Commentary: Sting in the tale of IBM's pride

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The Independent Online
IBM's latest attempt at a crash diet is no doubt welcome to shareholders, but the consensus is that it does not go far enough. While almost every company in the information technology industries is feeling the pinch, Big Blue has been slower than most to admit the need to cut costs in the form of corporate fat.

The danger now is that the company will stop short of all that needs to be done. Assuming it realises as much, the latest 25,000 job losses, coming after 40,000 previously announced, should not be the end of the tale. IBM's predicament stems not only from the difficulties in the marketplace but from the company's own past mistakes. Big Blue has attempted to resist the fact that the traditional mainframe computer business (where its profit margins are highest) is seriously under threat. Nor has it been quick enough to accept the growing importance of software and services - something that other companies selling IBM-related products and services have been quick to use to their advantage. They have benefited from the recession- driven trend towards building on existing computer installations without splashing out on lots more expensive hardware.

Recent efforts to reorganise within IBM by moving people out of the back office into frontline jobs such as sales have also ignored the growing use in the computer industry of direct sales to the end-user - by telephone and mail for example - and the use of third-party distributors. Furthermore, IBM's sales force has not in the past been noted for its user-friendliness. Expanding it does not necessarily increase its effectiveness.

With revenues estimated to be around dollars 67bn this year, IBM is no mean operation to contend with. Not even giants of that size, however, are unassailable. As one industry observer has put it, w(h)ither IBM?

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