IBM--Far from perfect, but better than most

Earlier Monday, CNET News' Charlie Cooper reported on IBM's aggressive strategy during the current tumultuous economic cycle. IBM CEO Sam Palmisano told shareholders that IBM can weather nearly any economic storm--and in fact can grow through the downturn.

"We will not simply ride out the storm," he said. "Rather we will take a long-term view, and go on offense."

Back in 2005, I wrote my masters thesis on IBM and came to the conclusion that if managed effectively, the company could profit from nearly any world event, positive or negative. That viewpoint came from a great deal of research, much of it related to IBM's serious downturn during the initial PC era.

When the company started a rebirth (one of many) in 2002 toward an "on demand business" the success possibility became an issue of strategic execution. For all the negatives we can point out about specific products (and there are many), the company is still extremely well positioned for survival.

Developing strategy ideas for IBM is a bit like trying to buy a birthday present for the man who has everything. This is an organization more than 100 years old with more than 320,000 employees in 10 countries consistently recognized as one of the top three brands worldwide. The company single-handedly accounts for a significant portion of global sales of computer hardware, software and services.

Here is an excerpt of my IBM situational analysis:

The company's business model is built to support two principal goals: helping clients succeed in delivering business value by becoming more efficient and competitive through the use of business insight and information technology (IT) solutions; and providing long-term value to shareholders. In support of these objectives, the business model has been developed over time through strategic investments in services and technologies that have the best long-term growth and profitability prospects based on the value they deliver to clients. In addition, the company is committed to its employees and the communities in which it operates.

The company's portfolio of capabilities ranges from services that include business performance transformation services to software, hardware, fundamental research, financing and the component technologies used to build larger systems. These capabilities are combined to provide business insight and solutions in the enterprise computing space.

And what happens in a downturn:

If overall demand for hardware, software and services changes, whether due to general economic conditions or a shift in corporate buying patterns, sales performance could be impacted. IBM's diverse portfolio of products and offerings is designed to gain market share in both strong and weak economic climates.

The company accomplishes this by not only having a mix of offerings with long-term cash and income streams as well as cyclical transaction-based sales, but also by continually developing competitive products and solutions and effectively managing a skilled resource base. IBM continues to transform itself to take advantage of shifting demand trends, focusing on client or industry-specific solutions, business performance and open standards.

IBM is far from a perfect corporation. It has mishandled everything from producing mediocre software, to performing serious HR blunders. Regardless, it has done an incredible job of stacking the odds in its favor. While it remains to be seen what happens throughout the rest of the recession, I would bet on IBM to still be in decent shape.