By Stan Gibson  |  Posted 2006-02-21 Print this article Print

If dividing into three units and going after smaller customers are examples of granular thinking, so is an approach IGS execs are calling the Component Business Model.

If IBM can break a customers business into components and address each piece with a repeatable services discipline, the thinking goes, then IBM can lower its overhead by not having to reinvent the wheel for each account—and the company can justify going after smaller accounts such as Coty.

"Think of it as an X-ray of a business—a Component Business Model. We have built them for many different industries. Its a unique view of how a business can be broken into pieces and what the applications and technologies [are] that support those pieces," said Rometty.

IBM is seeking to dovetail its componentized views of different businesses with its expertise in SOAs (service-oriented architectures), she added.

The cost factor

But will such novel approaches be enough in the long run? One analyst insisted IGS will have to bring its costs down. "There are lots of new customers in the past year, but IGS overhead is too high. Their cost structure is too high compared to Indian outsourcers," said Julie Giera, an analyst at Forrester Research, in Cambridge, Mass.

However, IBM seems to understand that and is bent on utilizing its worldwide resources—especially in low-cost countries such as India, where the company has been steadily adding workers.

From 2002 to 2004, IBM increased its employment in India from 6,000 to 23,000, while its head count in the United States has declined from 137,000 to 134,000.

"We are a global company. That means we have local roots, and we take advantage of global resources. My job at IBM is to be the facilitator of the globalization of the company," said Moffatt, who noted IGS improvement in margins and credits the adoption of standard practices for its worldwide offices, not just hiring Indians rather than Americans, for the gain.

Taken together, these incremental measures are keeping IGS healthy, even if they are not delivering the kind of turbocharged revenues that IBM might have wanted when it grabbed hold of PricewaterhouseCoopers Consulting three and a half years ago.

But in the treacherous outsourcing waters in which IGS navigates, where stiff competition, thin margins and risky deals stand ready to wreck the less cautious, it will have to be enough—for now.

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Stan Gibson is Executive Editor of eWEEK. In addition to taking part in Ziff Davis eSeminars and taking charge of special editorial projects, his columns and editorials appear regularly in both the print and online editions of eWEEK. He is chairman of eWEEK's Editorial Board, which received the 1999 Jesse H. Neal Award of the American Business Press. In ten years at eWEEK, Gibson has served eWEEK (formerly PC Week) as Executive Editor/eBiz Strategies, Deputy News Editor, Networking Editor, Assignment Editor and Department Editor. His Webcast program, 'Take Down,' appeared on Zcast.tv. He has appeared on many radio and television programs including TechTV, CNBC, PBS, WBZ-Boston, WEVD New York and New England Cable News. Gibson has appeared as keynoter at many conferences, including CAMP Expo, Society for Information Management, and the Technology Managers Forum. A 19-year veteran covering information technology, he was previously News Editor at Communications Week and was Software Editor and Systems Editor at Computerworld.

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