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IBM and the Emerging Cloud Computing

Industry
Group 2 - SFRLO
Name

Roll Number

K Sivaram

PGP/17/149

Viswesh S

PGP/17/188

Girish Ganapath J

PGP/17/207

S Akshaya

PGP/17/233

R Adharsh

PGP/17/288
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Dominated competitors with a 70% market share


1960s Largest of the eight major computer companies
Failed to dominate the emerging industry by letting RAND Corporation
take over the programming of new computers
1950s Chief contractor for developing computers for the U.S. Air Forces
automated defense system
After the Social Security Act of 1935, secured government contract to
maintain employment data for 26 million people
Continued to manufacture new products despite the Great Depression
Specialized in developing punch-card data processing equipment
Originated as the Tabulating Machine Company in 1896

IBM The Rise of a Giant

The Decline of Mainframe Computing

1970s- Relied on a vertically integrated strategy


1976 Threat in the form of Apple Inc.
Underestimated the power and speed of the computer revolution
Failed to introduce its own version of the PC till 1981
Due to this delayed response, lost the opportunity to dominate the
market
Vertical Integration did not provide an advantage in the evolving
computing Industry
As the value chain disintegrated, different companies took lead in
specific segments
January 19, 1993 IBM announced the largest single year corporate loss
in U.S. history ($8.1 billion)

Key Issues to be Addressed


Reference point How far to venture into this territory?
to be used with Should it go for vertical integration?
Should it focus on specific value chain
respect to
cloud
activities? (Supply the hardware,
computing
develop and sell software, become a
cloud service provider)

Whom to work
with

Market
segmentation

Should it work with a partner?


Should it acquire existing business?
Should it go alone?

Should IBM target individual


consumers?
Should they focus on small and medium
companies?
Large enterprises or whole nations?
Would it be better off serving public,

Change in Leadership

Louis Gerstner
Believed in providing
integrated solutions but
keeping company together
Three strategic pillars
Pioneering the e-business
Hope was till there, even if
innovation cycle was
missed

Broad
computer
services
Hardware,
software,
consulting
and
maintenanc
e

Move to
open
systems
compatibilit
y with
competitor
products

Fully
embrace the
internet and
networked
world

Change in Leadership

Sam Palmisano
Pushed IBM beyond being
equipment supplier valuable
component to value chain
activities

Dedication to every clients


success

Software and consulting were


primary drivers , high-margin
hardware components

Innovation that matters

Sold off IBMs PC division built


software expertise through
various acquisitions

Trust and personal responsibility in


all relationships

Challenges included new players


from India and emergence of
cloud

Cloud Computing
Changing the IT Stack
IaaS, PaaS, SaaS
Changing Computing Devices
PCs to tables, smart phones etc.
Portable and interactive computing experience
Changing IT Industry
Developing metering application, open-source programming
Distinction among industry participants blurred partners to
Competitors
Changing the way to do Business

Capital expenditure to operating expenditure


Coping with peak demand, technical help
Enabled star-ups to scale up and giants to cut IT budget
Increased interdependence of organizations
7

Emerging Ecosystem of Cloud Competitors

Under consumer applications - Googles App engine and


Salesforce.com became the footholds of platform as a service market
Salesforce.com active in software-as-a-service segment
Increasing number of enterprise applications offered as cloud-based
services
Cloud service market was estimated to lie in the range of $42-$160 BN
by Merrill lynch in 2012
The public cloud-infrastructure segment was dominated by Amazon,
followed by Rackspace
Companies like Rightscale, Cloudkick and enStratus which offered
tools to manage public cloud infrastructures emerged
There was scope for telecom companies like AT&T to capitalize on their
infrastructures, scale and cost capabilities to enter cloud technologies
There was initial hesitation in private cloud-infrastructure as it required
significant investments & reconfiguration of data centers

IBMs Cloud Strategy


Early initiatives
In 2007 IBM launched Blue cloud- A combination of
software and hardware components providing
customized cloud-based services to clients
In 2008 IBM offered integrated cloud computing
centers targeting emerging markets. It enabled
clients to transition to virtualized data centers. It
reduced system and application management cost.
Provided consulting and technology services to the
cloud and developed a certification program covering
the quality of service provided by its partners.
Alliance with Google
Joint intention to promote commercial cloud based
services
IBM provided infrastructure and services for Googles
cloud offering
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IBMs Cloud Strategy


Recent efforts

New offerings at every level of the cloud infrastructure


Software-as-a-service: promoted Lotus Live as the Facebook
for enterprises
Platform-as-a-service: All product groups aligned their offerings
to work in the cloud
IBM built several private clouds for its clients
Brainstormed on wide range of issues: security, potential,
business models etc.
Acquired smaller companies offering necessary middleware
Intended to create an ecosystem of partners in which every
vendor addressed a specific business need
Smarter planet

IBM initiated a massive advertising campaign to promote the idea of


building a smarter planet
Cited real life examples which require attention e.g. ineffiicient
energy supply chain and cited successful applications (stockholms
traffic has been reduced by 20% using a smart traffic system)
Positioned its investment in cloud computing as a key resource in
moving towards a smarter planet

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Recommendations
Reference Point

Categorization of the various functions as income generating and


support functions.
Concentration on income generating functions as cloud computing is a
evolving technology and could face strategic discontinuities
IBM has bitter experience with vertically integrating the entire value chain
in case of PCs e.g. possession of sales force and data centers became
Target
obsolete in PC market

Hybrid private + public cloud

Whom to work with?

Similar

Local

Technological
Boundary
Spanning
Internal
Boundary
Distant
Spanning

External
Boundary
Spanning

Radical

Radical exploration
Internal
External
Rich pool of talented employees 47756 patents
Organizational Boundary
But opting for local search/ internal boundary spanning might
Spanning
Lead to familiarity trap/ competency trap
IBMs current strategy
Acquisitions of smaller businesses for income generating functions
(as ofPartners
2015) IBM
Service
Leads to IBMs portfolio expansion
Platform
103
139
Application
6
99
Entire share of value created (there is not much difference
Infrastructure
3
25
between small and big companies in cloud space
Business process
0
23
Strategic partnerships with vendors for support functions
11

THANK YOU

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