Staying the Course

Last month when IBM announced its strong first-quarter results, company chairman and CEO Lou Gerstner explained why IBM was performing so well when the economy was in the tank.

Last month when IBM announced its strong first-quarter results, company chairman and CEO Lou Gerstner explained why IBM was performing so well when the economy was in the tank. "In the face of weakening economic conditions," he said, "the validity of the strategy we put in place over the last five years was underscored time and time again."

That strategy—IBMs move from a hardware and software firm to a diversified services-led company—has paid off consistently and is one of the major reasons we named IBM Global Services as the No. 1 company in our Smart 100 ranking this year. Not only did IBMs juggernaut services arm rake in more than $33 billion in revenue for 2000, its impressive growth rate also has continued without interruption over the long term.

Today, the companys services are so much in demand that it has compiled an $85 billion backlog of projects. With that kind of work pending, IBM Global Services has the best possible insurance against the slowdown thats adversely impacted so many other companies in the technology sector.

IBM isnt the only major name to top this years ranking. With the collapse of many of the dot-com solutions and services providers, well-established integrators and consultants such as Deloitte, EDS and Accenture reasserted themselves with a vengeance. In contrast, many of the Internet firms that dominated last years list dropped out of the rankings altogether. Only three firms that topped the list for 2000—Sapient, Proxicom and DiamondCluster (formerly Diamond Technology Partners)—are repeated among the top 10. At the same time, more than 50 percent of the companies that were included on last years list didnt make the cut this time around.

As in the past, this years ranking was based on recommendations from our editors and responses to our online survey, and included such criteria as revenue per employee, new business and strategic partnerships, and, of course, financial performance across the board. Despite the absence of many of the dot-coms, our most recent Smart 100 is a diverse mix that includes Internet communications companies such as Qwest; distributors such as Tech Data and Ingram Micro, both of which are newcomers to the list; all but one of the Big Five consultancies; and some stellar smaller solutions providers.

Among the companies appearing for the first time: Deloitte, Siebel Systems, Expanets, Teksystems, Cap Gemini Ernst & Young and Answerthink.

Despite their differences, most of these companies have several important things in common. Like IBM, they didnt bet the ranch entirely on the Internet or target dot-com clients exclusively. Almost all of this years top companies have restructured themselves in the past few years, and in many instances have added new capabilities.

Finally, they have solid business models and strategies in place and have been able to execute them effectively. As IBMs success indicates so vividly, such guidelines are essential, especially when it comes time to secure your seat belts and ride out a rough patch.