IBM begins major revamp of its services business

IBM Corp. is taking the first step toward a major overhaul of how it packages and sells global services.

The vendor is due to begin rolling out the first two of what it terms "service products" worldwide on Tuesday. The standardized offerings are designed to be used by any IBM customer anywhere, a very different approach from the company's previous focus on providing customized, one-off services to individual users.

"This will enable us to access the market in a new way," Laurence Guihard-Joly, vice president of IBM's newly formed Integrated Communications Services (ICS) unit, said. "Our strategy is to get to the next level in services, to be brand-driven in the way our systems technology and software already are."

The first two services are Network Convergence Services Product and Internet Protocol (IP) Telephony Services Product. The network convergence bundle of services is aimed at customers keen to determine their readiness for adopting communications networks that combine support for data, voice and video. The IP telephony offering is for users looking to work with IBM and its partners including Cisco Systems Inc. on designing, deploying and managing IP telephony infrastructure.

As part of the restructuring, IBM has taken what was the networking services piece of IBM Global Services (IGS) and turned it into a new business unit, ICS.

Although IBM's services business is a huge operation, its growth rate has appeared somewhat stagnant over recent quarters. In the company's most recent financial results, IBM reported IGS revenue fell 0.9 percent to US$11.9 billion compared with the year-ago quarter. IGS competes against Accenture Ltd, Capgemini SA and Electronic Data Systems Corp. (EDS)

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"IBM is trying to invigorate its services business and propel it into growth faster than it has been," Bob Djurdjevic, president of Annex Research, said. He expects IBM's rivals will also adopt the service product approach in areas where they have specific expertise to draw upon.

IBM begun the work on the new services strategy a year ago engaging in a "deep re-analysis of the market" including talking to its customers at all levels, Guihard-Joly said.

By year end, IBM plans to release around 30 service products. They will be a mix of brand-new offerings and existing assets that have been "reassembled, updated, hardened and tested," Guihard-Joly said. The products will include network management services around the Netcool software IBM acquired when it bought Micromuse and radio frequency identification (RFID) services.

Even with highly complex projects, Guihard-Joly believes about 80 percent of a customer's services needs could be met by IBM's new building block approach.

The new ICS business unit has four main focuses for its services -- converged communications; networking strategy and optimization; mobility, wireless and RFID; and network integration and management services.

IBM may create other business units within its evolving services operations. "The key challenge is going to be training their own staff to think in a new way," Djurdjevic said. Having a specific unit focused on a specific market might help employees move more quickly to the different way of doing business.