I.B.M., the leading supplier of information technology, is ?doing its own thing in the enterprise market,? Steve Lohr wrote on the Bits blog, and should no longer be considered a bellwether of the broader tech economy.
What the company is doing, exactly, should be of particular interest to Indian outsourcing companies. Mr. Lohr wrote of ?some intriguing details in the I.B.M. conference call and presentation last week.?
Higher profit margins were the main reason the company?s operating earnings per share rose 14 percent ? and all of the improvement came from I.B.M.?s services business, the company?s largest, with about $60 billion a year in revenue. (In I.B.M.?s presentation to analysts, see slides No. 6 and No. 13).
I.B.M. talks about the ?industrialization of services? as a key strategic goal. That industrialization process includes paring services jobs down to standardized, repeatable tasks; spreading the work around to world to where it can be done most efficiently and most inexpensively; and steadily automating simpler tasks with software.
The benefits of a globalized work force should diminish over time, as wages rise for skilled workers in India, for example. But if more and more services work can be done with software instead of people, I.B.M.?s profit margins could well keep improving ? and the company could separate itself further from other tech suppliers.
In response to an analyst?s question last week, Mark Loughridge, I.B.M.?s chief financial officer, said that much of the profit improvement came from projects that joined the company?s research scientists with services teams to automate tasks. That, Mr. Loughridge said, is a ?unique capability that I don?t think you?d see in our competitors.?
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