IT services company profiles

Computer Industry Report, Nov 26, 1993

The following profiles review and analyze the major services suppliers in three categories: hardware manufacturers, professional integrators, and management consulting firms. Each category has a unique perspective on IT services and a distinct history of providing those services. The distinctions among these providers are blurring as each finds itself encroaching on unfamiliar turf while exploring opportunities in the emerging and burgeoning IT services segments of business reengineering, integration and consulting, client/server systems, and outsourcing.

Note: Throughout this issue revenues cited refer to IT services only and include a wide range of services such as integration, outsourcing, hardware and software maintenance, education, and training. Nineteen ninety-three numbers are estimates.

IBM/ISSC

1992 Services Revenue: $16.3 billion

1993 Services Revenue: $17.5 billion

Key vertical markets: IBM's target verticals for IT services include manufacturing, financial services, insurance, health care, and the public sector.

Other strengths: Breadth of products and services, experience in performing integration and consulting services.

Outlook: ISSC is moving toward performing more outsourcing contracts as corporations scale back expenses and seek to concentrate on what they do best. Field service centers may enable IBM to gain a foothold in smaller businesses and develop some of the expertise common among smaller integrators.

IBM has four separate organizations pursuing IT services: ISSC, IBM Consulting, Federal Sector Division, and US Trading Areas. ISSC, a wholly-owned subsidiary, is the most autonomous arm of IBM's IT services business. ISSC's business is a mix of large integration and outsourcing projects with IBM mainframe-based projects. Advantis, a joint venture with Sears Business Centers, is ISSC's network outsourcing arm. The IBM Consulting Group targets the strategic planning and process reengineering consulting segment offering management, functional, and technology consulting in IBM and non-IBM environments. Adorned with its own logo, the group is bent on distancing itself from the parent organization. The Federal Sector Division bids on government integration contracts, largely with an IBM focus. The Federal Sector, although profitable, is reportedly up for sale. The Trading Areas, or branch offices, concentrate on IBM-based technology solutions for specific industries.

IBM recently reorganized ISSC to minimize overlap and competition and to better define the roles of ISSC and the IBM Consulting Group. ISSC is to compete for large integration projects and outsourcing contracts. The IBM Consulting Group now focuses exclusively on business and systems consulting. Both groups are organized by vertical market. When appropriate, the groups pursue projects jointly, with the Consulting Group providing analysis and recommendations, and ISSC handling IT implementation. The Trading Areas compete against smaller integrators in the small- to medium- sized business market. In 1993, IBM established 31 field service centers to focus on small integration deals with a geographic and vertical focus. They also provide integrated services such as service operations and maintenance.

ISSC still bids on IBM-based solutions and obviously has an inside track on projects that include IBM mainframes. It is able to leverage IBM's reputation in broad-based commercial markets that have used IBM systems and software for many years. ISSC will lead IBM's charge into outsourcing, squaring off against EDS. In 1993, it has enjoyed strong growth and should capture significant market share. The further ISSC can separate itself from its parent, the stronger its competitive position will be. However, it will never be able to completely separate itself from IBM. It should continue to leverage IBM's long-standing relationship with ISVs to develop joint solutions for particular industries and align itself with best-of-breed providers through subcontracting alliances, partnerships, or investment.

IBM, which has been in the professional services industry longer than any other manufacturer and most independents, still commands a leading position in terms of dollars and scope. Nonetheless, more than any other vendor IBM is stuck with the vendor-bias label. The growing independence of ISSC and the forward thinking of the Advantis venture are promising. But the company must continue to develop partnerships, be they as joint ventures, as with Advantis, or close ties with others, as with ViaSoft, for application reengineering.

Hewlett-Packard

1992 Services Revenue: $2.9 billion

1993 Services Revenue: $3.3 billion

Key vertical markets: Worldwide focus is on manufacturing, telecommunications, and financial services. Other verticals are determined by geography and business concentration.

Other strengths: Unix leadership in systems, resource management, and network management software.

Outlook: HP will focus on downsizing opportunities in which it can leverage its own products as a mainframe alternative.