Ovum: Size, diversity helps IBM in economic downturn

IBM is a good example that size and diversity are clear advantages in the current economic climate, according to consultancy Ovum.

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IBM is a good example that size and diversity are clear advantages in the current economic climate, according to consultancy Ovum.

Diversity in geographic, industry and product or service revenues have brought stability to the IT vendor, said David Mitchell, senior vice president of IT research at Ovum.

Significant annuity revenues from recurring services, support and maintenance, and other predictable channels represent a major part of the revenue mix for IBM.

IBM has seen solid third quarter results for 2008. Net income rose 20 percent to US$2.8 billion. Revenues for global technology services were up 8 percent, global business services, seven per cent, and software, 12 percent.

The Americas experienced relatively slow growth, at only three per cent. In contrast, Europe, Middle East and Africa revenues grew 10 percent and Asia Pacific, six percent.

As the Europe, Middle East and Africa market enters a phase of cooling, the Asia Pacific may see steady growth and it is likely to be the American markets that will signal the unfreezing of corporate spending at the earliest.

"Having exposure to all three territories offers that all important counter-cyclicality that has been talked about recently in financial markets," said Mitchell.

The growth markets that IBM is now increasing its focus on are growing at 13 per cent and this focus may generate further growth in the short term.

Another important benefit of having a strong services component to the revenue mix is the forward visibility of revenues.

Across its strategic outsourcing, business transformation outsourcing, integrated technology services, global business services and maintenance services, IBM indicates a current backlog of US$114 billion.

"This visibility gives firms such as IBM the ability to better control their businesses, avoiding the short-term or knee-jerk responses that companies with lower visibility often feel obliged to make," said Mitchell.

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