Providing end-to-end solutions to companies is where the action is in the information technology market. according to Mr Michael Daly, director of IBM global services in Ireland. "HP and Compaq are seeing this as the way forward and IBM are a long way down the road," he says.
IBM emerged from last year's downturn in IT spending better than many of its competitors due to the strong performance of its global services group, the world's largest IT services provider and IBM's fastest-growing division.
While sales in the chips, disk drives and other computer components made by IBM's technology group fell, global services has responded to demand from companies cutting costs by outsourcing IT departments.
Ms Carly Fiorina, chief executive of Hewlett-Packard, has identified IT services as a strategic and key element to the restructuring of the company following its merger with Compaq. IBM's global services division is its main competitor and has an 11-year head start, says Mr Daly.
The division integrates IBM's capabilities in services, hardware, software and research. It now accounts for 40 per cent of total revenues and employs 150,000 people worldwide. Close to 800 of IBM's 4,500 employees in Ireland belong to the division.
Global services revenue increased by 5.4 per cent in 2001 and finished the year with a record backlog of services contracts, despite the tough business climate, according to IBM's annual report. Revenues declined 3 per cent in the first quarter of 2002 to $8.2 billion (€8.7 billion), but the group has signed more than $15 billion in services contracts, up 50 per cent on last year and a record for a first quarter.
The group is divided into four areas: business innovation services, integrated technology services, strategic outsourcing and learning services. The end-to-end approach means it delivers everything from the initial consultation and installation of applications in areas including customer relationship and supply chain management through to the maintenance of systems and e-business skills training for staff.
Consultation with clients may involve recommending competitors' components, if that is what is needed to make the business processes work, Mr Daly says.
IBM has more than 20 service level agreements with Irish companies for its strategic outsourcing service, including customers in the financial services sector, public sector organisations, utilities companies and manufacturers.
"There has been a general move to outsourcing that Ireland has been slow to embrace," says Mr Daly. "But with the slowdown in the economy, many companies are more cost-focused, so we would be working with companies to help them improve their cost competitiveness."
Mr Daly has been director of IBM global services in Ireland for five years and managed the strategic outsourcing and integrated technology services divisions before that. He believes the fact that the 800 employees here have access to global services' worldwide network of expertise is critical to its success, as is working with the right partners.
"The key challenges for us are to maintaining our focus on our customers, remaining familiar with what our competitors are bringing to the marketplace and making sure we are different from them by having leading-edge solutions," says Mr Daly. "We also make sure we have the right staff with the right skills."
While IBM prides itself on being a services company, Mr Daly believes the global services brand has some promoting to do.
"Everybody knows about IBM but not everyone has heard of global services," he says. "We have 11 years of experience and 11 years of developing a strong customer base with 150,000 people working for us and nobody can compete with that."
