IBM and the Emerging Cloud-Computing Industry

IBM is a large and successful IT company, which has been changing over the years together with the market. In the 2000s, the firm decided to enter the clouding computer industry because its popularity was growing with many other firms shifting towards it. However, this shift was accompanied by different questions and issues, which will be investigated in this paper.

IBM has experienced a significant change over 20 years and there are some lessons to learn from it. During this period, the firm changed the products and services it offered to the market because the demand was changing as well. Moreover, such changes are vital to the IT industry, because technologies and products are advancing every year and any company that wants to survive and grow should adapt to the new trends of this sector. Thus, IBM reacted to the changing market and its experience was used by other companies. In particular, the firm has produced hardware and software according to the latest trends and requirements as it has always tried to adapt to the new demands of its customers. In particular, when the popularity of the cloud-computing services was growing, the executives of IBM focused on them trying to do their best to offer such services or at least participate in a value chain by offering hardware or other products for the cloud-computing service firms. Thus, a few important lessons can be learned from this strategy. The most important lesson is that the firm should be flexible and able to change and produce products that are demanded, especially in the IT industry or other related sectors. This is the only approach that will allow the firm to be profitable and competitive.

Currently, IBM has particular business and corporate strategies. The business strategies are focused on various businesses the company holds including hardware and software production, IT infrastructure services, security and financing. Precisely, business level strategies aim at supporting all businesses’ development and growth and manufacturing competitive products that are demanded by customers. These strategies take into consideration current state of IT market and its actors, because changes are rapid in this sphere and new products appear regularly. Moreover, business level strategies focus on the development of new businesses. For example, a new potential business of cloud-computing services that is described in the case. Corporate level strategies summarize business level strategies for all businesses, which provide support for the former. As a result, corporate level strategies of IBM imply being competitive and powerful in the market, studying the demand and the products offered by its competitors, adapting company’s general philosophy and production to the new market trends, cooperating with partners that can support the strategy, finding new suppliers and customers as well as expanding to the new markets. Finally, mergers with partners are parts of corporate level strategy.

IBM has top three market segments: services, software and hardware. All segments are attractive for the company. All three are developing in the modern IT world and have good prospects for further development and profit generation. Services include consulting partners, strategic outsourcing, integrated technology services and maintenance among others. This segment has a good potential for development because more and more firms use technologies in everyday operations and supportive services are necessary for them. Moreover, since IBM plans to enter the cloud-computing sector, services related to cloud-computing will be demanded. Software segment is also important for IBM because it already offers different software products, which generate high profit if compared to the total profit. Moreover, the firm can develop this segment by offering new software products including the ones for cloud-computing. Finally, the hardware segment is also attractive for IBM and has a good potential because for any software of supporting services, hardware is required. Software cannot operate without good hardware hence this segment can be developed further. As IBM plans to enter the cloud-computing market, it can increase its hardware production and sales by offering special hardware for the cloud-computing services.

Considering all IBM’s resources, capabilities and competencies, the company can gain and sustain a competitive advantage. It is possible because the firm owns significant resources and capabilities. It has large plants to produce hardware as well as patents and required knowledge to produce software and provide different services. In IT sphere, capabilities are important and often are more valuable than plants or equipment. The capabilities of the company are significant, which can be said based on its patent history. The company produced many patents, whose number was constantly growing. For example, it produced about 3,000 in 2004 and about 5,000 in 2009. Thus, a growing number of patents indicates that IBM has enough knowledge and resources to gain competitive advantages. Moreover, the firm has core competencies to gain competitive advantages. Its core competencies are unique features that are hard to copy or cannot be copied by competitors. They include IBM’s history and reputation, since the company owns a well-known brand and has a stable position in the global market. Thus, the company can gain and sustain competitive advantages due to its core competencies.

Since IBM wants to enter the cloud-computing sphere, it is necessary to choose a particular segment. In my opinion, it will be better for IBM to focus on a vertical integration in the cloud-computing market. There are several reasons to choose such strategy. First, IBM already operates in different segments including hardware, software and services. Thus, it will be easier for it to choose vertical integration and offer various cloud-computing products. For example, IBM can offer services for cloud-computing, hardware for cloud-computing providers and special software to support cloud-computing services. Second, IBM already operates in different markets across the world hence vertical integration is not hard for the company. Third, the company is large and has many partners hence vertical integration will allow offering different cloud-computing solutions to them.

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If the firm enters cloud-computing sphere, it should have a plan for such business decision. IBM’s offensive plan should focus on entering the cloud-computing sphere and growing it. Thus, such plan may include strategies on what niches to take and how to find potential customers. Offensive plan should aim at entering and growing the cloud-computing industry. On the other hand, IBM should create a defensive plan in case it fails to enter the cloud-computing industry or succeed this market. Defensive plan should determine how IBM plans to maintain its position in existing markets, market share, existing relations with customers and competitive strategies. Both plans are necessary and should be developed as alternatives.

In conclusion, IBM is a large and successful company that operates in a global market and produces software, hardware and different services. The company wants to enter the market of cloud-computing because it is highly prospective in the nearest future. Such market entry is possible due to the resources, capabilities and core competencies of IBM. In order to enter the new market, the firm should develop two plans; offensive plan for entering the cloud-computing industry and a defensive plan for maintaining its current market position.