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Gerstner: Teamwork, Net key to services

IBM's CEO sends a strong message to the company's business partners: Work together to tap the power of the Net and we can do wonders in the exploding services market.

NEW ORLEANS--IBM chief executive Louis Gerstner sent a strong message to the company's business partners today: Work together to tap the power of the Internet and we can do wonders in the exploding services market.

"Our industry is in the middle of an extraordinary change that happens every 20 years," he told attendees of IBM's Business Partner Executive Conference, the computer giant's largest annual event, which is expected to draw more than 6,000 professionals here this week.

Gerstner said the lonely position IBM staked out several years ago--that networked computing would be the industry's future--"is feeling a lot less lonely" today. He added that building open standards and open platforms, supporting Java, and boosting compatible infrastucture for others will be key to the electronic business's growth. IBM predicts that $600 billion of total information technology dollars spent will go toward e-business by 2002.

Gerstner's keynote followed a blitz of musical fanfare, including some in-the-aisle gospel entertainment remniscent of Whoopie Goldberg's film Sister Act. This year's theme, "Unleashing the Power of e-Business," is backed by the huge IBM advertising campaign in print and online media.

Gerstner credited the business partners--more than 45,000 worldwide--as key to IBM's transformation over the past several years from a struggling mainframe company to a worldwide technology leader and the No. 1 global services company. Overall revenues IBM reaps from business partners has jumped dramatically from about 10 percent in 1993 to nearly 35 percent in 1998, an average compound growth of 15 percent, he said.

Business partners delivered 60 percent of IBM's services to small to medium-size businesses last year and are now involved in about 80 percent of IBM projects at large corporations, he said. Partners accounted for $14 billion in large account revenues in 1998, an 11 percent increase from 1997, he said.

"Over the past two years you've increased sales of IBM services by 72 percent," Gerstner told the audience, noting sales grew from $600 million in 1997 to $1.7 billion last year.

However, through talking to business partners at the conference, Gerstner said there are problems to address to improve business, including generating more business leads to Canada-based partners, tackling internal competition in the services and consulting business, and clarifying the company's position in the server market.

"We've got to be candid with each other," he said. "We've got to get things fixed?We're in this game to win."

And the stakes are high if IBM wants to increase its claim to the trillion-dollar global services market, which is up for grabs and hotly competitive.

"I'm not sure we've advanced as much as we'd have liked," Gerstner said, noting that no services provider now holds a percentage of the services market in the double digits. "We are a leader with 9 percent. We are in a position to go get it. We'll do that if we're smart, by talking to each other."

Gerstner also downplayed recent media hysteria surrounding Year 2000 preparedness within corporations and institutions.

"It's clear we'll see [problems]," he said. "But no recession or some sort of digital winter envelopes the whole world. All the research we've seen and assessment of our customers' readiness shows most major markets will be OK. They've made Year 2000 a priority and they're testing."

Trends toward merging across the computer industry are also impacting IBM, Gerstner noted.

IBM has curbed the number of its distributors from 18 to 8 and has halved its number of solution providers from 8,000 to 4,000 to better align the company with the larger players it needs to focus on to better compete, he said.