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IBM Corp - Shift To E-business Services

web billion software firm

RJR Holdings executive Louis V. Gerstner, Jr. was hired to take over as CEO and chairman on April 1, 1993. He canceled Akers' plan to divide IBM into separate entities, believing that the firm's ability to offer comprehensive business solutions to clients would prove beneficial in the long run. He also began reigning in IBM's research and development spending, which had reached $6 billion by 1992. In June of 1995, IBM bought Lotus Development Corp., hoping to strengthen its foothold in the computer software market and use the Lotus Notes messaging software to offer integrated email, data processing, and Internet services to clients. The firm also folded its software operations into a single unit to simplify purchasing and support services for customers. Sales that year totaled $71 billion. In 1996, IBM added network software maker Tivoli Systems Inc. to its holdings.

By mid-1997, services had become the fastest growing segment of IBM's operations. The firm began touting itself as an e-business products and services provider. Earnings reached $6 billion on sales of $78.5 billion. IBM divested its Global Network operations to AT&T Corp. for approximately $5 billion. In 1998, the company acquired wireless communications chip maker CommQuest Technologies. That year, IBM increased its advertising budget by 21 percent, pushing its e-business servers, software, hardware, technology, and services in an effort to target business managers expected to use the Internet to streamline processes, improve bottom lines, increase visibility, and so on. The firm bought Denmark-based corporate resources planning software maker Management and Applications Support in 1999. It also updated the e-business portion of its own World Wide Web site. Sales climbed to $88.4 billion.

IBM's first e-Business Innovation Center was launched in Santa Monica, California, in January of 2000 with 16 employees. Central to the firm's e-business services was its WebSphere server software, which IBM used to support the e-commerce initiatives, including retail Web sites, of clients. The Web-Sphere Commerce Suite 4.1 package launched that year included Web development tools and customer classification functions that allowed e-business to hone future marketing efforts. By December, employees at the center had grown to 135, and e-business services had increased more than 70 percent to $5.2 billion. IBM's own Web site realized a 65 percent increase in sales, reaching $9 billion.

Rather than targeting upstarts, as many e-business service providers had done, IBM peddled its services to traditional businesses. As a result, when the fallout in 2000 left many in the e-business services industry floundering, IBM continued to grow. By 2001, 25 e-Business Innovation Centers were either operating or being constructed. According to a January 2001 article in the Los Angeles Business Journal, "IBM wants to establish itself as the one-stop shopping source for customers seeking Web-related creative design, consulting and tech support."


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10 months ago

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