IBM Prepares its GTS Business to Compete in the As-a-Service Economy

For the last three years all the traditional outsourcing-centric IT service providers having been struggling to find their feet as the market direction for infrastructure outsourcing gravitated toward cloud and digital. IBM is not immune to this and the business unit most impacted by these changes, Global Technology Services (GTS) strategy, is adapting to this new market direction.

During a recent analyst call and briefing, IBM communicated how the strategic direction of GTS was changing to better reflect the new IT services world. Largely, this is a shift from labour replacement services, toward more automated and component led solutions driven by business need. The main changes are:

• Organizational – the Integrated Technology Services (ITS) and Strategic Outsourcing (SO) units are combining into one Infrastructure Services Organization. Leaving its Technical Support Services business to deal with maintenance of IBM and third party products.
• Drawing together portfolio – the separate portfolios of ITS and SO are combining, largely as they addressed similar market needs. The new portfolio aims to focus more on business needs.
• Go to market – the separate sales forces have been combined into a single Infrastructure Services sales team. This includes dedicated teams focused on integrated Infrastructure Services, Cloud and Security.
• Delivery – the focus for delivery is automation. IBM is using a number of advanced analytics within its datacentre and its clients’ datacentre environments.
• Workforce – focusing on skills development in key technologies – such as cloud and analytics.

IBM’s SO unit was great at providing monolithic custom outsourcing deals that took on the staff and the processes of the outsourcing customer. The increasing move away from custom engagements and labor-based deals toward modular, outcome based offerings can only be a good thing. IBM is not trying to distance itself from its core large outsourcing deal focus. Indeed, given that it is one of the few service providers still able to win global infrastructure mega deals consistently, this would be foolish but rather IBM is looking to become more flexible for this changing market.

The IBM focus is to improve its ability to service the increasingly commoditizing infrastructure services space, especially within complex operating environments, helping it remain competitive in mega deals and be more attractive within smaller and less complex deals.

This is particularly important when it has to combat the siren lure of commodity cloud services, which are increasingly being targeted at non-IT functions of business customers. IT departments need help in delivering services that offer the agility of cloud, in a secure and end-to-end managed environment. Services that bring together the management of legacy and cloud infrastructures. These are what is required to be a successful in winning both the large mega deals and the often trickier, but more frequent, mid-sized deals. GTS simply has to pull this one off, market these services effectively and find a market for these services outside of the megadeal if it wants to maintain its long term foothold as the IT infrastructure services market leader.

HfS has also looked more specifically at IBM GTS’s automation strategy here.