Competing with IBM: A Daunting Challenge, But Don’t Despair

Deep pockets certainly come in handy. Following the old wisdom about grabbing market share while times are tough, IBM has invested heavily in strengthening its position in professional services over the last few years via extensive advertising, more aggressive sales efforts, a stronger push into the small and medium-sized business market, and, of course, purchasing the consulting arm of PricewaterhouseCoopers. According to a recent ITSMA study of 400 buyers in nine vertical markets, the efforts have paid off big-time.

For competitors, and that includes just about everyone remotely connected to IT services these days, the results of IBMs efforts are daunting. As shown in ITSMA’s Professional Services and Solutions: 2003 Market Positioning Study:

• IBM substantially widened its lead over all competitors in general brand awareness for IT professional services.
• More than 25% of buyers from large firms named IBM as the one firm they would likely call if they needed IT professional services and solutions. EDS came in second with 4%; Accenture, Microsoft, and Hewlett-Packard were cited by 2-3% each.
• Almost 40% of buyers named IBM as one of the firms they know (i.e., unaided awareness) in this category; Accenture came in second with 10%; EDS, Hewlett-Packard, and Microsoft followed close behind.
• In both of these categories, IBM’s lead is notably larger than it was in ITSMA’s parallel study in 2002.

Further, IBM Global Services ranked at or very near the top in most other categories in the ITSMA study, including brand familiarity, knowledge, and preference. Indeed, IBM was the only firm strongly positioned in all five categories of IT professional services that ITSMA tested for:

• Management consultant/business advisor
• IT consultant/architect
• Systems integrator
• Outsourcing
• Solutions provider

Finally, IBM ranked first in five out of six categories of solutions: technology consulting, customer relationship management, outsourcing/applications management, shared services, and supply chain management. It ranked second (to SAP) in enterprise resource planning solutions.

Phew! Not a lot of encouraging news for the other players there.

Digging a little deeper into the data, however, provides evidence that all should not be doom and gloom for IBM’s competitors.

For one thing, the market remains wide open. When asked which firm they would most likely call for IT professional services and solutions, almost 40% named a firm other than any of the leading firms. Almost 10% said “I don’t know.” Similarly, even at the top of the heap, only 31% of buyers said they are very familiar with IBM Global Services. This is far from a monopoly situation.

Perhaps more important, buyers are not exactly overwhelmed with the services they are receiving—or perceiving—from providers in general (obviously including IBM). When ITSMA asked buyers about the most important attributes for providers of IT professional services and solutions, they answered as follows:

• Follows through on promises (4.8 on a five-point scale)
• Has industry expertise (4.6)
• Works collaboratively with customers (4.5)
• Transfers knowledge to customers (4.5)

Although IBM scored about as well as any firm on these attributes, it did not score up to the level that buyers are looking for. Interestingly, Dell was the only firm to score highly in six of the seven most important attributes for buyers—and Dell is not even a major provider of IT professional services!

One more hopeful point for at least some IBM competitors: Buyers state a very strong preference for their IT professional services providers to be technology neutral.

In the end, IBM remains an extremely formidable competitor. The company has spent heavily to build IBM Global Services and it has spent effectively. It’s not just deep pockets; IBM’s marketing strategies and activities are mostly topnotch. Yet opportunity abounds for alternative providers. Some customers have reverted to the old “you can’t go wrong with IBM” attitude of their parents’ generation; others will stay away from Big Blue precisely because it has such a large presence. But most customers are much more focused on their own problems, needs, constraints, and opportunities.

Compelling value propositions still win most of the time, and most buyers are looking for discrete solutions to near-term challenges, rather than the massive end-to-end solutions that are toughest for most IBM competitors to deliver. Sticking to the fundamentals of understanding your customers, targeting and segmenting for maximum advantage, creating a first-class customer, and delivering outstanding services and solutions (no simple list, of course) will bring most firms plenty of new and repeat business as the market begins to come back. And if not, IBM is always looking for more good partners!

ITSMA’s new report, Professional Services and Solutions: 2003 Market Positioning Study, includes detailed data and analysis on buyer perceptions based on a survey of 400 decision makers from nine vertical markets. The report covers unaided and aided awareness of professional services providers, familiarity and favorability, relative market positioning, preferred company attributes, and buyers’ goals and priorities. The report is available for sale at member and nonmember prices. Visit http://www.itsma.com/research/abstracts/bps0004.htm for details.

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ITSMA specializes in helping companies market and sell services and solutions more effectively. We work with the world's leading technology, communications, and professional services providers to generate increased demand, strengthen customer relationships, and improve brand differentiation. ITSMA annual program clients include business leaders such as AT&T, Cisco, Deloitte, EMC, Fujitsu, Hewlett-Packard, IBM, Microsoft, SAP, and Tata Consultancy Services, among others. Our comprehensive research, consulting, and training on topics including ITSMA Account-Based Marketing℠, Brand Positioning, and Solutions Development provide the insight and experience companies need to improve business results. ITSMA is based near Boston, and has offices in London and Tokyo. Learn more at www.itsma.com.