Posts Tagged ‘IBM’

IBM’s APAC fourth quarter revenue slides 17 per cent

January 23rd, 2015

IBM’s fourth quarter APAC revenues have dived 17 per cent, more than any other region, as the company reports full year profits of $US15.8 billion.Outsourcing54

Net income was down seven per cent on the previous year’s figure of $US16.9 billion.

Big Blue reported fourth-quarter 2014 diluted earnings from continuing operations of $US5.54 per share, compared with diluted earnings of $US5.76 per share in the fourth-quarter of 2013, a decrease of four percent.

Fourth-quarter net income from continuing operations was $US5.5 billion compared with $US6.2 billion in the fourth-quarter of 2013, a decrease of 11 per cent.

It reported consolidated net income of $US5.5 billion or $US5.51 of diluted earnings per share, including operating net losses in discontinued operations related to the microelectronics manufacturing business.

While total revenues from continuing operations for the fourth-quarter of 2014 of $US24.1 billion were down 12 per cent (down two per cent, adjusting for the impact of the divested customer care outsourcing and System x businesses and for currency) from the fourth-quarter of 2013 and were down one percent for the full year 2014, adjusting for the impact of the divested businesses and for currency.

IBM chairman, president and chief executive Ginni Rometty, said the company was making significant progress in its transformation, continuing to shift IBM’s business to higher value, and investing and positioning it for the longer term.

“In 2014, we repositioned our hardware portfolio for higher value, maintained a services backlog of $US128 billion and achieved strong revenue growth across cloud, analytics, mobile, social and security,” she said.

“Together these strategic imperatives grew 16 percent in 2014 and now represent $US25 billion and 27 percent of our revenue.”

In terms of geographic regions, the Americas’ fourth-quarter revenues were $US11.1 billion, a decrease of nine percent (down four percent, adjusting for divested businesses and currency) from the 2013 period.

Revenues from Europe/Middle East/Africa were down 13 per cent to $US8 billion (down one per cent, adjusting for divested businesses and currency).

Asia-Pacific revenues decreased 17 per cent (down 2 per cent, adjusting for divested businesses and currency) to $US4.9 billion.

The global services segment revenues decreased eight percent (flat adjusting for the impact of the divested customer care outsourcing and System x businesses and for currency) to $US13.5 billion.

While global technology services segment revenues decreased eight per cent (up two per cent adjusting for the impact of the divested customer care outsourcing and System x businesses and for currency) to $9.2 billion.

Global business services revenues were down 8 per cent to $US4.3 billion.

Software revenues were $US7.6 billion, down seven per cent (down three per cent, adjusting for currency) compared with the fourth-quarter of 2013.

Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Workforce Solutions and Rational products, were $US5.4 billion, down six per cent (down three per cent, adjusting for currency) versus the fourth-quarter of 2013.

Operating systems revenues of $US557 million were down 19 per cent (down 16 per cent, adjusting for currency) compared with the prior-year quarter.

Hardware revenue for the systems and technology segment plummetted 39 per cent (down 12 per cent, adjusting for the impact of the divested System x business and currency) to $US2.4 billion.

Revenues from System z mainframe server products decreased 26 per cent (down 23 per cent, adjusting for currency). Revenues from System Storage decreased eight per cent (down five per cent, adjusting for currency).

However, total reported expense and other income from continuing operations declined 20 per cent to $US5.8 billion compared with the prior year period. The reported reduction was driven by the gain of $US1.4 billion ($1.1 billion pre-tax income benefit, net of related transaction and performance-based costs) from the divestiture of the System x business and the elimination of the expense for the System x business from the company’s run rate.

Debt, including Global Financing, totalled $US40.8 billion, compared with $US39.7 billion at year-end 2013, and down $US4.9 billion from the third quarter of 2014.


IBM Reports Earnings Today And Is Expected To Discuss A Huge Reorg

January 21st, 2015

The company reports its fourth quarter earnings, the first one since CEO Ginni Rometty admitted she would not be keeping the promise made by her predecessor to return $20 earnings per share profit by 2015.Outsourcing48

Expectations for the quarter are modest. Analysts are looking for $24.77 billion in revenue, down almost 11% from the year-ago quarter, and adjusted earnings of $5.41 per share. That would be IBM’s 11th straight quarter without a year-over-year revenue increase.

For the year, IBM is expected to report $16.13 adjusted EPS and $93.55 billion in revenue, down about 6%, according to analysts polled by Yahoo Finance.

Some of that revenue decrease is on purpose. IBM has been selling its underperforming, less profitable units like its commodity servers (sold to Lenovo Group) and its semiconductor manufacturing operations (sold to Globalfoundries).

It’s been shifting investment into growth areas like cloud computing, big data, and mobile apps (via an agreement with Apple).

But, since abandoning the $20 EPS profit, called “Roadmap 2015,” CEO Ginny Rometty has not yet offered guidance on what the new profit plan or roadmap will be.

Reports are circulating that she is overseeing a huge reorganization of the company – one of the biggest re-orgs the company has ever faced, sources told Paul Kunert at the Channel Register.

Instead of separate hardware and software groups, a structure that’s been in place for eons, she’s reportedly creating new groups built around new business areas: Research, Sales & Delivery; Systems; Cloud; Watson; Security; Commerce and Analytics. The company will continue to operate its Global Technology Services unit.

Such a big reorg could also mean layoffs, which aren’t new to IBM. It’s a huge company that had over 400,000 employees worldwide in 2013 and it spent about $1 billion per year in both 2013 and 2014 on layoffs.

Then again, it’s also been hiring like mad in its growth areas, and is retraining some of its employees instead of laying them off.

Things have been so rocky for IBM since October, its last earnings announcement, that when 2014 drew to a close, Big Blue was one of the worst performing stocks in the Dow Jones Industrial Average for two years running. Rivals Oracle and Microsoft are currently both more valuable than IBM, by market cap (IBM: $155.3 billion; Oracle: $191.3 billion; Microsoft: $377 billion).

So, when IBM announces earnings, investors will be expecting to hear more about Rometty’s new profit targets and this reorg.


Indian IT staff could unionise, putting offshore model into question

January 8th, 2015

Trade union organisations in India are calling on millions of Indian IT workers to unionise as fears over mass redundancies spread across the country’s IT services industry.Outsourcing39

Talk of Tata Consultancy Services (TCS), India’s biggest IT services provider, reducing its workforce of more than 300,000 by 10% has fueled fears in India’s IT sector.

It’s also been speculated IBM is planning to cut its workforce in the country by 50,000. According to a report from India, the IT giant has already reduced its India-based workforce from about 165,000 in 2011 to 113,000 in 2014.

According to the International Business Times, the All India Trade Union Congress and the Centre of Indian Trade Unions has asked software engineers to plan a strategy to resist the alleged workforce cut planned by India’s largest software services firm. This collective activity would amount to unionisation.

Unionisation a major shift in Indian IT

Unionisation would be a major shift in the industry as Indian IT workers are not actually allowed to unionise. It would also make offshore services delivered from the country less competitive as staff demand higher pay and better working conditions.

Staff cuts in India are inevitable as the outsourcing sector goes through a period of major change. The traditional offshore model, where businesses paid for full-time equivalents, is less relevant today with the advent of modern technology, such as automation software and cloud services.

IT services firms traditionally grew in a linear way – typically, they win more business, then add more staff to support it. In many cases this has involved building large offshore workforces.

But service providers are now trying to reach the holy grail of non-linear growth. This means adding business without needing to add to the workforce to support it – reducing the proportional increase in the cost of providing an additional service.

At the same time, increased use of cloud-based IT is forcing IT services firms to add more higher-level support services, while the move to platform-based services in the cloud means there is less need for businesses to develop their own software.

The lack of labour rights in India also benefits businesses that want a flexible workforce that can be scaled up and down easily.

Massive consquences for offshore IT services
One IT outsourcing industry source said unionisation will have massive ramifications on offshore IT services.

“This will mean less flexibility,” he said. “Offshore IT operations will no longer be able to be ramped up and scaled down easily because it will no longer be easy to lay people off.”

He added if talk of TCS laying off 30,000 people in India is true, it will be evidence of the company’s move towards non-linear business models.

“Because TCS is a bellwether this could spread across the Indian IT industry,” he said.

Indian companies need to change if they are to continue to grow. According to ISG, between 2005 and 2008, Indian suppliers’ revenues grew at a combined annual growth rate of 32%.

But the recession, which began in 2008, has been a shot across the bows. In the years since, Indian firms have experienced half the growth rate, at 16%.


IBM pushes hard into the enterprise cloud

December 18th, 2014

IBM is building out its global computing network in a bid to focus on the enterprise cloud market.Outsourcing22

The company announced today that it is adding cloud centers in 11 new locations.

In a $1.2 billion investment, IBM has built cloud centers in Frankfurt, Mexico City and Tokyo. The other eight new locations come to IBM through a partnership with Equinix Inc., which operates data centers across the globe.

The partnership will give IBM access to data centers in Australia, France, Japan, Singapore, the Netherlands and the U.S., boosting IBM’s cloud network to a total of 48 cloud centers.

That growth is aimed at helping IBM grow its hybrid cloud business for enterprise clients.

“IBM recognizes that businesses and governments need the cloud to help them innovate, grow and operate more efficiently in concert with their existing IT investments,” said Robert LeBlanc, senior vice president of IBM’s software & cloud solutions group, in a statement. “Just as we helped major organizations transform in each preceding era of IT, IBM now serves as the cloud platform for the enterprise.”

This is a good move for a company that wants to court the enterprise, which is increasingly moving to the cloud, said Charles King, an analyst with Pund-IT, Inc.

“Lots of people are wondering if IBM is entering the market too late. I disagree with that,” King told Computerworld. “I think the market for cloud is not as mature as some people seem to think it is. There’s a lot of headroom in the hybrid cloud, in particular. As the market has become increasingly competitive, there’s going to be some interesting shakeouts in the months ahead.”

That shakeout should see major cloud players like Amazon, Google, Microsoft and IBM – grappling for marketshare, though King didn’t dare to guess where those top players will be a year from now.

He’s confident that IBM will continue to be a major cloud player with traditional business clients.

“You can see the other cloud players, including Amazon, making a pitch that their own services are ready for the enterprise,” said King. “IBM, though, is very well-positioned for that market right now. Markets evolve and mature in sometimes curious ways, so it will be interesting to see how IBM bears up as other companies try to invade the enterprise cloud space.”

Dan Olds, an analyst with The Gabriel Consulting Group, said IBM is putting some muscle into the game with what had to be a sizable investment in these new cloud centers.

“The cloud market is crowded and highly competitive,” Olds said. “IBM is trying to differentiate themselves through providing a higher level of service and support, along with giving customers the ability to negotiate their own service levels for their IBM clouds. Other competitors will do this as well, of course, but IBM’s experience in providing these types of services for decades through their outsourcing/hosting services arm should give them an advantage with these customers.”

Having an IBM cloud center located in their country will also give some customers the ability to use cloud computing for likely the first time, he added.

Many businesses and government organizations are not allowed to use cloud services that host their data outside their country.

“This could give these types of customers a chance to dip their toes into the cloud and see if it’s all it’s cracked up to be,” said Olds. “So, really, the key part of this announcement is the geographic spread of IBM’s cloud centers.”


EU clears Lufthansa outsourcing deal with IBM

December 18th, 2014

The European Commission said on Wednesday it had approved the sale of Lufthansa’s IT infrastructure unit to IBM .General view of fibre optics and cabling from behind a storage rack at the IBM booth at the CeBIT trade fair in Hanover

Lufthansa was seeking a buyer for the unit, which provides data centers, networks and telephony, because it requires a high level of investment and economies of scale, which the airline could not provide.

“The Commission concluded that the proposed acquisition would not raise competition concerns given the very limited overlaps between the parties’ activities and the presence of several strong alternative players that would remain active after the merger,” the EU executive said in a statement.

The deal, which was announced on October, will result in a one-off pre-tax charge of 240 million euros ($299 million) for Lufthansa. It will allow Lufthansa to reduce its annual IT costs by around 70 million euros a year.

Under the planned deal, Lufthansa will outsource all its IT infrastructure services to IBM under a seven-year deal and the U.S. firm will take over the airline’s IT infrastructure division, currently part of Lufthansa Systems.

The transaction was examined by the European Commission under the normal merger review procedure.


Indian IT companies lag behind global peers in SaaS space

December 12th, 2014

The rise of software-as-a-service cloud delivery model poses a threat to the dominance of the homegrown software exporters as most of them lag behind the foreign companies, including IBM and Accenture in offering services to customers.Outsourcing12

Although significant investments are currently being made by Infosys and Wipro in strengthening their cloud offerings, some of the fastest growing SaaS firms globally do not even name any of the country’s largest IT firms as their strategic partners.

“We’ve got strong partnerships with Deloitte and Accenture and IBM and increasingly, PWC and KPMG, Towers Watson and Aon Hewitt,” said Aneel Bhusri, co-founder and co-CEO of Workday, in an analyst call last month, underlining the fact none of the Indian tech giants made the list.

For now, Indian companies are catching up with the foreign IT firms, as Wipro entered into a partnership with Workday in 2011, three years after Accenture first became Workday’s global deployment partner.

“We are there but we may not be matching them (IBM, Accenture)…It requires a lot of investments. They are ahead of us,” said Satishchandra Doreswamy, chief business operations officer at Wipro. “(But) we are also picking up…we are currently building cloud business platforms.”

Software-as-a-service, in which companies pay for software based on their usage, is expected to top $22 billion through 2015, up from about $14 billion in 2012, according to research firm Gartner.

The impact of this is most visible in Indian tech giants losing out to global software exporters when it comes to migrating existing infrastructure to cloud model. One of the examples is when IBM won a 10-year, multi-billion dollar deal to provide computer infrastructure services to Dutch bank ABN Amro running on its cloud systems. As in most deals, the biggest names, including Infosys and Wipro were in the race to bag this contract.

Another wrinkle for Indian tech majors is the inability to offer IPs in cloud space which can help them bag large contracts when competing for large deals.

“We have acquired industry leading cloud intellectual properties (IPs) which help us provide our customers with a strong orchestration layer to manage diverse cloud platforms in a seamless manner,” claims Anand Sankaran, president, Infrastructure and cloud computing at privately-held Dell services.

For this reason, some analysts believe cloud could pose a long-term challenge, capping upside potential in a sector growing at 13-14% annually.

“In the long run (5-10 years), we think cloud will eat into the enterprise application services (EAS) revenues of India’s IT services companies (15-20% of total), assuming ‘ERP on cloud’ becomes a reality,” Yogesh Aggarwal, an analyst with HSBC Securities said in a report dated November 25. “In the near term, the risk is more manageable at just 5-6% of total business, as cloud companies have achieved little in terms of operating metrics.”

To be sure, some of that impact is already showing. The time-and-material model of payment, where companies pay for the effort rather than the outcome, has been dropping steadily over the past few years.

“Clients are asking for a significant sub set of the existing work to be converted into a pay for use model. This will pose significant challenges to the Indian based providers which currently utilize an FTE base model,” said Peter Bendor Samuel, CEO of outsourcing advisory firm Everest. “Its impacts are already showing in the slowing growth and the increased need for investment.”

A senior executive of Infosys acknowledges the company’s limitations, with lack of certified consultants who can help customers to move to cloud space.According to the HSBC Securities report, Accenture leads the pack among IT outsourcers, with about 3100 certified Workday consultants. Additionally, the outsourcer also has 1800 Salesforce-certified consultants. In comparison, top five Indian IT firms collectively have a little more than 2,000 Salesforce certified professionals.

Still all is not lost as some believe a recognition by the leading IT firms to increase their investment can help them battle again the likes of Accenture when it comes to winning large deals.

“The two things that they need to do is to build these strategic alliances with companies that have cloud-based products and second is to have hosting either in their own data centres in geographies where they want to provide these services or they should have tie-ups with data centres in those regions,” said Biswajeet Mahapatra, research director at Gartner.

To combat the long-term threat, companies will also have to change how their services are delivered as the lowered complexity of cloud-based solutions will reduce the need to employ armies of engineers.

“Companies will have to invest in robotic process automation, artificial intelligence, analytics tools and capabilities, business process skills, consulting talent. They will need to change the revenue model from one driven by selling just labour to one selling products and expertise weaved into those services,” Phil Fersht, CEO of advisory firm HfS Research, said.


IBM bags multi-billion dollar outsourcing deal with ABN AMRO

December 2nd, 2014

IBM has bagged a multi-billion dollar 10-year deal with Dutch bank ABN AMRO, the second major European outsourcing win for the company in the last month.Outsourcing10

The deal is likely to bring cheer to Big Blue, following its recent “disappointing” third-quarter results.

The deal includes a private IBM cloud, mobile computing, managed services for mainframe, servers, storage, end-user computing, and support. IBM did not disclose the full details.

Piet Bil, IBM managing director for ABN AMRO, said the deal is intended to help the business become a digital bank.

In November IBM signed a seven-year €1bn (£800m) contract with Lufthansa to integrate mobile, social and analytics across the airline.

In its last quarter results posted in October, revenue fell across the company’s divisions, dropping six per cent to $22.4bn.

IBM chief executive Ginny Rometty said the company was disappointed in its performance and blamed a “marked slowdown in September in client buying behavior.”

Hardware fell most dramatically, down 15 per cent to $2.4bn. The company’s global services outsourcing division fared slightly better, down three per cent to $13.7bn.

Big Blue was asked if the results would prompt it to follow HP’s lead and split the business up. IBM said it was already divesting under-performing businesses such as the microelectronics unit, which is being passed over to Global Foundries.


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