IBM's "On Demand Business" Strategy

In the late 1990s, IBM successfully moved up the value chain and became one of the largest business and information technology (IT) solution providers in the world. To achieve such a transformation, the company made a number of strategic moves to reduce its exposure in the commoditization of IT hardware manufacturing. A key success factor was the creation of IBM Global Services and its venture into the high-margin management consulting and technology services industries. Moreover, IBM orchestrated a series of strategic acquisitions, sold ailing business units, and outsourced low-value-added manufacturing to external contractors and joint venture partners. In 2002, with the success of its business model and the introduction of new computing architecture, IBM made a high-profile announcement about its new corporate strategy centered on the concept of "on demand business." Nonetheless, followed by disappointing financial results in the first quarter of 2005, IBM's stock price plummeted and hit the lowest point since Sam Palmisano took over as CEO in March 2002. The company announced a massive restructuring in its European operations to be carried out in late 2005. Although the second quarter results had improved, some began to doubt whether the "on demand" strategy would deliver the promised results. More specifically, many started to question why and how such a strategy was justified in the first place. What difficulties would the company encounter in implementing its new corporate strategy?

• Personal growth and transformation
• Organizational restructuring
• Outsourcing
• Strategy