By the year 2002, over 50 percent of everything that is spent externally on IT services will be expended around e-business activities. That’s part of the e-business explosion predicted by Doug Elix, general manager for IBM Global Services.
“The connected world — and therefore, all the e-business services — is a long-term growth area and strategy for us,” said Elix. “The big explosion area here is businesses collaborating with one another, either for value exchange or for information exchange. That’s going to be the big surge of growth in e-business.”
That surge is part of what Elix sees as a continuing industry trend to move from a cost focus to a value focus. “While cost is still important in outsourcing, the real question is what value it is bringing to the enterprise in skills they couldn’t otherwise get and leveraging those skills so that the company can be more competitive.”
Other Areas on the Rise
He also singles out distributive computing environment as an enduring aspect of outsourcing. “It is increasingly complex for a client to manage connection of the desktop to the LAN, connection of the LAN to a wide area network, through to a host,” said Elix. “So that whole end-to-end distributive computing environment — keeping it high integrity, highly available, and capable of running mission-critical enterprise applications — is a big growth area.” Application enabling — taking packaged applications and showing clients how to deploy them in their organizations — is proving to be a growth area for IBM. And Year 2000 issues are also driving immediate growth.
“Year 2000 obviously is not something you would look at as a 10-year marketplace,” said Elix, “but it is top of mind for many customers who want to make sure they are ready. They need help, so that offers a lot of opportunity.” All of this growth is taking place in what Elix terms a healthy economy, especially in the U.S. “There’s not this burning pressure to restructure income statements and balance sheets,” he said. The economic factor that comes to bear is the escalation of the cost of skills and the shortage of them. “In the IT industry,” he said, “there’s a definite economic trend to these shortages of skills and an escalation in salary terms of key skills.”
All of these factors are reshaping the day-to-day outsourcing relationships between suppliers and customers. “The relationship that people are looking for now is a flexible relationship, one in which expectations are well understood and adjustments can be made based on changing business needs and changing expectations of technology,” Elix said.
And those changing expectations are fueling a move toward more partnerships and co-sourcing activities.
“People are trying to get the best value they can,” he said. “If they can’t get it from one partner in the marketplace, they look at multiples. But, every time you add another partner, that’s one more partner to manage. So I think companies are trying to limit those arrangements to a small number of partners who show a willingness and, in some cases, a proven track record of being able to work together.”
Having expectations and communicating them to a vendor are two different things. Elix said one of his greatest concerns for customers is ensuring that at one to three years into the relationship they can say that the company is better off than if the work had been kept in-house.
“They have to be able to answer yes to that question,” said Elix. “We spend a lot of time with our customer on clearly understanding their expectations of why they wanted to do this and then making sure we deliver. It’s not just the contractual obligations, but meeting the customer’s expectations.
“In fact,” he added, “when expectations are being consistently met, no one ever looks at the contract.”
A Global Footprint
While IBM Global is continuing to see a 20 percent growth in the U.S., the company also maintains a high profile in the international marketplace, with activities in 164 countries. Elix predicts that growth will continue internationally as well.
“We have special initiatives underway in the emerging countries like China, Russia, South Africa, and other eastern European countries are growing very rapidly,” he said. “Asia is growing very rapidly, not withstanding the Asian crisis.”
Whether at home or abroad, Elix said a major focus for IBM is skills. “The value proposition that we have here is that we have greater breadth and greater depth of skills — not only the technical skills, but also the disciplines and processes by which we work and produce a result,” he said. “We continue to invest in our existing employees so that they have the level of skills that let us deliver on our promise. If all we did was take over the same people and give them a different manager, then there would be no acrobatics.”