSINESSMACHINESCORPORATION ANDSUBSIDIARYCOMPANIES
_19
ONDEMANDINNOVATIONSERVICES(ODIS). IBMResearchscientists
work with BCS consultants to analyze and solve clients’ most
intractablebusinesschallenges.ODISoffersanumberofcross-
industry micropractices with deep expertise including mobile
enablementandinformationmining.
STRATEGICOUTSOURCINGSERVICES(SO). ComprehensiveITserv-
ices integrated with business insight working with clients to
reducecostsandimproveproductivity throughtheoutsourcing
ofprocessesandoperations.
INTEGRATEDTECHNOLOGYSERVICES(ITS). Design,implementation
andmaintenanceofclients’ technologyinfrastructures.
APPLICATION MANAGEMENT SERVICES. Application development,
management,maintenanceandsupportservicesforpackaged
software,aswellascustomandlegacyapplications.
e-BUSINESSHOSTING SERVICES. Solutionsforthemanagement of
clients’ Web-based infrastructure and business applications, as
wellasagrowingportfolioofindustry-specificindependentsoft-
warevendor(ISV)solutionsthataredeliveredasaservice.
BusinessSegments
Organizationally, the company’s major operations comprise a
Global Services segment; a Systems and Technology Group;
a Software segment; a Global Financing segment; and an
EnterpriseInvestmentssegment.
GLOBAL SERVICES is a critical component of the company’s
strategyofprovidinginsightandsolutionstoclients.Whilesolu-
tionsoftenincludeindustry-leadingIBMsoftwareandhardware,
other suppliers’ products are also used if a client solution
requiresit.ContractsforIBMservices—commonlyreferredtoas
“signings”—can range from less than one year to ten years.
Businessesgeneratingshort-termsigningsincludeITS andthe
commercial content of Consulting and Systems Integration
(C&SI).Long-termbusinessesinclude SO,BTO,andthefederal
contentofC&SI.
SYSTEMS AND TECHNOLOGY GROUP providesIBM’sclients
withbusiness solutions requiringadvancedcomputing power
and storage capabilities. Approximately 60 percent of the
Systems and Technology Group’s server and storage sales
transactionsarethroughbusiness partners; approximately 40
percentaredirecttoend-userclients,morethanhalfofwhich
are through the Web at ibm.com. In addition, the group pro-
videsleadingsemiconductortechnologyandproducts,pack-
agingsolutionsandengineeringtechnologyservicestoclients
andforIBM’s own advanced technology needs. While appro-
priately not reported as external revenue, hardware is also
deployedtosupportservicessolutions.
SOFTWARE consistsprimarilyofmiddlewareandoperatingsys-
temssoftware.Middlewaresoftwareenablesclientstointegrate
systems, processes and applications across their enterprises.
Middlewareisdesignedtobetheunderlyingsupportforappli-
cations providedby ISVs,whobuildindustry- orprocess-specific
applicationsaccordingtoopenindustrystandards.Operating
systemsaretheenginesthatruncomputers.Approximately 45
percent of external Software revenue relates to one-time
charge(OTC)arrangements,wherebytheclientpaysoneup-
frontpaymentfora perpetual license.Theremainingannuity-
based revenue consists of both maintenance revenue sold
withOTCarrangements,aswellasrevenuefromsoftwaresold
on a monthly license charge (MLC) arrangement. Typically,
arrangementsforthesaleofOTCsoftwareincludeoneyearof
maintenance. The client can also purchase ongoing mainte-
nance after the first year, which includes product upgrades
andtechnicalsupport.
GLOBAL FINANCING isdescribedonpages 43 through 47.
ENTERPRISE INVESTMENTS developsandprovidesindustry-
specific IT solutions supporting the Hardware, Software and
Global Services segments of the company. Primary product
linesincludeproductlifecyclemanagementsoftwareanddoc-
umentprocessingtechnologies.Productlifecyclemanagement
softwareprimarilyservestheIndustrialsectorandhelpsclients
managethedevelopmentandmanufacturingoftheirproducts.
Document processor products service the Financial Services
sectorandincludeproductsthatenableelectronicbanking.
IBM WorldwideOrganizations
Thefollowingthreecompany-wideorganizationsplaykeyroles
inIBM’sdeliveryofvaluetoitsclients:
• Sales&DistributionOrganizationandrelatedsaleschannels
• Research,DevelopmentandIntellectualProperty
• IntegratedSupplyChain
SALES &DISTRIBUTION ORGANIZATION
With a comprehensive knowledge of IBM’s business and infra-
structure solutions, as well as the products, technologies and
services IBM and its Business Partners offer, the company’s
globalclientteamsgainadeepunderstandingofeachclient’s
organizational, infrastructure and industry-specific needs to
determinethebestapproachforaddressingtheircriticalbusiness
andITchallenges.Theseprofessionalsworkinintegratedteams
withIBMconsultantsandtechnologyrepresentatives,combining
theirdeepskillsandexpertisetodeliverhigh-valuesolutionsthat
addressclients’ painpointsandinnovationalaspirations.
The majority of IBM’s business, excluding the company’s
original equipment manufacturer (OEM) technology business,
occurs in industries that are broadly grouped into six sectors.
Thecompany’sgo-to-marketstrategies andsalesanddistribu-
tionactivitiesareorganized aroundthesesectors:
• FinancialServices:Banking,FinancialMarkets,Insurance
• Public:Education,Government,HealthcareandLifeSciences
• Industrial: Aerospace and Defense, Automotive, Chemical
andPetroleum,Electronics