Customer, partner, client, competitor
By Nick Donofrio
The traditional image of the marketplace contains buyers and sellers, each playing well-defined roles. It's simple, it's clear-cut and it's all but obsolete.
Businesses have always played multiple roles, buying from one company and selling to another, but today the roles are even more complex. Companies often find themselves acting as partners in one area and competitors in another. With IBM's growing presence in the OEM (original equipment manufacturer) marketplace, we find ourselves in this situation more and more often. And it's a good place to be.
Certainly, it's good for IBM's bottom line—our OEM business has enjoyed double-digit revenue growth since 1998, when IBM formed the Technology Group to sell storage, microelectronics, printing, display and other technologies in a coordinated fashion to other hardware manufacturers. It's good for them, our OEM customers: they gain access to our leading-edge technologies. And it's good for our customers within IBM who incorporate our technology into IBM products: while they no longer have sole access to our technology, they share in the benefits that accrue from selling to a larger, global market.
What are those benefits? First, greater demand enables us to make fuller use of our manufacturing capacity and to realize —and pass on—economies of scale. Second, by competing against top technology firms that also supply the OEM market, we are forced to critically evaluate everything we do. That helps drive innovation, deepens our commitment to openness and standards, and ensures that we strive to stay at the forefront of the industry. Third, by reaching a larger customer base, we gain a broader appreciation of emerging trends and market forces. Such efficiencies and improvements—which directly benefit all our customers, including our IBM ones—are driven by our success in the OEM marketplace.
Through our OEM business, IBM technology also gains entry to markets and industries in which IBM does not offer products of its own, such as the areas of networking, consumer electronics, and appliances. And that's not all. Our hardware offerings are complemented by an outstanding suite of services and software. As the world's IT infrastructure grows across the computing spectrum—from pervasive devices to enterprise systems—the challenge of managing it and providing the necessary support also grows. Already, along with multibillion-dollar outsourcing agreements, we have seen our OEM business generate substantial sales of IBM e-business solutions, deep computing applications and other software.
Our OEM business has also paved the way for new types of alliances. We've opened our global technology portfolio, our Research innovations and our integration skills to some of our fiercest competitors, who also are some of our best customers. Together, we draft blueprints for future technologies and solutions. The OEM business enables us to leverage our research and expand the potential market for our technology. This is not the beginning of research-for-hire: rather, it is a smart way to speed new ideas into products. Our partners know their customers; we have unique expertise in many areas. Working together, we can reduce the overall risk while creating solutions that quickly capitalize on growing opportunities.
Nick Donofrio is senior vice president and group executive, Technology and Manufacturing.
