Heading south or down: IBM’s own business transformation

28 November 2018 Consultancy.lat 4 min. read

Business technology company IBM have had a rough couple of years. Constantly moving away from an outdated business models, IBM has its sights set on Latin America as its new stomping ground. The company sees opportunities in the region’s tech-shift, to correct itself in the midst of falling revenue and crashing stocks.

International business machines (IBM) started out in the 1920s as a company which made, well, business machines. They made typewriters as well as other office machinery and moved into computers throughout the 40s. By around 1990, IBM was practically the heavyweight of personal and business computers but then eventually stopped selling them all together.

Their new business line ran as a sales, services and development company. IBM created their own software, as well as microcomputers which ran exclusively IBM operating systems integral to big business, and provided companies with IT services. This could have been anything from installing their own software, maintenance, to a full in-house IBM team set up. They also invested a serious amount of money in developing the capabilities of Linux.

This is all distinctly before the Industry 4.0 boom. IBM has notoriously been ahead of the curve when it comes to new technology. Whilst that’s still the case, the migration from the above mentioned business model has not produced the fruits which some technology firms have seen recently. As a result, IBM’s stocks have hit $120 – or lower than they were before the financial crisis in 2008 – and are down 12% this year alone.

Whilst the boomtime may be over – at least for now – IBM’s revenue was nearly $80 billion a year, roughly the same as Guatemala’s nominal GDP. The company continues to hold the most patents of any tech company in the US and has the second most patents specifically within the blockchain domain. The company is heavily involved in providing cloud based services and is developing their own in-house solutions based on blockchain, the Internet of Things, artificial intelligence and big data.

Heading south or down; IBM’s own business transformation

With this in mind, the once technology manufacturing company is beginning to act a lot more like a technology solutions and consulting firm. In this domain, Apple and Google looks less like competition, with rather Accenture, the Big Four and other management consulting firms dominating the space. Competition may be rife for innovation driving the industry forwards at a lightning pace, but IBM hopes to turn its trajectory around.

At the beginning of the year, IBM even enlisted Bain & Company to help the restructuring. Instead of focusing on consulting on in-house data technology, they jumped on the cloud train. The consulting firm was instructed to cut costs, and up productivity whilst IBM determined its new path. It’s recommendations were productively redeployed 30% of the company’s 100,000 service delivery and technology staff.

Towards Latin America

Now IBM, who today has over a third of its global workforce in India and locations scattered around the world, will look towards filling one of the biggest talent shortages of the 21st century so far. Latin America’s tech transition will, according to global market intelligence firm IDC, create a talent shortage of 550,000 professionals by next year. The main area’s where those professionals are missing are in artificial intelligence, blockchain and cloud computing.

Having already partnered with a over 700 academic organizations including universities and educational institutes, IBM has been training their next generation of Latin workers. With a heavy focus on digital transformation, the company partners with these institutions creating classes and incubating their skills to solve real-life-problems. Over a third of a million people have been through these classes.

"The success of businesses in the transition to the digital economy is absolutely dependent on the adoption of new technologies in their business models, but also on the ability to develop a culture of continuous learning to generate a sustainable competitive advantage in the region", says General Manager at IBM Latin America, Ana Paula Assis.

"[The need to keep up with] talent changes is a recognized fact. The point is how quickly and deeply we are able to drive this evolution - working as an extended ecosystem, composed of private companies, educational institutions and public entities - to avoid talent shortages and impact on our professionals, societies and economies," Assis adds.

Shifting its focus down to Latin America from its headquarters in the United States or from its stronghold in India has potential benefits. Over 60% of Latin executives are finding it difficult to keep their workforce’s skills up to date. This provides a large business opportunity for the flatlining multinational. It’s a long way from where they began, but it seems that Latin America may be the saviour that IBM needs.