Globalization of economies has triggered widespread changes in the way businesses and trade is carried on today. Advancing technology and rapid innovation in the field of information exchange has compelled the organizations to redefine and redesign their business strategy in quest for increased cost advantage and efficient management of work processes. This shift in managerial strategy has impacted all industry sectors and business ventures irrespective of their size and area of operation. The paper discusses the changes that have impacted the information systems industry sector with the help of an analysis of IBM, a global IT company. The information technology related services being a vast area the discussion concentrates on outsourcing industry focusing on business strategies and human resource practices adopted by IBM Global Services, specializing in business consulting and outsourcing operations.
The paper highlights the various strategies that the company has incorporated in the past few years in response to operating environment triggers to retain its market share and position as a global market leader. Outsourcing may be the buzzword today but markets are known to change and evolve over time. The businesses need to anticipate these changes and enforce appropriate strategies to meet the unforeseen future and it is here that they can meet with success. Tomorrow’s market may not be conducive to outsourcing operations and under such circumstances companies like IBM Global Services need to draw strategies that can steer them through such changes. The discussion also aims to analyze the company goals and strategies and how it has been successful in meeting the rapidly changing business environment.
Information Systems – an industry overview
Information technology has penetrated all types of business ventures and industry sectors rapidly impacting the global businesses and trade scenario. The fact that individuals can be connected across remote geographical locations through a wireless modem and computer has revolutionized the way businesses and entrepreneurs are re-engineering their business processes to accommodate the benefits of advanced technology and extended reach of this new medium. Conventional brick and mortar stores are rapidly making way for online stores and web-malls catering to all kinds of products and services available at the fingertip of the potential consumer. E-commerce has provided an innovative platform for finalizing business transactions and deals with customers sitting across the globe. This has added a new dimension to the shopping experience with the use of new technologies and upgraded business models.
Of late, businesses across the globe are shifting focus to a new and emerging trend that is an offspring of the globalization of economies and liberalization of markets. Outsourcing of work processes to developing and rising economies is rapidly gaining momentum among companies. Business processes are being re-engineered to make use of technological advancements towards greater work efficiency and increased returns. The primary benefits of outsourcing are visible in reduced cost of operations, increased focus on smaller units of the work process, increased productivity, and improved management of people and resources. “The digital revolution and the dramatic fall in international telecommunications cost have created unparalleled opportunities for businesses to take advantage of high-skilled, low wage workers in emerging countries” (Farrell, 2005).
IBM has proven expertise in the field of development and application of technology. They have utilized this expertise and have extended their operations into outsourcing activities and the management feels that “outsourcing isn’t how much money such arrangements save, but what kind of value they add” (Walker, 2006). Outsourcing is more about enhancing business performance and process innovation than just cost. IBM offers outsourcing services in areas of information technology outsourcing services, business process management services, networking services, application management services, hosting services, network station management services, and customer care center services.
These ranges of outsourcing services are delivered under the company flagship of IBM Global Services. The IBM management claims that outsourcing and providing e-business solution are integrated to provide the customers with an opportunity to transform the core business processes across their global enterprises. The basic advantages that have worked in the favor of IBM Global Services is its global corporate entity, huge infrastructure facility, and an extensive base of talented employees.
IBM Global Services – An introduction to the organization
The IBM or the International Business Machines brand was conceptualized in the year 1914 when Thomas J. Watson Sr. stewarded the Computing-Tabulating-Recording Company towards a global operations providing large-scale, custom built tabulating solutions for businesses. Over years the company evolved as leading information technology innovator applying its expertise across all levels of industry and businesses. With the turn of the 21st century the company joined the e-business revolution enabling millions of business enterprises across the world to connect and collaborate on business solutions and processes.
IBM Global Services started operations in the year 2002 extending into the outsourcing industry that has gained considerable prominence over the past few years. IBM Global Services provides clients with business expertise and solutions in serving clients, solving complex and leading edge business problems, and creating innovative solutions. It offers its customers faster implementation solutions, flexibility in support services through adequate manpower skills, and proven leadership in technology.
The changing business environment and advancing technology has triggered the need for change management and strategic planning to help the business units meet the potential challenges in the work front. IBM has displayed great flexibility and dynamism in its approach towards meeting challenges and evolving as a leader. Lawrence Owen, the Vice President of IBM claims “companies need to anticipate change and develop more systematic processes so they can tackle it quickly and effectively to stay ahead of competition.”
Outsourcing of services has become a widely popular practice in view of its effective resource utilization and cost advantages. IBM Global Services report claims “companies around the globe have strategically transformed their business by outsourcing entire IT operations or business processes, such as human resources, logistics, customer relationship management, finance etc. These organizations are discovering that outsourcing providers have dedicated skills and expertise to perform these functions more effectively and at a lower cost than in-house resources.”
Company Mission Statement
IBM’s mission statement reflects its purpose and objectives that forms an integral part of its decision-making and strategic planning process.
“At IBM, we strive to lead in the invention, development and manufacture of industry’s most advanced technologies, including computer systems, software, storage systems and microelectronics. We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide.” (ibm.com)
Company Vision Statement
The vision statement of IBM Global Services represents the core ideals of the company that provides direction to the management and a purpose that is shared by all members of the organization.
“Bringing together business insight, best practices and innovation to tackle your most difficult issues.” (ibm.com)
The significance of the company vision statement lies in its role in providing the employees with a strong sense of belief in the company they work for and the ideals it represents. It is imperative that employees identify with the company goals and objectives and effective leadership is displayed in communicating and creating a strong belief in the company objectives among the workforce. In order to induce a strong belief in the company goals, the leaders need to believe in these objectives foremost. The management and leaders within the organization face the crucial task of building a shared vision. An effective leader is successful in articulating these goals and objectives in clear practical terms that the employees can easily relate to.
Organizational Culture and Effective Human Resource Practices
Organizational culture is a term that encompasses the work environment at large. The organizational belief and attitude that is evident in the way things are done, the predominant values, and the pattern of employee behavior reflects its culture. The leaders within the organization play a strong role in building the organizational culture. The type of organization depends on the type of leadership quality that it represents. An organization is shaped by these attributes that lead employees to project higher level of motivation at work, enhanced performance, increased productivity, and lower rates of attrition.
An organization needs to understand that the goals and objectives set need to be tangible and challenging enough for individuals to buy it. The leaders play a vital role in challenging and motivating the team members to gain their commitment to the cause. The broad company goals need to be broken down to short-term objectives that are achievable and yet challenging to inspire the workforce. The leaders should elicit response from the team members on the strategies that need to be adopted to achieve these goals. Subsequently once the goals are set, the leaders need to define and identify the parameters on which the objectives will be assessed and the time frame in which it needs to be completed. Involving the team members in such strategic planning not only creates a high level of enthusiasm but also increases the motivational level among the workforce.
IBM Global Services has adopted these leadership principles to achieve a well-balanced work environment that instigates employees to deliver their best. Additionally, in tunes of changing working relationships the company has implemented a flatter organizational structure replacing the traditional hierarchical levels. This form of organizational structure promotes leadership within the organization and fosters an environment of growth and respect for each other’s work and contribution to the company goals. The departments within the organization are divided into separate business processes handling specific areas of work. Specialization in these business processes is a must. This has given the company an edge in the quality of work delivered and increased customer satisfaction levels.
Training and Development
Another area of change within IBM Global Services that has greatly impacted its organizational culture is the incorporation of in-house training and development workshops for their employees. In today’s rapidly changing business scenario it is essential for an organization to set the right direction and adapt to changes as and when required. This is possible only when the organization implements training and development programs on a regular basis for its employees. The Information Technology sector is more prone to changes and upgrades than any other industry. Employees trained in one specific development tool rapidly finds his skill becoming obsolete with new and advanced versions coming up in the market. In order to retain his usefulness the company has to take interests in training and upgrading his skills. An organization can prove efficient only when its employees respond quickly to anticipated changes instead of adopting defensive strategies. It is essential that an organization projects itself as a learning organization “where people continually expand their capacity to create the results they truly desire, where new and expensive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together” (Senge, 1990).
The IBM Global Service Centers have provided discussion rooms and learning centers at workplace that facilitates employee learning with in-house trainers and an active training department that provides the necessary resources to the trainers and trainee in making a specific training workshop a successful experience.
Besides regular training workshops peer coaching has also been a part of the training and development plan at IBM Global Services. Peer coaching is “a confidential process through which two or more professional colleagues work together to review current practices, expand, refine, and build new skills, share ideas; teach one another, conduct classroom research; solve problems in the workplace” (Slater and Simmons, 2001).
One of the advantages of peer coaching is the teamwork that it fosters within the group and the employees understand that they are good but can always do better. They also learn to trust their colleagues and are willing to help each other.
Personal Development Plans
Another program initiated within the IBM Global Services is the personal development plans and appraisal systems that helps in addressing the training and developmental needs of each individual. The line manager helps the team members to assess their skills, competencies, and weaknesses. The individuals review their core areas of development and strengths that can be honed through adequate training and development workshops. The line managers help the individuals to identify their potential and scope of growth within the organization depending on which they are assigned to relevant training programs. The organization facilitates the employee to attend in-house training workshops on personal development e.g., communication skills improvement, leadership skills, team work and time management.
Performance Appraisal and Constructive Feedback
Performance appraisal is yet another step in harnessing human resources skills that has been incorporated by IBM Global Services. Appraisals can prove to be effective yardsticks for performance management. It not only improves the communication process between the employees and their supervisors but assists in defining specific job objectives, relating personal objectives to the company goals, identifying parameters of performance management, defining how a particular job could have been done better, improving employee performance and work relationships, and most importantly identifying the barriers to better performance, and means to dissolve these barriers.
The major goal behind these appraisals is enhancing performance and productivity. Performance appraisals should not be considered as a platform for unpleasant confrontations, fruitless paper work, and ground for disciplinary process. A healthy appraisal system is one in which both the parties look forward to a session that includes performance planning, problem identification, problem solving, and observation of facts. These sessions should incorporate constructive feedback to be more effective. The focus of this kind of feedback should be on the behavior and performance of the individual rather than on personality. Moreover, constructive feedback focuses more on the positive than the negative aspect of employee performance. A crucial element followed in this kind of feedback mechanism is the policy “praise in public and reprimand in private.” This is very effective in controlling rebellious attitude and promoting good code of conduct among the employees.
IBM Global Services, like most business organizations, realize the importance of keeping their employees happy with their work environment and company policies. The company realizes that in order to motivate others the leaders need to keep their own motivation level high and this is the most challenging aspect of leadership. A positive mental attitude that builds personal confidence and better self-esteem is necessary for self-motivation. IBM Global Services has implemented rewards and recognition system to promote good performance or code of conduct and exemplary achievements. This has greatly helped in boosting employee morale and motivating individuals within the organization to improve their performance.
These are some of the core human resource practices adopted by the IBM Global Services to ensure a healthy work culture and allow free flow of communication down the lines, ample scope of learning, and positive approach to work.
Business Strategy Management Policies
Managerial strategies are essential to running a successful business venture especially in today’s chaotic market and business scenario. Strategic planning involves competitive moves and approaches to increase performance and productivity within an organisation. Effective strategies focus on present chain of events and conditions that includes troubleshooting options and alternatives in case of unforeseen change in events.
Organizations are sometimes forced to change their strategies in view of rapid changes in the market and business environment. The key to success in businesses lies in adapting to changing trends and consumer expectations. Business outfits display leadership when they are able to gauge the consumer expectations and anticipate future market trends.
IBM Global Services has proved itself to be a market leader when it comes to meeting changing market and consumer demands. The consumers in the current market scenario demand more personalized services in lieu of the money spent. On time delivery, adequate support system, prompt feedback mechanism and after sales service are some of the growing demands of the consumers today. IBM has made impressive changes in the way it is meeting these demands with the help of round the clock assistance to its consumers, regional market adaptation of products and services to cater to global clients, and online support tools that enable prompt assistance and query handling. These are some of the strategic tools adopted by IBM to create a market niche for themselves in all corners of the globe.
IBM Global Services has opened customer care service centers and online assistance services that operate 24 hours and 7 days a week to promptly cater to the customer complaints and assistance. The company also has taken efforts to mould their services according to local culture and practices in order to project a more customer friendly approach. Being a global corporate entity the company needs to study the local markets in which they plan to operate to customize their services and products according to changing demographics. These efforts have certainly paid off in the increasing market share of IBM across the globe. The figure below displays the diverse business segments that IBM have ventured into in the past few years as part of its strategy to adapt to changing market conditions.
Figure representing diverse business segments of IBM (Source: ibm.com)
IBM has displayed great versatility in its approach to expanding operations and diversifying into new avenues. Recently it introduced e-business hosting services as part of the IBM Global Services product range. The company provides e-business solutions for businesses of all sizes that include provision of adequate skills or manpower to launch establish and run the operations on behalf of the client. The company endeavors to deliver the “reliability, availability, flexibility, and expertise the businesses require to grow and expand using latest technology without a major investment” (ibm.com).
Brand management has played a significant role in luring customers and increasing market share for IBM. Customers prefer to buy IBM products and services since they are well aware of the brand reputation and quality of service and product know-how that it offers. Being in the market for more than a century IBM has led the way to become a well-known global brand that spells quality and reliability to its customers.
However, strategies alone do not define success for any organization since most of the managerial strategies are same. It is the organization culture and values that play a prominent role in implementing and managing changes. Louis V. Grestner Jr., the former CEO of IBM states in the year 2002, “In our case we were able to define a strategic path that made sense. A united culture gave IBM’s strategy the speed and effectiveness that was missing before. The Internet was certainly a galvanizing force, too. The company has spent $800 million per year for the last nine years on process transformation, and it is now transforming the process systems once again to make them all network-enabled.”
IBM has gradually evolved over the years by responding to changing market needs and at times anticipated market trends. Being a pioneer in advancing technology it has successfully set the ball rolling to meet global challenges. With a lot of pros working in it’s the favor the organization is all set to meet new challenges and future market demands. A SWOT analysis of IBM Global Services highlights the current position of the company in existing industry climate. There are number of analytical tools developed to assist the management in the process of formulating effective strategies while implementing changes. SWOT analysis is a powerful strategic management tool that is used to analyze and assess the strengths, weaknesses, opportunities, and threats faced by the company. It serves to identify the internal and external factors that are conducive to the business unit. The data and information assimilated using this tool can provide a base for evaluating market opportunities and devise appropriate strategies to mitigate risks and threats.
Global market leadership
Strong brand image
Reputation for excellent customer service
Extensive resources and infrastructure backing
Susceptibility to loss of image
Adherence to high quality standards
Increasing cost of operations
Probability of decreasing standards of customer service
Advancing technology opening new areas of operations
Increasing market demand in developing and emerging economies
New service providers in the market
Data protection and issues concerning confidential consumer data
Having completed the SWOT analysis the company management needs to devise strategies to build on its strengths, overcome the weaknesses and threats and exploit the opportunities. The above SWOT analysis reveals that IBM Global Services is in a comfortable position in the industry owing to its strong brand image and global presence. However, in the face of intense market competition it is essential that the management retain its global market share with the use of extensive marketing promotion and innovative strategies. Being a global market leader continuous process of innovation and development strategies will help in retaining its position in the long run.
The ability to manage changes within the organization is essential for successful implementation of business expansion strategies. Effects of globalization, advances in technology, and mushrooming multinational companies directly impact the business environment. The IBM study on Making Change Work observes that effective leadership, employee involvement, open and timely communication, corporate culture that motivates and promotes change, effective training programs, efficient organization structure, and performance incentives are some of the critical factors that assist in successful change management. The emergence and growth of the outsourcing industry provides an insight into rapid changes taking place in business orientation and strategy implementation across all fields and sectors. IBM Global Services has emerged as a crucial player in outsourcing services and the success is attributed to its emphasis on the people management and relevance to the organization culture. The company is committed to develop and train its employees to meet any future challenges.
Elizabeth Sparrow, a consultant feels that successful outsourcing needs the organization to specify their goals and objectives at the very onset to maintain clarity of direction. The decision to outsource is a critical decision for most businesses and there might be cases where offshoring or outsourcing may not be a feasible alternative. The higher cost of operations might be a result of inefficient operations and poor planning and management of resources. Studies on these cases have established that it might be more economical to analyze and examine the current business processes before deciding to offshore. More and more companies are following this dictum and this might result in shifting market practices from outsourcing to in sourcing. In such a scenario, companies like IBM Global Services will need to re-think their business strategy and re-define their service scope to retain their profitability and revenue-earning capacity.
IBM has witnessed a lot of adverse market conditions over the last few years and this may just be one of them to tide over. The ability to innovate and develop new business strategies has created a market niche for this company and this is visible in increasing market share and its position as a market leader. The turbulence that it has faced since its inception in the year 1914 has weathered the company to face new challenges and emerge stronger in the face of all adversity.
Sparrow, Elizabeth. 2004. Successful IT Outsourcing: From choosing a provider to managing the project (pg 17-34). Published by Springer.
Farrell, Diana. May 2005. Offshoring: Value Creation through Economic Change. Journal of Management Studies.
Senge, Peter. 1990. The Fifth Discipline. Accessed on 25th October 2008 from http://www.infed.org/thinkers/senge.htm
Slater, C.L. and Simmons, D.L. 2001. The design and implementation of a Peer Coaching program (pg 67-76).
British council library journals on strategic management
Abrahams, Jeffrey. 2007. 101 mission statements from top companies: plus guidelines for writing your own mission statement – pg 74. Published by Ten Speed Press.
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Harvard Business School. 2002. Grestner: Changing culture at IBM – Lou Gerstner discusses changing the culture at IBM. Accessed on 25th October 2008 from http://hbswk.hbs.edu/archive/3209.html
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IBM Business Consulting Services. Outsourcing the learning function. Accessed on 25th October 2008 from http://www-935.ibm.com/services/us/imc/pdf/g510-6206-outsourcing-the-learning-function.pdf
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