IBM Is No More The Proxy For Services!!

Recently Bob Cringley felt that IBM was on the verge of a disaster – pointing to lack of innovation and claimed it is surviving on customer inertia and clever advertising. A recently released UBS report on IBM says that due to company-specific execution issues, IBM isn't the proxy it used to be for the services space, especially in consulting/systems integration. Key points include:

- Some company-specific services softness in IBM's 2Q services results are reflective in part of co-specific issues (i.e. PwC integration & turnover) rather than industry-wide demand conditions.
- Outsourcing signings down significantly LT signings of $4.6B declined 50% y/y & 12% on a TTM y/y basis (tough y/y comp & notably longer sales cycle).

A computerwire report that I came across captures the point the new bookings are showing a declining trend. The figure(courtesy of computerwire) captures it all:

I do not want to say anything on the above – but in general, come to think of it - substitute IBM with any other known name from consulting & services industry – would it look any different –unlikely barring a few.(I do know of a few really having different models, metrics and approach). The whole service industry and enterprise software industry plays on the customer inertia and lack of an alternative. Whats that disruptive model that would shake up the services industry – clearly offshoring played that role to an extent but the laggards seem to be catching up here/atleast make up an appearance of catching up. Seen from a service industry perspective, next technology breakthrough heralding new opportunity could help them rejig their model – like what BPR/ERP wave did earlier or the dot com era – SOA is still many years down the line. Seen from a customer perspective, how does one lock themselves out of this ? Seen from an investor perspective, how to value service companies where increasingly the differentiation factors seem to be just the scale and historical presence.These are definitely key concerns. Innovation inside consulting and service organization needs a different mindset to foster and manage - clerical approach shall have deleterious effects.