Behind the fantastic quarterly results a dark cloud engulfs IBM’s long term future
Dan Lokuta
Oct. 17, 2006

IBM today is a IT services company. The hardware, software, middleware all are geared to support the services section of the core business. IBM changed course some years back when it acquired the services consulting business Coopers Price-waterhouse. Today IBM has also stripped its PC business to focus on service side of IT.

IBM has been able to turn around a series of quarterly revenue declines that started after the PC division was sold to Lenovo. IBM beating analysts'' third-quarter earnings estimates by 10 cents came from numerous acquisitions of software companies with good revenue stream and cash flows. All these companies contributed to the overall profit structure.

But behind all these hoopla and euphoria, there lies some serious trouble zones. The dark clouds are there and IBM is aware of the same. Computer services industry has the least pricing power especially because of cheap Indian workers available in Bangalore and other places in the country. IBM India is failing to attract the best talent. The same is also true in North America. Computer services business is not an easy operation. For that best suited companies very small who specialize in vertical process segments within specific industry sector. IBM bought these companies one after the other. But the knowledgebase is with the small software company owners who are slowly venturing out.

Like all large companies IBM faces the big dilemma – lack of talent. The best talent today wants to become an entrepreneur not a large company employee.

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