International Business Machines Corporation provides information technology (IT) products and services worldwide. Its Cognitive Solutions segment includes Watson, a cognitive computing platform that interacts in natural language, processes big data, and learns from interactions with people and computers. The company's Cognitive Solutions segment also offers data and analytics solutions, including analytics and data management platforms, cloud data services, enterprise social software, talent management solutions, and solutions tailored by industry; and transaction processing software that runs mission-critical systems in banking, airlines, and retail industries. The company's Global Business Services segment offers business consulting services; delivers system integration, application management, maintenance, and support services for packaged software applications; and business process outsourcing services. Its Technology Services & Cloud Platforms segment provides cloud, project-based, outsourcing, and other managed services for enterprise IT infrastructure environments. This segment also offers technical support, and software and solution support; and integration software solutions. The company's Systems segment offers servers for businesses, cloud service providers, and scientific computing organizations; data storage products and solutions; and z/OS, an enterprise operating system for z systems. Its Global Financing segment provides lease, installment payment plans, and loan financing services; short-term inventory and accounts receivable financing to suppliers, distributors, and remarketers; and remanufacturing and remarketing services. It has a strategic collaboration with ABB Ltd to develop industrial artificial intelligence solutions. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. The company was founded in 1910 and is headquartered in Armonk, New York.
Business Analysis of IBM
The Technology Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how IBM compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by IBM to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.
Here is the performance snapshot of IBM with an interactive chart.
- Revenue Growth: IBM reported a revenue growth of -2.2% year-on-year during 2016. IT Consulting and Outsourcing Services Industry grew at -0.6% in the same period
- COGS share of Revenues: As a percentage of revenue, IBM spent 52.1% of its total revenues on COGS. IT Consulting and Outsourcing Services industry average (COGS share of revenue) in the same period was 65.9%
- R&D share of Revenues: As a percentage of revenue, IBM spent 5.2% of its total revenues on R&D. IT Consulting and Outsourcing Services industry average R&D spending in the same period was 2.7%
- SG&A share of Revenues: As a percentage of revenue, IBM spent 26.4% of its total revenues on Sales, Marketing, and General Administration (SG&A). IT Consulting and Outsourcing Services industry average SG&A spending in the same period was 19.0%
- Inventory share of Revenues: As a percentage of revenue, IBM spent 1.9% of its total revenues on Inventories. IT Consulting and Outsourcing Services industry average Inventory spending in the same period was 1.8%
- Accounts Payable share of Revenues: As a percentage of revenue, IBM invested 7.8% of its total revenues on Accounts Payable (A/P) IT Consulting and Outsourcing Services industry average Accounts Payable investment in the same period was 7.9%
- Accounts Receivable share of Revenues: As a percentage of revenue, IBM invested 47.9% of its total revenues on Accounts Receivable (A/R). IT Consulting and Outsourcing Services industry average Accounts Receivable investment in the same period was 33.6%
- PP&E share of Revenues: As a percentage of revenue, IBM invested 13.6% of its total revenues on Property, Plants, and Equipments (PP&E). IT Consulting and Outsourcing Services industry average PPE investment in the same period was 11.5%
- Intangibles share of Revenues: As a percentage of revenue, IBM invested 51.2% of its total revenues on Intangibles. IT Consulting and Outsourcing Services industry average Intangibles investment in the same period was 38.5%
- Net Margins: IBM Net Margins in the year 2016 were 14.9%. IT Consulting and Outsourcing Services industry average Net Margins in the same period were 8.5%
Sector and Industry Association of IBM
For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries.
IBM is associated with Technology Sector and IT Consulting and Outsourcing Services Industry.
Technology sector is comprised of the following industries: Computers Systems and Peripherals; Software; Semiconductor; IT Consulting and Outsourcing Services; Networking Equipment and Services; Internet; Other. The definitions for each of the industries is as follows:
- Computers Systems and Peripherals industry includes companies primarily engaged in manufacturing of personal computers, servers, mainframes, workstations, and other computer accessories and peripherals such as storage drives, mice, keyboards and printers. It also includes manufacturers of mobile phones and tablets.
- Software industry includes businesses providing software products such as operating systems, productivity suites, enterprise software, data and analysis software, advertising and marketing software, engineering and manufacturing software, networking software, and IT management software. It also includes companies providing industry-specific software focused on different sectors such as Financials, Automotive, Telecom, Utilities, Travel, Real Estate, Media, and Publishing.
- Semiconductor industry includes companies primarily engaged in manufacturing and distribution of semiconductor products such as microprocessors, chipsets, motherboards, flash memory, and wired and wireless connectivity products. It also includes companies that provide semiconductor equipment and services to the semiconductor industry.
- IT Consulting and Outsourcing Services industry includes companies primarily engaged in providing information technology consulting and outsourcing services to other businesses. The services include IT consulting, systems integration, application development and management, IT infrastructure management, and network operations management.
- Networking Equipment and Services industry includes companies primarily engaged in manufacturing and distribution of networking and communications equipment for transporting data, voice, and video traffic across intranets, extranets, and the Internet. The key products include routers and switches for local and wide-area networks, cable modems, teleconferencing equipment, and wireless access points.
- Internet industry includes Internet-based businesses providing products and services such as search engines, social networking, web hosting, email, domain name registration, and eCommerce. It also includes industry information/services portals focused on different sectors such as Financials, Automotive, Travel, Health, Real Estate, Media, and Publishing.
- Other industry includes companies providing products such as photocopiers, fax machines, point of sale machines, audio/video technologies, and video games. It also includes technology companies that are not part of other six technology industries.
Industry Ranking of IBM
With $79.9 billion revenues, IBM ranked number 1 of all the companies in the US IT Consulting and Outsourcing Services industry. There were a total of 28 public companies in the US IT Consulting and Outsourcing Services industry that had revenues greater than $50 million during 2016.
The top-10 companies in the US IT Consulting and Outsourcing Services industry by revenues during 2016 were:
Business Model Analysis (BMA) Framework
We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.