Editor’s note: As WRAL TechWire reported earlier Monday in detail, IBM Chair and CEO Ginny Rometty is implementing a major restructuring. Rometty’s customer-driven reorganization sets stage for IBM’s transformation, concludes a team of analysts at Technology Business Research: Stuart Williams, Vice President; Geoff Woollacott, Practice Manager/Principal Analyst; Allan Krans, Practice Manager/Principal Analyst; and Christian Perry, Senior Analyst/Content Manager. (TBR also has a breakdown on the new business units and leadership.)

HAMPTON, N.H. – IBM’s (NYSE: IBM) reorganization is one of many steps designed to change its recent trajectory.

IBM internally announced a reorganization on Jan. 6. It structures the company into specific units focused on combining technology, software assets and IP, and domain and vertical expertise for more agile delivery of IT in response to how its customers want to consume technology.

After the news that IBM would not hit previous 2015 financial expectations last quarter, this reorganization begins the road to redemption. Its success or failure will lie in the execution, but this reorganization is a proactive step to align with today’s IT customer.

  • IBM reorganizes its assets around how buyers want to consume IT, collapsing disparate technology silos in the process

TBR believes IBM has organized itself around the way in which commercial enterprises want to consume IT. Four units — Commerce, Analytics, Security and Watson — focus on delivering solutions appealing to the emerging line-of-business (LOB) buyer with more business advisory consulting capabilities. Two other units — Cloud and Systems — focus on delivering high-performance infrastructure technology to IT departments for businesses seeking to deliver solutions in a hybrid IT environment.

It should also be noted the Cloud unit will contain IBM IaaS and PaaS offerings, while IBM SaaS solutions will remain with IBM Commerce, IBM Analytics and IBM Watson.

This structure will enable IBM to target what TBR views as a hybrid enterprise customer base that increasingly approaches IT purchases from a project-centric, workload-focused perspective, rather than from IT-wide initiatives that are no longer appropriate for heterogeneous business environments. To meet the needs of this evolving customer set effectively, IBM’s units will collaborate as necessary to handle engagements that cut across multiple technology and solution areas.

Despite IBM’s reorganization into a range of discrete business units, the sales and R&D organizations remain intact and the Global Services units (GBS and GTS) remain the core delivery engine for its professional services and support execution. IBM does not currently anticipate changing the way it reports its results to Wall Street.

  • IBM can deliver the same solution more quickly

None of the solution units announced are new technology areas for IBM, as the company already delivers security, analytics, cloud, commerce, systems and services for its customers. However, as the underlying fundamentals of the IT industry shift, the speed at which customers seek tangible results accelerates rapidly.

What previously required coordination across different groups within IBM is now restructured to speed the time to value for customers. This enterprise transformation positions IBM to rapidly assemble the assets and craft the solutions customers demand. Core sales, marketing and development activities remain similar to before the announcement, but are shifting along with highly skilled assets into the business units.

This enables these units to take the lead in solutioning the engagements then executing in concert with the IBM Global Business Services unit. This unit will mostly operate as usual, save for SoftLayer and Security moving out of GTS into the Cloud and Security units,
respectively.

  • IBM Partners have less channel conflict and greater access to IBM IP

IBM will combine the partner teams previously residing in several groups within the Systems unit to broaden the partner participation and accelerate the delivery of mission-critical IP into the IBM ecosystem. This will reduce a layer of complexity and conflict for partners doing business with IBM. In addition, the core units focused on outcome buyers will be more closely aligned with specialty partners to stitch together solutions having greater relevance and monetary impact on commercial enterprises.

Given the changes already underway for IBM’s channel partners with the recent sale of the x86 server business, the timing of this change will enable partners to begin 2015 with an all-over fresh vision for how the IBM portfolio will be structured and programs executed. IBM customers have multiple ways to consume IBM IP from prebuilt solutions to core infrastructure components

IT purchasing preferences continue to shift. Buyers run the gamut from those seeking a simple, easy-to-procure SaaS solution in “add to cart” format all the way back to those who want to adhere to traditional consumption models by building their own solutions from leading-edge infrastructure components. The new IBM organization provides many access points, unified by the unchanged IBM sales and delivery units, which can guide their customers to the right part of the IBM organization to facilitate the relationship.

  • Competitors face a ‘unified’ IBM that sells on value

Over the past several years, IBM has started to evolve away from being a point-product and technology company.

By offering on-premises- and cloud-service-based versions of offerings, IBM initiated a hybrid strategy of serving a broader range of modern buyers. With the reorganization, IBM can better enable the development and delivery of the full range of these offerings and to address the broadest market opportunity.

Competitors will face an IBM that can fully enter client discussions with a choice of consumption options in specific areas. As buyers broker decisions between components and cloud, for example, IBM has an advantage over competing firms that can only sell one part of the mix.

The challenge for IBM is to continue to train and align its traditional sales force to sell across this new model, as revenue recognition, value propositions and customer conversations will differ.

Vendors that cannot match IBM’s portfolio breadth will now be challenged to justify why their limited offerings are better for the customer than the IBM solution set. Traditional technology multiline vendors such as Microsoft, HP and Cisco are now challenged to match IBM to address the expanded customer universe.

  • Expect the transformation to continue

IBM is not a stranger to enterprise transformation and remaking itself over its 100-plus-year history. The rapid acceleration of cloud adoption, coupled with analytics reducing the time to insight for business through strategic IT deployment collapses the boundary lines between strategy-led and technology-led consulting firms. IBM will compete and provide core infrastructure platforms to those wanting them, while also continuing to develop leading-edge solutions through its continued collaboration with large commercial enterprises and partners with
niche specialty skills.

(C) TBR