International Business Machines or IBM is an American multinational technology and consulting corporation known for its hardware, software, and services. Founded in 1911, it has its headquarters in Armonk, New York, United States, and operates in over 171 countries with offices and laboratories distributed worldwide.
IBM’s main products include servers, workstations, storage systems, middleware, software, and related services. The company is also a major research organization and one of the world’s largest employers, with approximately 345,900 employees as of 2020.
In recent decades, IBM has expanded its business to services and consulting. It also acquired companies such as PwC Consulting in 2002 and SPSS in 2009. Moreover, it holds patents for some of the world’s greatest inventions, such as the automated teller machine (ATM) and the hard drive.
Although it enjoys a long history and a vast global presence, IBM does not possess any monopoly status in its markets. In fact, it competes against several other tech giants such as Amazon, Apple Inc., Oracle Corporation, Google, SAP AG, HP, and Microsoft.
See also: Tim Cook Bio
IBM Business Strategy
IBM’s business model entails the selling of computer hardware, software, and IT infrastructure services. It provides technology and services to governments, financial institutions, healthcare, education, retail, and large corporations.
The strategy involves a combination of global expansion, mergers and acquisitions, strategic partnerships, joint ventures, research and development (R&D), customer relationship management (CRM), marketing strategy, and business consulting.
In this context, its products and services are designed to scale to support larger transactions and maximize productivity across different fronts at reduced costs.
IBM invests in research activities by gradually transitioning from hardware to the cloud, cognitive computing systems, and analytics solutions. With these investments, the company envisions itself as an integral part of a new platform that provides high-value business insights to its customers.
Its global strategy is based on three pillars: continued investment in cloud computing, major data analytics initiatives, and success in growing markets.
In the quarter ending 30th June 2021, IBM reported revenues amounting to $18.745 billion, representing a 3.43 percent increase year over year. Its profitability is driven by its competitive pricing strategy, operational efficiency, and strategy to redeploy resources. IBM’s operating margins have consistently remained over 8 percent for the past ten years.
IBM’s SWOT Analysis
Core Strengths
- Trusted innovation and leadership: With over 100 years of experience in the market, IBM has built a first-rate reputation as an employer. This is due to its culture of innovation and research, which drives it to deliver advanced technology solutions to its clients continuously. Moreover, it holds many patents for products and technologies that remain cutting edge even decades after their invention.
- Full-stack capabilities that leverage big data and analytics : Its cognitive systems mainly drive IBM’s offerings. They include Watson Analytics, IBM Global Business Services, and various cloud computing solutions- SoftLayer, Bluemix, Node-RED. These platforms enable it to provide clients with many services to deal with complex AI, machine learning, and data analysis issues.
- Broadly adopted open hybrid cloud platform: Its IBM Cloud services offer scalable and flexible on-demand access to infrastructure resources. The company has invested heavily in R&D to ensure complete compatibility with different types of clients. This allows IBM’s products to integrate into the existing IT environment of its customers easily.
- Robust partner ecosystem: IBM has invested in a wide range of partner channels. This builds a strong ecosystem around its products and services, strengthens its R&D capabilities, extends the value of its technology portfolio, and enhances the ability to deliver innovative solutions to clients rapidly.
Key Weaknesses
- Imitable products and services: IBM’s product line is dominated by several solutions designed to address the pain points of specific customers. But due to their limited scope, these offerings are often imitated and replicated by competitors. A recent example is the cloud computing market. IBM’s value proposition has been significantly undercut by companies like Amazon Web Services and Microsoft Azure, which offer broad-based services at a deeply discounted price.
- Legal liabilities: IBM’s data centers play a key role in the security of most client networks. This has potentially exposed it to major legal liabilities and litigation from its clients. The company is currently facing numerous lawsuits due to potential security breaches against some of its databases.
- Lower demand for mainframes: IBM’s business model has historically been tied to the traditional IT services market. It is still heavily reliant on selling hardware and software, such as mainframes, servers, storage equipment, and operating systems.
Key Opportunities
- Increasing customer data volumes: IBM has been able to leverage its deep understanding and experience in dealing with Big Data, enabling it to help clients solve many potential issues such as faulty reporting and analytics. The one major issue is the lack of a comprehensive strategy to deal with the exponential explosion in data volumes. This makes it difficult for IBM to sell its services to companies from various sectors.
- High cloud adoption rate: There is a general shift towards leveraging cloud computing solutions to run crucial business processes and handle mission-critical information. IBM’s core strengths include an extensive suite of cloud computing products and a large international customer base. The company can use this to tap into the immense potential of the cloud computing market in different regions.
- Increasing need for data security: Over the last few years, there has been an increased focus on ensuring data security. IBM has developed a strong portfolio aimed at safeguarding critical information and preventing data breaches. The company has a sizeable customer base, which can cross-sell its R&D capabilities in this space.
Threats
- Intense price competition: IBM’s key rivals leverage their low-cost advantage to gain market share. The company faces a significant threat from price-focused competitors like Amazon.com and Google, which offer a very aggressive pricing structure to their clients. IBM’s attempts to leverage its extensive client base are undermined by companies that provide technology solutions at much lower costs.
- Currency fluctuations: IBM operates in multiple countries with a large number of business units. The company’s financial performance can be significantly affected by fluctuations in the local currency against the U.S. dollar, impacting its bottom line and cash flows.
IBM Competitor Analysis
IBM faces competition from several companies across the globe. Its major competitors include Accenture, HP, SAP, Oracle, Dell, EMC Corporation, Amazon.com, Microsoft, and Google. IBM’s ability to implement its business strategies will depend on how well it can work with these companies in a dynamic marketplace.
1. Accenture
Accenture is a major IT consulting and services company offering a comprehensive suite of services to clients across several industries. It has an extensive client base that works in both traditional and emerging markets. The company is focused on providing value-added solutions to existing customers, leveraging its expertise and domain knowledge in various sectors.
It competes directly with IBM in the consulting and Global technology service space. Accenture offers consulting and business process outsourcing services, including application management, business consulting, infrastructure services, and software implementation. Also, Accenture technology focuses on Tech Services, Application Services, and Cloud & Managed Services.
Accenture has been strengthening its capabilities to operate in the cloud infrastructure market. The company has a strong international presence, with offices in over 120 countries worldwide. With a market cap of 211.44 billion, Accenture is among the top IT consulting companies. Its current brand value is estimated at $26 billion against IBM’s $16.1 billion.
In 2020, the company recorded revenues amounting to $44.33 billion with a net income of $5.11 billion. It boasts a workforce of 569,000 employees, and its clientele includes a majority of the Fortune 500 companies. One of its main competitive advantage over IBM is increased investment in developing technological solutions and intellectual property.
2. Hewlett and Packard (HP)
HP is one of the leading players in the IT hardware and software space. Its diverse product portfolio includes enterprise servers, storage, networking technology, software, and IT services. In addition, the company has a significant presence in the desktop and printing market.
HP competes with IBM across multiple industry verticals such as servers, storage, mobility solutions, networking technologies, client management solutions, and industry-specific software. The company is one of the largest producers of enterprise data center equipment and products for small and medium-sized businesses.
In reference to an IDC report, HP controlled 15.9 percent of the Servers market share, a close second to Dell Technologies, while IBM controlled 5.3 percent in Q1 2021. With a market cap of $35.305 billion, HP is among the top computer equipment companies globally. In the second quarter of 2021 reports, HP recorded revenues amounting to $15.9 billion, a 27.3% increase Y/Y.
3. Amazon
Amazon is a major online retailer offering various products to consumers. The company has a significant presence in the retail sector and has expanded its business to include web services, cloud computing technology, advertising technologies, and artificial intelligence-based solutions. IBM and Amazon are in direct competition for cloud computing contracts, where clients will need to choose between their IaaS or PaaS solutions.
Amazon’s business spans several verticals, including technology infrastructure, online retailing, digital streaming services, and web services. It is a major provider of e-commerce cloud computing services, competing with IBM and other leading IT services companies.
With a market cap of $1.674 trillion, Amazon is a major retail and cloud computing player. It recorded revenues amounting to $113.080 billion in the quarter ending 30th June 2021, representing an increase of 27.81% Y/Y. It controls 32 percent of the global cloud market share while IBM hangs on to a 5 percent share as per records from the first quarter of 2021.
4. Oracle
Oracle is a major player in the enterprise software arena. Founded in 1977, the company provides cloud-based and on premise business software, including ERP applications, supply chain management solutions, and business intelligence tools. The company provides enterprise resource planning (ERP) software to clients across various industry verticals. In addition, Oracle offers IT services through its global delivery model with over 138,000 employees worldwide.
Oracle competes with IBM in the cloud computing space, as well as the Big Data market. Oracle is a major player in cloud solutions and offers its software and services in both private and public cloud models to compete with IBM’s on premise business model. As of the second quarter of 2021, Oracle had a market cap of $247.427 billion and recorded a revenue of $40.5 billion in the fiscal year 2021.
It controls two percent of the global cloud market share compared to IBM’s 5 percent market share. In 2019, Oracle controlled 2.6 percent of the software industry market share while IBM followed closely behind with 2.5 percent. Its main competitive advantage over IBM is its diverse product portfolio, scalable cloud services, and lower costs.
5. Microsoft
Founded in 1975, Microsoft is the leading IT Company today. It offers software products and technology solutions, including operating systems, client-server applications, business and consumer software, server and online apps, productivity suite, computer peripherals devices, and PC accessories.
Microsoft is one of IBM’s major competitors in the cloud and software market. The company is a major player in the global enterprise software industry and has maintained its position by constantly innovating to meet changing client needs across various industries. IBM and Microsoft both offer a wide range of software products. Still, Microsoft’s main competitive advantage over IBM is its strong focus on Innovation through research such as quantum computing and artificial intelligence technology, which is expected to increase over the next decade.
Microsoft has a market cap of $2.275 trillion and recorded revenues amounting to $46.2 billion in the quarter ending 30th June 2021, representing an increase of 21% Y/Y. Microsoft controls 20 percent of the global cloud infrastructure market share compared to IBM’s 5 percent.
How IBM Stands Out Against Its Competitors
IBM’s transformation from a product- and technology-driven company to an industry-based “insights” organization has enabled it to provide enhanced business value.
IBM’s transformation is manifested in the firm emphasizing further R&D, developing close customer relationships, growing its analytics business, gaining market leadership positions across many of its segments while ensuring that clients gain access to cutting-edge products.
In addition to its strong focus on R&D and client relationships, IBM has adopted an open innovation model by collaborating heavily with ecosystem partners.
Adopting RedHat’s open-source approach to Linux operating systems and offering it on the IBM hybrid cloud platform is another area where IBM stands out against its competitors. This approach enables IBM’s clients to reduce costs by providing a more flexible computing environment while maximizing their existing infrastructure investments.
From its 2020 strategic update, IBM aims to establish the number one hybrid cloud platform and AI Company globally. It seeks to achieve this by focusing heavily on R&D, strengthening its collaboration with ecosystem partners (NewCo) and brand recognition as an enterprise-level technology company.
IBM Competitor Analysis (FAQs)
Question: Are Adobe and IBM Competitors?
Answer: Adobe and IBM are competing companies in the technology industry because they both offer software products. Adobe focuses on developing graphics, web, and publishing software while IBM develops a wide range of enterprise software products.
Question: What is IBM’s biggest competitor?
Answer: IBM’s main competitors include Microsoft, Amazon Web Services (AWS), Google Cloud Platform (GCP), Oracle, and Salesforce.com. IBM’s major competitors in the cloud market are AWS, GCP, and Microsoft, while its main competitors in the software industry are Oracle, SAP, and Microsoft.
Question: Is IBM a competitor of Accenture?
Answer: Accenture is IBM’s closest competitor as they both provide consulting and technology services. They also serve many of the same clients, although Accenture may be a bigger direct competitor for IBM in certain markets
Conclusion
IBM stands out against its competitors by focusing on innovation through research, developing close customer relationships, and ensuring clients gain access to cutting-edge products. It has a particularly strong focus on R&D and client relationships. The company has also adopted an open innovation model by collaborating heavily with ecosystem partners to enable clients to reduce costs and maximize their existing infrastructure investments.
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