Management Toolkit

IBM Global Services slims down to grow again

Eamonn Kennedy Ovum

Published: 04 Jul 2005 13:00 BST

As has been widely rumoured in the business press for months, IBM EMEA will no longer have a Paris headquarters. Instead, the company will operate two regions within EMEA — the north-east region will be based in Zurich and the south-west region will be based in Madrid. Executives were emphatic in their declarations that this marks a significant change for the company and that these were not simply new headquarters. With only 200 employees each compared to 5,000 in Paris under the old structure, that would appear to be the case. Zurich and Madrid will be supplemented by various 'centres of excellence' to provide shared services to the in-country operations. The changes officially come into effect on 4 July.

The reorganisation
The essential abolition of headquarters is intended to provide two main operating advantages. Firstly, country operations should have more discretion over a wider range of decisions affecting their accounts — referring back for regional authorisation should be required less often. Secondly, successful executives will be encouraged to remain 'in the field' — there will be no headquarters for them to advance their career into.

The first objective seems like a winning idea from the start if it materialises in the form of more flexible negotiating stances with clients and quicker decisions by IBM. No doubt there will be regional guidelines that elaborate how this autonomy should be exercised. Nonetheless, the degree of near-anarchic independence that country operations are being seduced with looks likely to result in quite varied performance from country to country. We believe there will be further refinement to this idea over time, with an equalising role being played by the 'centres of excellence'.

Successfully achieving the second objective is less clear-cut, as it does not appear to address the main reason why executives have traditionally gravitated towards headquarters: 'out of sight' is 'out of mind'. In a company of over 300,000 people, it is often the case that remaining in-country amounts to being 'out of sight '. Extending the useful life of the best employees is an industry-wide challenge and IBM is the first to try tackling this by locking the doors to HQ and throwing away the key. Whereas a few years ago we could easily have suggested that such high flyers would simply pursue an HQ job with a competitor, that option is less attractive these days, so IBM's bold approach may just work as long as it can avoid creating national fiefdoms.

Shuffling the portfolio
Although the intricacies of the reorganisation are interesting in their own right, they are largely secondary to the go-to-market initiatives IGS is pushing ahead with. These have been developing for a couple of years and we have commented on these as and when they reached varying stages of maturity. This latest round of announcements is the most advanced statement yet as to how profound a change the Pricewaterhouse Coopers Consulting acquisition really was.