IBM to Try Selling Technical Services as Products

Published: September 27, 2006

by Alex Woodie

When you think IBM technical services, chances are you think Global Services and the Fortune 500 companies that typically can afford these valued specialists. Over the next two months, IBM will be trying to change that perception, and its underlying reality, with the introduction of a series of bundles that combine the services of specialists with hardware and software, as part of a product-oriented sell designed to attract more small and mid size business (SMB) customers. But can Big Blue pull off the nimble transition?

IBM's Global Services arm is a sprawling business that brought it more than $46 billion in revenue over the last 12 months. That figure is more than twice its hardware sales, and more than half of Big Blue's total revenue, which shows you just how important selling services is to IBM. In many ways, IBM has become a services company, for better or for worse. But its services business has started to slow.

There were warning signs in IBM's last quarterly financial statement. The Global Services unit brought in $11.9 billion, which was just 1 percent off its second quarter 2005 numbers. However, when you looked ahead to anticipate services-related revenue, the numbers weren't pretty. Global Services' short-term and long-term contract signings totaled just $9.6 billion at the end of June, down from the $14.6 billion in the pipeline a year earlier.

The new bundles are part of a plan to boost these numbers. They will be delivered through a new a new IBM Global Technology Services business unit called Integrated Communications Services. IBM says it already has 7,000 "highly skilled" employees in the Integrated Communications Services unit, working across four disciplines, including converged communications services; networking strategy and optimization services; mobility, wireless and RFID Services; and network integration and management services.

IBM is starting off with two bundles, and plans to have a total of about 30 bundles available by the end of the year, the company says. The first two services bundles target network convergence and IP telephony, the latter being an area that Microsoft has heavily invested in recently.

With IBM's network convergence bundle, customers will receive an analysis of their current network and an assessment of the changes needed to enable the customers existing Ethernet network for so-called "network convergence," which refers to networks that handle not just data, but voice and video streams, among other types of traffic. In addition to performing analyses, IBM consultants will come in and upgrade wires, hardware, and software for network convergence, and even help monitor and manage the network to meet service level objectives.

Once a customer has a fairly advanced network in place--replete with an appropriate level of redundancy, wireless and virtual LAN capabilities, CAT-5 or better cabling, and quality of services (QoS) controls--then it becomes a candidate for the second new services bundle IBM announced yesterday: IP Telephony, better known as voice over IP (VoIP).

As part of its VoIP bundle, IBM services representatives will follow a four-step process to enable a customer to place and receive telephone calls over the Internet, including the assessment and planning phase, the design phase, the implementation phase, and the "run" phase. IBM handles just about everything required to get an enterprise-strength VoIP installation up and running--including ordering and installing the equipment, designing and testing the software, and training and supporting the staff.

These are just the first two of 30 expected bundles. The company is reportedly working on bundles for digital video surveillance and services oriented architecture (SOA). Considering that one of the disciplines in the Integrated Communications Services is radio frequency identification, one should expect an RFID bundle, too, but IBM declined to elaborate further on its planned bundles.

While the whole point of this exercise, it would seem, is for IBM to make its services organization more approachable, understandable, and product-oriented, it still leaves something to be desired in the customer service department. IBM is not disclosing detailed information and pricing for its bundles, and directs interested parties to contact their IBM representative for more information. Obviously, businesses that are not IBM customers aren't going to have an IBM representative, which may leave them wondering how to make that first step, and that could turn off new customers. IBM has a lot of work to do if it thinks it's going to make Global Services more Dell-like.

For (a little) more information on IBM's network convergence services bundle, see IBM Services Announcement 606-022. For information on IBM's VoIP bundle, see IBM Services Announcement 606-021.

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