IBM's Turnaround and its New Business Model|Business Strategy|Case Study|Case Studies

IBM's Turnaround and its New Business Model

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Case Details:

Case Code : BSTR107
Case Length : 22 Pages
Period : 1993 - 2004
Organization : IBM Inc.
Pub Date : 2004
Teaching Note :Not Available
Countries : USA
Industry : Information Industry

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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IBM's Turnaround

Gerstner's immediate task was to make IBM profitable. He spent the initial period at the company learning about the prevalent situation. Gerstner visited different IBM facilities all over the world and met customers, competitors, senior executives, financial analysts and consultants to get a first hand account of the actual state of affairs.

During these interactions, he learned that customers still appreciated IBM since it offered solutions for a host of their computer- related needs under one roof. However, having seen the facilities himself, Gerstner realized that the quality of IBM products had to be significantly improved. Gerstner felt that different business units of IBM had to be integrated in order to produce products of better quality within a specified time period. This led him to take a crucial decision to reverse Akers' plans to split IBM into eleven entities. The plan did not made any sense to him as he felt that customers would find it inconvenient to select from thousands of suppliers to develop a working system.

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He argued that customers wanted IBM to remain a single entity...

IBM - on the Growth Track

After achieving his first objective of turning around IBM, Gerstner faced the challenge of increasing the company's revenues, which had been stagnant for several years. In the mid-1990s, Gerstner visualized that information technology's (IT) role was more significant than just being a productivity tool for a company.

IT had become fundamental to how a company operated and the prime source of a company's competitive advantage. Clients wanted to integrate different computing platforms and applications in networks and they turned to specialist computer service companies like EDS, and the consulting arms of big accounting firms. Gerstner felt that given IBM's size and scope, it could provide 'complete solutions' to its customers. Gerstner also felt that IBM was moving in the direction of using the same computing architecture for different product lines. This required tight integration of different businesses. He visualized that the PC era would come to an end and would be replaced by network computing...

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