Why IBM bucked the technology downtrend

At one time the in-house joke for IBM was that the initials stood for "I've been moved" as executives were continually shuttled about as they moved up the corporate ladder. Right now a better translation for the company would be "I've been moving" as in the company's rapid and continuing shift from hardware sales to software and services conducted on a global scale.

The wisdom of that shift was evident on January 20 as the company showed continued net income and profit margin growth in the fourth quarter despite a six percent revenue fall compared to the comparable quarter a year earlier.  This strength in the face of a general financial meltdown is remarkable. What's going on here? Here's my quickie analysis.

1. The shift to software and services on a global basis provides both a constant, predictable revenue stream and allows for the rapid transfer of knowledge within the IBM organization. What works profitably in one region can be quickly duplicated in another region. While that sounds easy, getting this type of intra-company communication to be robust and immediate is no easy task.

2. In an uncertain economy, outsourcing continues to be a decent technology choice for customers who are unclear where their revenue growth will come from or whether or not they will remain independent. The recent financial troubles at Indian outsourcer Satyam, will probably accelerate customer shift to trusted outsourcers such as IBM.

3. IBM has emphasized its role as a technology facilitator of a company's infrastructure including financial controls, energy management and human resources supervision. All those operations will continue to be important regardless of the economic conditions.

4. The company's embrace of the open source concept has helped convince reluctant customers that they could break free of the IBM embrace should they so desire.

5. Despite a decline in hardware revenues, the company continues to invest in new mainframe technologies and ways to fit that hardware into new unfolding concepts such as cloud computing and racks of blade servers. Customers want hardware platforms that are reliable, cost effective and secure and despite decades of predicting the decline and fall of mainframes, those big systems continue to offer performance in the areas customers value most.