May1991 ACCORVol.II,No.1 APublicationfromINPUT IBM Announces an Information Services Subsidiary OnWednesday,May15,1991,IBM andanentrepreneurialenvironment. Asa announcedawholly-ownedsubsidiary,the separatesubsidiarywithitsownboardof IntegratedSystemsSolutionsCorporation directors,DenniebelievesthatISSCwill (ISSC),itsnewinformationservices providethatenvironmentand organization. What'snew, responsivenesstoitsclientsandprospects. organizationally? Notalot. Although ISSClooksmuchliketheIBMSystems Thoughitwasnotdiscussedtoanyextent ServicesDivision,beingasubsidiarywill intheannouncement,INPUTbelievesthis makeitastrongercompetitor. structuralchangeisalsotargetedat eliminatinganyconstraintsthatmayhave OnWednesday,May15,viaanationwide beenimposedbyIBM's1956consent telephonehookup,IBMexplaineditsnew decree. Duringtheteleconference,Dennie subsidiarytothemarketresearchand annovmcedthatISSCwouldoffersome consultingcommimity. Thepurposeofthis newdataservices(thatmayhavebeen researchbulletinistoprovideINPUT'S restrictedbytheconsentdecree). clientswiththecontentofthat Establishingthesubsidiaryappearsto teleconferenceandINPUT'Sviewofthe haveeliminatedtheconsentdecree significanceoftheannouncement. restrictionsandtrulyimprovesIBM's flexibility. Competitorsbeware! IBMcan InNovember1990,IBMestabhshedthe nowfreelyaddressallofitsclients' IBMSystemsServicesDivisionunder requirements. DennieWelsh,aformerIBMFederal SectorDivisionexecutive. Intherecent AFullRangeofServices announcementIBMrenamedthe organization,restructuredittosome Duringtheannouncement,Dennie extent,andsetitupwithaseparateboard describedtheservicesISSCwillbe ofdirectors. DennieWelsh,nowpresident offering. TheyarelistedinExhibit1and ofthenewsubsidiary,madethe areasurprisinglybroadsetofofferings.It announcement. Hestressedthatthemajor isworthexaminingsomeoftheseservices reasonforthischangewastoprovidethe becausetheygobeyondwhatearlierIBM organizationwithflexibility. He systemsoperationsimitsoffered. commentedthatarapidlychanging marketrequiredaresponsiveorganization ISSCwillofferconsultingandsystems integrationservicesinadditiontoitsbasic ©1991byINPUT.Reproductionprohibited. Inthedataservicesarea,ISSCwill Exhibit1 performcheck,claims,orreservation ISSCServiceOfferings psrhoocuelsdstihngeyserrevqiuceesstfiotr.itsclients, •Systemsoperations Organization •Consulting AsasubsidiaryofIBM,ISSCwillhave •Systemsintegration iCthsaoiwrnmabnoaorfdtohfedBioreacrtdoriss.MT.hBeernard •Businessrecoveryservices Puckett,whoisalsotheGeneral ManagerofIBM'sApplication •Networl<managementservices SolutionsLineofBusiness. Other •Customapplicationdevelopment boardmembersincludeDennieWelsh (theDivisionPresident),BillWilson •Applicationsoftwaremaintenance (ISSCGeneralManagerof Operations),andSidHandler(ISSC's •Helpdesk ChiefFinancialOfficer). •Educationandtraining Thetop-levelorganizationisshownin •Dataservices Exhibit2. Itisimportanttonotethat therearethreemarketingvice presidents,eachwithspecificindustry Source: INPUT focus. ISSChasnodirectsales capability. systemsoperationsservices.Itwillbidon ISSChastwobasicresponsibilities: anysystemsintegrationprojectthatthe providingserviceto thecommercialand local"tradingarea"stafiFfeelsitisnot stateandlocalgovernmentindustries,and capableofaddressing. (IBMnowoperates providinginternalISsupportfor itsU.S.fieldsalesactivitiesthrough64 marketingandservices. Itwillnotserve geographictradingareas.) The thefederalmarket,sincethatmarketis organizationthatprecededISSChadalso reservedfortheFederalSectorDivision. offeredSIservices,andhadcompleted projectsliketheATMsystemforBank Toperformitsmission,ISSChasfive South. thousandemployees.Fourthousandof theseemployeesarecurrentlyperforming Intheareaofbusinessrecoveryservices, IBMsupportandtheremainingthousand ISSCindicatedthatitalreadyhasoverone areappliedtocommercialwork. ISSCwill thousandcontractsinplace. Itisalso continuetousealliancesandpartners,like undercontractforseveralnetwork ComputerTaskGroup,tosupplementits managementjobs. skills. Itwillalsoborroworlendresources fromortothetradingareas. ISSCwillofferthefullrangeofapplication softwareservices,includingcustom INPUTbelievesISSCwillnotattemptto developmentandmaintenance.Helpdesk increasethepermanentstaffrapidly,but servicesarebeingexpandedandwill willcontinuetousepartnersandalliances includesupporttodistributedsystems assubcontractorsformanyofitscontracts. environments,includingIBMandnon-IBM DuringtheannouncementDenniestated products. thatISSC—wouldretainIBM'sbasic principles ^includingitssalaryandbenefit 2 ©1991byINPUT.Reproductionprohibited. Exhibit2 ISSCOrganization M.BernardPuckett* ChairmanofBoard Dennie^/I.Welsh* President WG.enW.ilMsgorn.* S.Handler* S.Huhn W.Ehrich Operations V.P.ofFinance Counsel Dir.ofPersonnel P.Dance D.Maki V.PE..MAarrckheetring V.P.Marketing V.P.Marketing Insurance, Financial IndustrialSector Transportation Services PublicSector Other Source: INPUT *Boardmembers — plans ^whichwouldalsodiscouragerapid ThefieldsalesforcewillcalluponISSC growthofthepermanentstaff. whenitdoesnothavelocalresourcesto satisfyacustomer'sreqiiirements. This OperatingPhilosophy hasinterestingimplications. ISSC's successwillbebasedonthetradingarea tIrSaSdCinigsianrebaussianleesssfotroces,upsopoirtthatshenIoBsMales tshailsestofowrocer'kswsiulclceisnsgfnuelslsy,tothueseItBhMem. For forceofitsown.IBMhasretainedits commissionplanmustpromo—teuseof philosophyofonefacetothecustomerand ISSC,andISSCmustprove through isusingthecommissionedtradingarea responsiveness,—competitiveness,and salesforcetosellISSC'sservices. The qualityservice thatitshouldbethesales tradingareashavebuilt-inservices force'svendorofchoice. capabilitiesintheirfieldsystems engineeringforces,aswellastheformer Althoughitisawholly-ownedsubsidiaryof SystemsIntegrationDivisionprofessional IBM,ISSC willnotreportitsbusiness servicesstaffthatwasdistributedamong resultspublicly. Itwillmeetalllegal thefieldforceslastyear. reportingrequirementsthroughinternal reporting. ©1991byINPUT.Reproductionprohibited. 3 Summary IBMhasoutstandingsystemsoperations experience. Itson-linemarketingand Thismostrecentannouncement supportsystemshavebeenindustry reemphasizesIBM'sresolvetobecomean leadersformanyyears. Inaddition,IBM evenmoresignificantplayerinthe hasextensiveexperienceinmanufacturing informationservicesindustry. The applications. IBM'sinternalplanning announcementreleasesitfi-omanyrealor processandqualityprogramshavemade impliedrestrictionsofthe1956consent itsinternalISoperationsextremely decree.IBMwillbecomeanevenmore efficientandeffective. Thispermitsitto fiercecompetitorinthesystemsoperations priceproposalsextremelycompetitivelyin marketandinotherserviceareasaswell, thesystemsoperationsmarket. particularlywhereitshardwarebaseis threatened. IBMhassuperiormarketcoverageasa resultofitsequipmentbusiness. Ithas Nearthecloseoftheannouncement,ISSC salesandservicespersonnelinconstant statedits1990commercialrevenuesfor contactwithvirtuallyeverysystems theactivitiesnowinISSCwerearound operationsprospect. Payingcommissions $300million.Itexpectsrevenuestogrow to thetradingareasalespersonneltosell inexcessof100percentperyearoverthe ISSC'ssystemsoperationsservicesshould nextthreeyears. proveverysuccessful. Exhibit3identifiesthestrengthsthatIBM IBMhasoutstandingcreditandaccessto nowhasinthesystemsoperations capitalmarkets. Asasubsidiaryofa business. Thislistissimilartotheone technologyleader,ISSCknowstheproduct pubhshedinINPUT'SNovember1990 developmentsthatarecomingandwill Rese—archBulleti—n;however,another buildthemintoitsproposals. Inaddition, item ^flexibility hasbeenaddedtothe asasubsidiaryofanequipment hst. manufacturer,ISSCwillenjoyextremely lowequipmentandsoftwareproductcosts. Exhibit3 Finally, IBMcreatedISSCasan IBMSystems organizationthatwillbeextremelyflexible andnimble. Thedecisioncyclewillbe OperationsStrengths shortenedandtheconsentdecreeshoiald nolongergetintheway. ISSCmayvery wellachievethegrowthobjectivesstated •Operationsexperience initsannouncement. •Marketaccess •Capital •Teciinology •Lowproductcost •Flexibility Source: INPUT ThisResearchBulletinispublishedbyINPUT. Ifyouhavequestionsorcommentsonthisbulletin, 1953GallowsRpoleaads,eScuailtleyo56u0r,lVoicaelnnIaN,PVUAT2o2r1g8a2n,izTaetlioenphoornDeo(u7g03W)i8l4d7e-r68a7t0I,NFPaUxT,(703)847-6872. 4 ©1991byINPUT.Reproductionprohibited. IBMANNOUNCESANINFORMATIONSERVICESSUBSIDIARY OnWednesday,May,15,1991,IBMannouncedawholly-ownedsubsidiary,the Integrated Systems Solutions Coiporation (ISSC), its newinfoiiiiation seivices organization. What'snew,organizationally? Notalot. WhileISSClooksalot liketheIBMSystemsServicesDivision,beingasubsidiarywillmakeitastronger competitor. OnWednesday,May15,viaanationwidetelephonehookup,IBMexplainedits newsubsidiarytothemarketresearchandcoiisultingcommunity. Thepurpose ofthisresearchbulletinis toprovideINPUT'S clientswiththecontentofthat teleconferenceandINPUT'Sviewofthesignificanceoftheannouncement. InNovember 1990,IBMestablished the IBMSystems Services Division under Dennie Welsh, a fonnerIBMFederal SectorDivision executive. In the recent aanndnosuetnciteumpenwtitIhBaMserpeanraamteedbotahredoorfgadinriezcattoirosn.,DreensntiruectWuerlesdh,itntoowspormeesideexntetnto,f thenewsubsidiary,madetheannouncement. Hestressedthemajorreasonfor thischangewastoprovidetheorganizationwithflexibility. Hecommentedthat a rapidly changing market required a responsive organization and an enhepreneurialenvironment. Asaseparate suDsidiarywithits ownboard of directors, Dennie believes that ISSC will provide that environment and responsivenesstoitsclientsandprospects. Wliile not discussed to any extentin the announcement, INPUTbelieves this structuralchangeisalsotargeted ateliminatinganyconstraintsthatmayhave beenimposedbyIBM's1956consentdecree. Duringtheteleconference,Dennie announced thatISSCwouldoffersomenewdatasei-vices(thatmayhavebeen restricted bythe consentdecree). Establishing thesubsidiaryappears tohave eliminated theconsentdecreerestrictions and trulyimprovesIBM'sflexibility. Competitionbeware! IBMcannowfreelyaddressallofitsclients'requirements. AFullRangeofServices Duringtheannouncement,Denniedescribed thesei-vicesISSCwillbeoffering. Theyare listed in Exhibit 1 and areasurprisinglybroad setofofferings. Itis worth examining some ofthese seivicesbecause theygobeyond what earlier IBMsystemsoperationsunitsoffered. 1