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TBR 4Q10 IBM Global Services Report
 

TBR 4Q10 IBM Global Services Report

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Technology Business Research is a different kind of research company. Our bottoms-up approach provides a look at the technology industry unlike anything you’ve seen before. We analyze company ...

Technology Business Research is a different kind of research company. Our bottoms-up approach provides a look at the technology industry unlike anything you’ve seen before. We analyze company performance in professional services, networking and mobility, computing and hardware, and software on a quarterly basis, leveraging our data to create industry benchmarks and landscapes that provide a business perspective on leaders and laggards and their business plans. We are experts in the business of technology.

IBM Global Services (IGS) is leading its major competitors in terms of offerings and capabilities due to its offensive strategy, vision for opportunistic investments, and geographic diversification.

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    TBR 4Q10 IBM Global Services Report TBR 4Q10 IBM Global Services Report Presentation Transcript

    • Technology Business ResearchAccelerating Customer Success Through Business Research TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .
    • PROFESSIONAL SERVICES BUSINESS QUARTERLYSMIBM Global ServicesFourth Calendar Quarter 2010Fourth Fiscal Quarter 2010 Ended Dec. 31, 2010Publish Date: Feb. 8, 2011Author: Elitsa Bakalova (elitsa.bakalova@tbri.com), PSBQ AnalystContent Editor: Alison Crawford, PSBQ Senior Analyst/ TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .Project Manager
    • Contents TBR Company Analysis Company Data Models 3 Executive Summary 29 Income Statements 8 Strategy Overview 31 Balance Sheet 11 Corporate SWOT Analysis 32 Service Line Model 15 Financial Model Strategy 33 Geographic Model 18 Go to Market & Services Strategies 34 Vertical Revenue Model 23 Alliance & Acquisition Strategies 35 Operating Expenses 25 Geographic Analysis 36 Headcount Model 26 Resource Management Strategy 37 Financial Strategy Graphs 28 Future Outlook 39 Go-to-Market Graphs 32 Appendix 40 Resource Management Graphs 42 Acquisitions Tables 46 Portfolio of Services 47 Vertical Offerings 48 Quarterly Signings Tables 54 Strategic Alliance Tables 56 Worldwide Locations Table 58 About TBR3 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Executive Summary TBRIBM’s growth investments will generate more signings in the near term Key Developments • IBM hit $142 billion in services backlog during 4Q10, up $8 billion sequentially and $5 billion year-to-year. IBM identifies this as a momentum builder and expects to keep Momentum is pushing forward in its backlog during 2011, especially in outsourcing. IBM has clear building across visibility into its outsourcing business performance. The company forecasts revenue from services, and Big its outsourcing backlog will grow 3% year-to-year during 2011, accounting for a major Blue is charging share of outsourcing revenue. Growing signings (up 18% year-to-year to a record $22.1 ahead at full speed 1 billion) due to improving demand in consulting & SI and in the mature markets, along with traction in the growth markets, will shape IBM’s performance in 2011. • IBM is investing in the development of its business analytics capabilities (a cross-business IBM is developing unit) to capture market share and growth. Business analytics is targeted to contribute its business 20% of IBM’s growth over the 2015 Corporate Roadmap. IBM is investing in dedicated analytics business analytics consultants (4,000 consultants in 2009; ended 2010 with 7,800); capabilities to targeted acquisitions (has spent $12+ billion on software investments since 2005); and capture market mathematics capabilities and analytics solutions centers to serve local clients. share from Competition may create temporary challenges, but TBR believes IBM is well-positioned in competition terms of capabilities (e.g., Cognos and SPSS gained through acquisitions) and client reach. IBM is working 1 • IBM’s ultimate ambition is to expand the Smarter Planet business (a cross-business unit) with clients to to ~$10 billion in total for IBM by 2015 (up from $3 billion at the end of 2010). TBR create a Smarter believes this is an achievable goal given IBM’s ability to provide a combination of Planet software, services and hardware addressing key client needs from specific verticals. • IBM’s BPO services is now called IBM Global Process Services (previously called Managed IBM has rebranded1 Business Process Services). TBR believes transformation has been at the forefront of its BPO-related IBM’s BPO offerings, and in addition to cost savings from outsourcing, IBM has provided business, investing its clients with business advantages from high-end strategic consulting and integration in growth services. The addition of analytics to BPO creates a unique offering in TBR’s view and a strong differentiator for IBM.4 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Executive Summary TBRThe improving momentum in the IT services market, coupled withIBM’s investments in growth, will create business opportunitiesTBR Position IBM AND IGS 4Q10 PERFORMANCE VS. EXPECTATIONS (in $ millions) Consensus Guidance Range ActualIBM Global Services (IGS) is leading its major IBM Revenue $27,910 $27,240 - $28,420 $29,019competitors in terms of offerings and capabilities due IBM Services Revenue (external) N/A $14,000 - $15,000 $14,923to its offensive strategy, vision for opportunistic IBM Services Operating Income N/A N/A $2,403.00investments, and geographic diversification. IBM Non-GAAP EPS $4.00 $3.74 - $4.11 $4.18 • IGS will continue to grow its top line in 2011, albeit IBM AND IGS 1Q11 GUIDANCE AND EXPECTATIONS at mid-single digits in TBR estimates, in line with IT (in $ millions) TBR Estimate Consensus Guidance Range services market growth anticipation for the year. IBM Revenue $25,000 $23,680 $23,380 - $24,130 IGS will benefit from stabilization of the global IBM Services Revenue (external) $14,196 N/A $14,000 - $15,000 economy as well as from its growth initiatives, IBM Services Operating Income $2,178.39 N/A N/A IBM Non-GAAP EPS N/A $2.23 $2.11 - $2.41 which will attract clients and projects. • IGS has significantly improved its competitive standing and has the potential to expand its client IGS’ Strategies reach and amass additional market share. To • Build a resilient, global business model that generates support its long-term, top-line growth, IGS has revenue and profit improvement opportunities invested in high-value offerings, such as business • Grow services business at/above market growth and analytics, cloud computing and vertical-specific expand pretax income by 8% to 10% CAGR through 2015 offerings (part of Smarter Planet initiative), as well • Shift portfolio toward higher-value, rapid-growth areas as investing in growth markets (expanding beyond (Smarter Planet, business analytics and cloud computing) the BRIC region). • Invest in skills and capabilities in emerging markets; drive • IGS will continue its gradual operating margin productivity in developed markets expansion (growing pretax income by 8% to 10% • Diversify geographic revenue base and satisfy demand CAGR through 2015). IGS will see more benefits for services in growth markets from its global integration, its focus on higher-value • Strengthen global service delivery network offerings and productivity initiatives. • Leverage inorganic growth to expand capabilities5 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Executive Summary TBRContinued revenue growth will create new opportunities for increasedsoftware and services revenue in the coming quarters Quarterly Segment Performance 4Q10 Growth Segment Key Changes & Drivers Trends to Monitor Revenue Y/Y Increasing outsourcing backlog with Services revenue was driven by growth key contribution from growth in outsourcing (albeit in the low-single markets looking to build their IT IBM Global digits), a return to growth in consulting $14.9 2.0% infrastructures, as well as improved Services & SI and strong performance in growth billion spending from base (existing) initiatives (business analytics grew 40% accounts, will contribute to year-to-year). outsourcing revenue growth in 2011. • IBM’s 4Q10 software revenue was driven by expanding middleware IBM SW is focusing on high-growth IBM demand in growth markets. $7.0 areas such as business intelligence, Software 11.0% • The company’s 14 acquisitions billion business analytics, cloud, Smarter Group throughout 2010 are increasingly Planet and growth markets. integrated and boosting revenue. IBM STG leveraged upgrades to its We anticipate strong STG growth Systems & System z and POWER lineups, while $6.3 going into 1H11, as IBM works to Technology meeting continued demand for Xeon- 21.4% billion better integrate its portfolio and Group based, high-end System x, to drive over expand into emerging markets. 20% revenue growth from 4Q09. We believe IBM will focus on Beneficial interest rate environments Global $628 constructing financing offers and and higher margins on equipment sales 1.1% Financing million incentives to drive growth in boosted Global Financing. emerging markets.6 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Executive Summary TBRIGS’ global integration, higher-value offerings and productivity initiativeswill continue to drive sustained margin advances Revenues • IGS’ external revenue increased 2.0% year-to-year, TBR IGS EXTERNAL REVENUE GROWTH AND PROFITABILITY demonstrating growth in Global Technology Services, an Revenue Growth Year-to-year $18 25% Pretax Income/Revenue $14.07 $14.92 $14.20 20% outsourcing business, and improving performance in $15 $14.63 $13.72 $13.72 15% Global Business Services, a transactional content business 10% In $ Billions $12 4.3% 2.1% 2.0% 2.1% 2.0% 3.5% 5% that was challenged during the recession (now seeing $9 0% -5% gains in consulting and in SI). $6 -10% $2.32 $2.22 $2.40 Expenses $3 $1.41 $2.11 $2.18 -15% -20% • IGS’ cost of services increased 4.2% year-to-year to $10 $0 -25% billion in 4Q10, accounting for 67.3% of external revenue, 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. up 140 basis points from 65.9%. Increased leverage of Revenue Pretax Income Revenue Growth Year-to-year lower-cost resources for service delivery will help IGS SOURCE: TBR AND IBM improve its gross margin. • IGS’ SG&A contracted 160 basis points to 16.6% of external revenue, as IGS’ focus on productivity had a IGS OPERATING RATIOS TBR positive impact in lowering operating costs. 100% 14.3% 90% 16.0% Margins % of External Revenue 14.6% 14.6% 15.0% 80% 9.7% • IGS’ pretax operating margin improved 30 basis points to 70% 30.3% 27.3% 28.9% 28.3% 33.9% 15.6%, while GTS operating margin improved 80 basis 60% 27.3% 50% points to 15.8% (both year-to-year). 40% 15.0% 14.9% 15.5% 15.8% 15.1% 10.0% • TBR believes IGS will continue to see improving 30% profitability. Levers include: continued global integration 20% 35.8% 34.4% 34.4% 35.3% 34.7% 34.7% of IGS capabilities and skills, augmented by expansion 10% 0% into higher-value service offerings; use of IP/assets and 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. new capabilities to drive performance (use of analytics GBS Operating Margin* GBS Gross Margin and cloud computing internally); and productivity GTS Operating Margin* GTS Gross Margin initiatives. SOURCE: TBR AND IBM * Pretax Income as a % of total GTS (external + internal revenue) and total GBS, respectively.7 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Executive Summary TBRIGS’ large revenue base, improving backlog and stable profitabilityhave enabled the organization to outperform its peers TBR Company Average Standard CALENDAR QUARTER RESULTS FINANCIAL METRICS Score Figure in Class Deviation TBR SCORING SUMMARY: 4Q09 1Q10 2Q10 3Q10 4Q10 Operating Margin 5.96 15.6% 9.7% 5.8% Financial Model Strategy: 5.85 6.14 6.25 6.22 6.32 Current Ratio 3.88 1.19 1.77 49.7% Debt-to-Asset Ratio 3.23 0.80 0.57 12.4% Go-to-Market & Services Strategies: 7.28 7.35 7.15 7.00 6.98 Return on Assets (TTM) 6.39 13.8% 8.1% 3.7% Resource Management Strategy: 5.73 5.47 5.66 5.70 5.75 Return on Equity (TTM) 9.11 66.4% 19.2% 12.9% TOTAL AVERAGE TBR SCORE: 6.29 6.32 6.36 6.31 6.35 TOTAL AVERAGE TBR SCORE 6.32 TBR Company Average Standard GO-TO-MARKET & SERVICES METRICS Score Figure in Class Deviation Revenue (in $ Millions) 10.00 $14,923 $2,421 $1,324 IBM’s strong backlog, stable Revenue Growth YTY 4.43 2.0% 9.6% 7.8% profitability, and improving Backlog/Revenue 6.57 2.41 1.92 0.35 outsourcing business generated Day Sales Outstanding 7.42 37.12 64.96 9.75 higher-than-average scores across TOTAL AVERAGE TBR SCORE 6.98 all TBR metrics. TBR expects IGS’ scores to continue to outperform TBR Company Average Standard peers as its growth accelerates into RESOURCE MANAGEMENT METRICS Score Figure in Class Deviation 2011. TBR also expects IGS’ focus on Gross Margin 5.33 32.7% 30.7% 5.9% strengthening its geographic Operating Expenses as a % of Revenue 5.68 16.6% 19.8% 4.2% Revenue per Employee (TTM) 5.77 $235,345 $182,013 $65,064 footprint, offshore service delivery Operating Income per Employee (TTM) 5.73 $33,940 $18,169 $22,232 and automation to drive profitability Utilization Rate 8.01 86.0% 77.2% 2.9% benefits. Turnover 4.45 15.4% 14.1% 1.8% TOTAL AVERAGE TBR SCORE 5.75 Key Represents an area where IGS is currently challenged versus peers Represents an area where IGS is outperforming its peers Represents an area where IGS is neither significantly outperforming nor underperforming its peers8 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Strategy Overview TBRBuilding a business model that is resilient to external market factorsand profitable growth is a top priority for IBM/IGS Function Key Strategies TBR Assessment • Build a resilient, global • IBM Global Services’ (IGS) business mix transformation business model that generates (focusing on higher-value services), growth investments Overall revenue and profit and focus on productivity continued to support services improvement opportunities. revenue and margins in 4Q10. • Grow services business • Both IBM GTS and IBM GBS will see success from their at/above market growth and growth and margin initiatives (listed on slide 10). TBR Financial expand pretax income by 8% expects improvement in IBM’s services financials during to 10% CAGR through 2015. 2011 as the company works to achieve its 2015 Roadmap for profitable growth. • We expect IGS to see revenue growth in 2011, though at mid-single digits in TBR estimates. Outsourcing is seeing stable outsourcing backlog; expected revenue from • Gain traction in outsourcing; outsourcing backlog to account for a major share of benefit from improving outsourcing revenue in 2011 and to grow 3% year-to- consulting & SI demand. year. Consulting & SI signings are improving and quickly transforming into revenue. • Grow in line with IBM’s four • Following IBM’s overall growth agenda will help IGS Go to Market growth areas (business develop its offerings portfolio, provide cross-IBM analytics, Smarter Planet, solutions (software, hardware and research), and gain cloud computing and growth clients through IBM’s marketing and business markets). development activities in the four areas. • Provide client insight, • Investments in research and studies helps IGS develop influencing the market. and shape its go-to-market strategies, according to current market trends and client demand.9 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Strategy Overview TBRIBM is investing profit dollars in inorganic growth, integrated global servicedelivery and in its people to support growth Function Key Strategies TBR Assessment • Partner with IT companies, • IBM will continue to successfully enter into strategic educational and government alliances to provide a full range of services, software institutions. and hardware. IBM uses alliance partners to strengthen its Smarter Planet, analytics and cloud computing offerings. Alliances & • Support investments with • IBM has been successful in acquiring companies with Acquisitions inorganic growth to expand intellectual property, high growth and margin capabilities. opportunities to help shift its overall business mix and position the company for growth. TBR expects IBM/IGS will continue to invest its profit dollars in software and services acquisitions to support the company’s business analytics and Smarter Planet offerings. • An integrated global service delivery with high focus on • Leverage integrated global low-cost regions, coupled with high use of assets/tools delivery capabilities for that aid/automate service delivery, are benefiting IGS’ service delivery, globalize bottom line. IGS’ nearshore/offshore headcount has support functions and grown sharply since 2006, reaching ~130,000 FTEs improve productivity. Resource & (53.1% of total in TBR estimates) at the end of 2010. Investments • TBR believes IBM has started to hire across key regions and service areas as demand improves to support • Focus on attracting and growth. Growing its own talent and attracting lateral retaining top talent. hires and freshers by selling them on the IBM brand and career opportunities are strengths of IBM.10 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Strategy Overview TBRHigher-value offerings, growth market expansion and thought leadershipwill help IBM grow its services business through 2015TBR Assessment of Key Strategy: Grow services business at/above market growth and expandpretax income by 8% to 10% CAGR through 2015 With the gradual stabilization of the economic environment, IBM has outlined a set of IBM’s services initiatives to boost services revenue and operating margin through 2015. business will see • GTS (outsourcing, integrated technology services and maintenance) positive financial • On the revenue side, GTS is shifting its portfolio to higher-value offerings, looking to results driven by its grow BPO business (e.g., Global Process Services) faster than the market, expanding ingrowth initiatives and growth markets, leveraging business analytics in sales and delivery, investing in skills positive market and quality processes, and growing asset-based offerings to complement portfolio. outlook; IBM • On the margin side, GTS is driving $1 billion+ of productivity per year, integrating IPanticipates both GTS’ from IBM’s businesses and research and innovating through cloud computing. and GBS’ target • GBS (consulting, SI and applications outsourcing) markets to grow at • On the revenue side, GBS is aligning with IBM’s growth initiatives (60% of growth),~4% CAGR from 2009 offering differentiated cross-IBM solutions (software, hardware, research), providing through 2015 client insight and influencing the market and clients’ decisions. • On the margin side, GBS is broadening the IGS EXTERNAL REVENUE AND PRETAX INCOME globally integrated delivery model (60% of TBR $90 centers), offering differentiated solutions $80 (high-value, asset use) and driving $70 4.7% CAGR operational excellence (improved project In $ Billions $60 2.6% Y/Y 4.2% Y/Y 09 - 15 $50 4.4% CAGR $72.5 management, enterprise productivity). $40 06 - 09 $58.8 $30 $48.3 $55.0 $56.4 • IBM has significantly improved its services $20 17.4% CAGR 8.4% CAGR business model and offerings to expand its $10 06 - 09 0.6% Y/Y 9.1% Y/Y $- $5.0 $8.1 $8.1 $8.9 $13.2 client base and gain market share. IBM’s CY06 CY09 CY10 CY11 Est. CY15 Est. multifaceted approach to margin SOURCE: TBR AND IBM Exernal Revenue Pretax Income (PTI) improvement will help services profitability reach the target levels through 2015.11 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Corporate SWOT Analysis TBRIBM/IGS’ strength lies in its well-developed resources and capabilitiesand its ability to adjust its offerings to demandStrengths Opportunities• Able to successfully integrate acquisitions • Demand for analytics brings investments in IBM’s• Strong relationships with alliance partners business analytics and optimization• Strong IBM brand associated with reliability; • Growth potential of cloud computing can help IBM backing from IBM as a whole gain traction• IBM’s Smarter Planet concept is a strong • European markets are now even more open to competitive differentiator outsourcing functions to outside vendors• Integrated global delivery network and presence in • Gain traction in emerging markets due to demand low-cost locations and IBM’s growth investments• Ability to adjust offerings to demand and create • Stabilizing consulting/SI demand can help IBM value for the client Global Business Services grow in the long run• Internal initiatives used to develop client offerings Weaknesses Threats • Partnership network is difficult to manage • Slower and uneven economic recovery in Europe • Perceived as biased toward “Big Blue” solutions may challenge IGS’ near-term performance. • IBM/IGS’ size can sometimes slow down decision- • Indian vendors are becoming more active in making and implementation processes business consulting and remote management ITO. • Disjointed go-to-market approach in smaller • Competition from other MNCs (e.g., Accenture, HP, geographies may decrease win rate etc.) and European and Indian firms for top clients • Perception as complex IT provider does not match • Rising attrition and intensifying competition in the simple, low-cost messaging around cloud labor market (especially in India)12 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Corporate SWOT Analysis TBRIBMs global integration provides convenient sourcing for the clientTBR Strength Assessment: Integrated global delivery network and presence in low-cost locations IBM is ahead of IBM has been investing to establish a network of globally spread, well integrated other MNCs and service delivery capabilities with strong nearshore/offshore presence. Indian and • IBM has integrated its global delivery (aggregation of its centers, LEAN and globalizationEuropean IT service strategy), achieving delivery efficiency and client value leading to margin benefits. providers in the • IBM uses common processes, methods and tools for service delivery, globally aligned integration of its governance models, integrated industry and domain capabilities, integrated resource global network capacity management, globally deployable assets and talent. • IBM Global Business Services’ (GBS) GBS’ Globally Integrated Delivery Capabilities integrated network for service delivery combines four types of delivery locations. A similar delivery model is also used by Global Technology Services (GTS), creating Central Europe & operational synergies for IBM. North America Eastern Europe • Onsite – services that require physical China presence at the client (e.g., consulting) • Local – services that need to be delivered Mexico Egypt Philippines from the same country SOURCE: IBM AND TBR. India • Regional – services from the same Brazil Vietnam continent, similar time zone, culture • Global – standardized services to achieve Argentina Regional Capability Center savings; ongoing operations, monitoring, Global Delivery Center development Center of Competence (CoC) • Virtual Centers of Competency with teams of Twelve CoCs: Banking; Energy & Utilities; Retail; Social Services & Healthcare; globally deployable subject matter experts Travel & Transportation; Chemical & Petroleum; Insurance; Telco; Strategy & with industry or service line expertise Transformation; Business Analytics and Optimization; SAP; Oracle. supplement local solutioning and delivery.13 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Corporate SWOT Analysis TBRIBM will expand around the globe and use tools for efficient delivery TBR Strength Assessment: Integrated global delivery network and presence in low-cost locations (cont.) • GBS is shifting its delivery mix to the globally integrated capability model to drive margin expansion (goal is to grow pretax income by 8% to 10% CARG by 2015). • During 2008 and 2009, GBS deployed the globally integrated delivery model across 40% of its global resources. This share increased beyond 50% in 2010, and the goal is The key to success to grow beyond 60% through 2015, which TBR believes is achievable given GBS’ for GBS is the established model, practices and resources for global service delivery. extended global • GBS will continue with the expansion of its global delivery capabilities from a physical integration of its standpoint, investing in suitable regions across the globe. capabilities; • The investment decision is based on where demand can be served from. • The strategy is to expand in regions where IBM can address growth in diversified investment in expansion of its demand, rather than venturing into brand new countries. • The key is to be consistent with the rest of IBM; currently, 80% of GBS’ global delivery physical presence, centers overlap with other IBM units, creating operational efficiencies. especially in • Annual reviews, based on factors such as costs, skills, talent, security and time zone, lower-cost help GBS decide whether to maintain, expand or reduce capacity in certain regions. locations; and • India is currently the largest global service delivery center for GBS with eight high use of locations throughout the country (TBR notes India is also a large global service IP/assets that aid delivery location for GTS). GBS is looking to expand in Tier 2 cities in 2011, helping its service delivery to access a greater pool of talent and focusing on industry skills. and create margin • A strength and also a margin lever for GBS is its use of resource management tools. benefits • GBS’ global headcount of 100,000+ people (in TBR estimates) is managed by a tool called IBM Professional Marketplace. The tool allows GBS to match its resources with clients and to move people to the right place (globally, regionally, locally, onsite). The tool functions in a manner similar to the way a supply chain system tracks and forecasts demand and inventory.14 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Corporate SWOT Analysis TBRIBM is creating value to the client through analytics in its BPO offeringsTBR Strength Assessment: Ability to adjust offerings to demand and create value for the client IBM has rebranded its BPO-related business, investing in growth (the goal is to outpace market growth). IBM’s next-generation BPO services are now called IBM Global Process IBM has extended its Services (previously Managed Business Process Services). BPO offerings to help • IBM’s Global Process Services attracts clients with its horizontal offerings (e.g., F&A, CRM, clients innovate their HR and procurement), industry-specific offerings and platforms, coupled with forward-business processes and looking insights generated through analytics to drive innovation for clients. differentiate their • TBR believes transformation has been at the forefront of IBM’s BPO offerings, and in businesses, generate addition to cost savings from outsourcing, IBM has provided its clients with long-term both top-line growth business advantages from high-end strategic consulting and integration services. and bottom-line • Through analytics, IBM is not only able to create value for the client, but the provision of savings, and take analytics in BPO also allows IBM to grow its analytics business overall. advantage of • Analytics was initially offered to the banking and telecommunications vertical, but it is opportunities of the now offered in CRM, HR, F&A and SCM BPO; IBM plans to expand into healthcare, global economy. insurance, energy & utilities and consumer products/retail. • In addition to being well-positioned in terms of global delivery, IBM is keen on geographic The addition of diversification of its delivery capabilities. IBM is entering new regions that have potential, analytics to BPO such as the recently opened nearshore center in Cairo for CRM BPO, which in TBR’s view creates a unique may spur expansion of IBM’s delivery capabilities in the African continent. • IBM’s bread and butter are large-scale and multitower deals, which have been scarce foroffering, in TBR’s view, that allows IBM to the past two years given the tough economic environment. • IBM has been able to leverage its asset-based plays to provide services to the ever- expand its analytics initiative. increasing midmarket, as well as to provide “start small and grow” services. • While demand for major BPO deals is picking up, which will help IBM gain more such deals, TBR believes IBM needs to extend its focus on winning smaller-sale deals and gradually expand scope as the relationship matures. This will help IBM benefit from additional existing business opportunities.15 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Financial Model Strategy TBRRevenue growth remained in the low-single digits; 2011 revenue will growin line with IGS’ addressable market growth Revenue Performance External Revenue & Growth Drivers TBR IGS EXTERNAL REVENUE, GROWTH AND PROJECTIONS 4Q10 Revenue: $14.92 billion, 2.0% YTY 30% • IGS generated external revenue of $14.92 billion in $60.0 61.7 20% 4Q10, improving 6.0% over 3Q10 and 2.0% year-to- 56.4 58.8 year, both as reported and at constant currency from Revenue Growth In $ Billions $40.0 4.3% 3.5% 5.0% 10% $14.63 billion in 4Q09. 2.1% 2.0% 2.1% 2.0% 2.6% 4.2% $20.0 • IBM’s GBS segment saw its revenue grow in 4Q10 0% 14.6 14.9 14.2 driven by growth in outsourcing (application 13.7 13.7 14.1 $0.0 -10% management services) and improvement in 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 CY10 CY11 CY12 transactional business (consulting & SI). In 4Q10, GTS Es t. Es t. Es t. saw an increase in revenue driven by existing backlog IGS Externa l Revenue Revenue Growth Yea r-to-yea r NOTE: Annual revenue and projections are for calendar 2009, 2010 and 2011, respectively. and increase in revenue from base/existing accounts, SOURCE: TBR AND IBM the first reported growth since 4Q08. Revenue and Growth Outlook TBR IGS TWO-YEAR TRAILING 12-MONTH REVENUE • TBR believes building backlog momentum in $75 $58.89 $57.46 $55.69 outsourcing, as well as improving signings in the $54.70 $55.00 $55.57 $55.84 $56.13 $56.42 $56.90 transactional business, will enable IGS to sustain its revenue growth performance in the near term. TBR In $ Billions $50 believes IGS is on track to report an increase in $25 annual growth rates; however, revenue will grow CY08 CY09 CY10 more or less in line with overall market growth. $- • IGS will increase focus on growing in emerging 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 SOURCE: TBR AND IBM. Es t. markets. IGS will continue bolstering its service portfolio, particularly within key focus areas of cloud computing and business analytics.16 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Financial Model Strategy TBR IGS’ global integration, productivity improvements and higher-value offerings are driving operating margin advances Cost & Margin Performance Cost Structure & Margin Performance 4Q10 Operating Expenses: $2.47 billion TBR IGS OPERATING EXPENSES AS A PERCENTAGE OF IGS’ cost of services increased 4.2% year- EXTERNAL REVENUE 25.0% to-year to $10.2 billion from $9.6 billion 20.0% in 4Q09, accounting for 67.3% of 5.6% 3.2% Cost of 2.9% 2.4% 2.6% external revenue, up 140 basis points 15.0% 2.6% Services, from 65.9% year-to-year. Increased 10.0% Gross Profit 15.3% 16.2% 14.3% 14.8% 14.0% 15.9% leverage of lower-cost resources and 5.0% automation of service delivery will help 0.0% IGS improve its gross margin. 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Es t. IGS’ SG&A contracted 160 basis points Sa l es a nd Ma rketing Expens e G&A Expens e year-to-year to 16.6% of external SOURCE: IBM AND TBR ESTIMATES Opex revenue, as IGS’ continued focus on productivity and efficiencyTBR IGS GROSS AND OPERATING PROFIT improvements. AND PROJECTIONS Operating margin (pre-tax margin)40% 34.1% 32.7% 34.5% 33.8% 34.6% 32.1% 32.1% 33.2% 32.5% expanded 30 basis points from 15.3% in30% 4Q09 to 15.6% in 4Q10 (as a percentage20% 15.3% 15.2% 15.6% 15.1% of total IGS revenue). TBR believes the 14.8% 14.8% 13.9% 14.5% 9.9% Operating continued growth of IGS’ globally10% Margin and integrated capabilities, augmented by 0% Outlook expansion into higher-value service 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 CY10 CY11 CY12 offerings and ongoing cost management Gros s Ma rgi n Es t. Es t. Es t. and productivity initiatives, will deliver Pre-tax Ma rgi n (Opera ting Ma rgi n)NOTE: Annual gross and operating profit and projections are for calendar 2009, 2010 and 2011, stronger results to the organization’srespectively. Profit calculated as a percentage of IGS external revenue. SOURCE: TBR AND IBM profitability. 17 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Financial Model Strategy TBR Improved performance in GBS, coupled with stable outsourcing and maintenance growth in GTS, will support IGS’ revenue in the near term Service Line Performance Service Line Drivers Service Line FinancialsTBR IGS SERVICE LINE REVENUE (IN $ BILLIONS) 100% Outsourcing revenue increased 1.0% $1,841 $1,779 $1,772 $1,802 $1,904 $1,879 year-to-year (first time since 4Q08),% of External Revenue $2,395 $2,073 $2,098 $2,162 $2,381 $2,110 75% driven primarily by existing backlog $5,815 $5,454 $5,364 $5,532 $5,881 $5,607 (80%-90% of revenue) and revenue 50% Outsourcing growth from base/existing accounts. 25% $4,580 $4,410 $4,483 $4,572 $4,758 $4,600 Traction in the growth markets in 0% addition to stable outsourcing backlog 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Es t. will contribute to 2011 growth. GBS Outs ourci ng ITS Ma i ntena nce ITS revenue fell 0.6% year-to-year,SOURCE: TBR AND IBM GTS accounting for 16.0% of total external Integrated revenue and down from 16.4% in 4Q09. Technology IGS is seeing strong demand in the Services (ITS) emerging/growth markets, which will TBR IGS SERVICE LINE REVENUE AND PROFITABLITY 80% help rebound growth in 2011. % of External Revenue 68.5% 68.7% 67.8% 67.3% 67.5% 68.1% 67.6% 65% Maintenance accounted for 12.8% of 50% Maintenance external revenue and supported IGS’ 32.4% 35% 31.5% 31.3% 32.2% 32.7% 32.5% 31.9% operations as a strong cash generator. 20% GBS’ revenue grew 3.9% year-to-year 5% driven by growth in consulting & SI 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. (gained share) and in application GTS Revenue GBS Revenue Global Business GTS Pretax Margin* GBS Pretax Margin* management services (sustained Services (GBS) SOURCE: TBR AND IBM * GTS Pretax Income as a % of total GTS and GBS Pretax Income as a % of total GBS share); business analytics revenue grew 40% year-to-year, as IBM continued to grow its capabilities. 18 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Go to Market & Services Strategies TBRIGS is strengthening its portfolio through continuous investment ininnovative and higher-value offeringsService Line Strategies Key service offering announcements during2015 Roadmap (top- and bottom-line growth) 4Q10 include:Global Technology Services (GTS): • IBM launched new social business consulting• Grow revenue above the market in all service lines services. The services will draw experts from IBM’s • Shift to higher-value offerings Strategy and Transformation consulting business to • Grow BTO business faster than the market help clients understand how social software can be • Expand in growth markets (30% of 2015 revenue) used in an organization. The offerings include: • Leverage business analytics in sales and delivery • Social business strategy, assessment and • Invest in skills and quality processes • Grow asset-based offerings to complement implementation programs portfolio • Social network analysis readiness and maturity• Continue with margin expansion modeling • Drive $1 billion+ of productivity per year • Leadership and skills development • Integrate IP from IBM’s businesses and research • Governance, policy and privacy management • Innovate through cloud computing • IBM launched the IBM Municipal Shared ServicesGlobal Business Services (GBS): Cloud, which enables internal and global sharing of• Grow revenue at/above the market through: information by local governments. The cloud is a • Alignment with IBM’s growth initiatives (60% of combination of advanced data analytics and SaaS growth) technology and integrates services from multiple • Differentiated cross-IBM solutions (software, providers. The platform supports loose coupling of hardware, research) applications that will help improve government • Provide insight, influencing the market productivity and service quality. The IBM Municipal• Continue with margin expansion through: Shared Services Cloud will be available through IBM • Globally integrated capabilities (60%+ of centers) Global Technology Services. It is developed by IBM’s • Differentiated solutions (high-value, asset use) First of a Kind program, a collaboration between IBM • Operational excellence (improved project Research, industry experts and clients. management, enterprise productivity)19 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Go to Market & Services Strategies TBRIBM’s growing backlog and improving signings with larger-scale dealswill generate revenue returns in the coming quartersServices Contract Signings TBR IGS CONTRACT SIGNINGS• Signings increased 18% to $22.1 billion due to growth $25 As reported At cons tant currency in both outsourcing and transactional signings. On a $20 trailing 12-month basis, signings grew 1.0% (all year- (In $ Billions) $15 $14.1 to-year and as reported). $11.4 $12.2 $10 $6.7 $6.5 • Outsourcing/long-term signings (GTS outsourcing, $5.6 $5 app. outsourcing) increased 24% year-to-year to $7.4 $5.5 $5.8 $5.4 $8.0 $6.7 $0 $14.1 billion. Outsourcing signings are volatile and uneven by quarter and in 3Q10 declined 15% year- 4Q09 1Q10 2Q10 3Q10 4Q10 4Q10 Outs ourci ng/Long-term (GTS outs ourci ng, a pp. outs ourci ng (AMS)) to-year. As such, they are not a good predictor of Tra ns a ctiona l /Short-term (ITS, Cons ul ting, AMS SI) revenue. Factors such as duration, start date, and SOURCE: TBR AND IBM new business versus extensions affect revenue Key 4Q10 Customer Wins translation. Outsourcing backlog ($97 billion in • Bharti Airtel, India – 10 years; deploy and manage IR 4Q10) has been stable during the past several quarters and will be the driver for outsourcing infrastructure and applications in 16 African countries revenue in 2011. Revenue from backlog is expected • Samlink, Finland – 5 years, $37 million; manage overall to grow 3% year-to-year. IT operations and develop a desktop cloud solution • Transactional/short-term signings (ITS, consulting • Westpac Group, Australia– 5 years; IT infrastructure and SI) increased 8.0% year-to-year. This second services (datacenter, mainframe, midrange, storage, consecutive quarter of signings growth reflects a desktop, print and security operations) turnaround in areas hit hard by the downturn, • Starbev, Czech Republic – 5 years, multimillion-dollar; including consulting and SI, as well as a positive IT infrastructure services (datacenter, help desk, end- influence on near-term revenue (transactional user support) and overall service management signings trends are similar to revenue trends). • Central Norway Regional Health Authority, Norway –• IBM signed 19 deals larger than $100 million, up from $120 million; create Smarter Healthcare infrastructure 10 in 3Q10; backlog increased 4% year-to-year (as • Bank of Ireland, Ireland– 5 years; IT infrastructure reported) at $142 billion, positioning IBM for revenue services (desktop, servers, mainframes, local area growth. networks and service desk)20 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Go to Market & Services Strategies TBRResearch and thought leadership help IBM set vertical trends and shapeits overall go-to-market strategies Vertical Market Strategy IGS’ Revenue Contributions by • Help clients in all verticals transform and reduce costs through business analytics Vertical in 4Q10 • In the public sector, focus on capturing a share of the Distribution Communications budgets pie through Smarter Planet offerings. 11.0% 10.0% • Increase the number of Smarter Planet projects in Industrial other verticals – energy, healthcare, science, 14.0% SMB 17.2% education, transportation and banking • Develop industry leadership in the growth markets Other (banking, energy & utilities, healthcare, transportation Public 2.0% & rail, natural resources); invest in industry-specific 15.8% skills through hiring and training. Financial Services • Invest in industry sales skills to expand client reach in 30.0% the Smarter Planet initiative SOURCE: TBR ESTIMATES Research and Thought Leadership Strategy • IBM’s research and thought leadership reside within IBM Research, the global R&D organization and IBM’s Institute for Business Value (IBV). Part of Global Business Services, the IBV is a research and analysis organization with 50+ consultants. The IBV develops IBM’s global C-level studies (e.g., IBM Global CFO Study, Global CEO Study, etc.), as well as industry and functional thought leadership. • Investments in research and studies help position IBM as a thought leader in the industry, which TBR believes is of significant importance for a large multinational player like IBM, allowing it to influence the market. • The key, in TBR’s view, is that such initiatives help the company develop and shape its go-to-market strategies according to current market trends and client demand.21 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Go to Market & Services Strategies TBRIBM utilizes a three-tiered direct sales approach to manage its accountsand generate new businessDirect Sales ApproachIBM uses a three-tiered sales structure with an integrated(Tier 1), vertical (Tier 2) and geographical (Tier 3) focus: Tier 1: Integrated Accounts Tier 1 • IBM’s largest accounts, where it ensures a highly integrated Top ~100 experience with dedicated IBM resources. Accounts • Vertical-specific global sales team works with Managing Account Director; Brand Category Leader assists Managing Account Director with proposals. Tier 2 • Includes the top +/-100 multinational accounts ~1,400 Accounts (more than $20 million in IBM revenue). Aligned by Industry Tier 2: Industry-Aligned Accounts • Industry-specific and likely to have shared IBM resources. • Includes the next +/-1,400 accounts, clustering together Tier 3 1 to 10 clients from the same industry. Tier 3: Medium Accounts 40k Direct + 120k+ Indirect • Territory-specific accounts that leverage business partners Aligned by Geo/Territory and regional ISVs. • Large regional players with annual revenue up to SOURCE: IBM AND TBR ESTIMATES $200 million. • Includes 15,000 (growth) focus accounts, 25,000 prospects and 120,000+ SMB targets; served by partners.TBR believes the sales model for IGS is similar to the overall IBM go-to-market model.22 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Go to Market & Services Strategies TBRPricing is stabilizing across markets; however, pricing increases are notexpected to be significant in the near term TBR U.S. GOVERNMENT HOURLY RATES • Overall, TBR believes IGS’ pricing environment remains competitive. TBR sees LABOR CATEGORY 10/09 - 09/10 10/10 - 09/11 % GROWTH this continuing into the foreseeable future as Project Executive Functional Specialist/Subject $338 $348 3.0% heightened competition from Indian vendors Matter Expert $292 $301 3.1% and stronger market conditions lead to Director $239 $246 2.9% aggressive pricing tactics from competitors. Senior Manager $193 $199 3.1% Manager $159 $164 3.1% • TBR expects IGS to experience moderate pricing traction through 2011, albeit at an Program Support $156 $161 3.2% uneven pace among its primary markets. Consultant III $126 $130 3.2% Consultant II $102 $105 2.9% • TBR believes IGS and its competitors are Consultant I $79 $81 2.5% getting the best pricing traction in North Project Assistant $71 $73 2.8% America as the U.S. economy recovers. Administrative Support $53 $55 3.8% • Pockets of pricing power in EMEA will Interviewer $37 $38 2.7% emerge (i.e., in countries that are NOTE: RATES INCLUDE INDUSTRIAL FUNDING FEE (IFF) experiencing more rapid economic recovery, SOURCE: TBR AND GENERAL SERVICES ADMINISTRATION such as Germany), but the broader region will stay in a flat-line state. The table above provides hourly pricing rates for IGS from a Mission Oriented Business • APAC markets will fare similarly to the U.S. Integrated Services contract with the U.S. government’s General Services Administration. The contract period is from October 1997 through September 2017 and for 2011, with opportunities to gain pricing covers such services as consulting, facilitation, survey and privatization support and traction becoming more evident throughout documentation. the year.23 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Alliance & Acquisition Strategies TBRAlliances will continue to play a vital role in the success of IGS TBR Assessment of Alliance Strategy: Alliances are a key element of IBM/IGS’ strategy IGS has a well-established network of alliance partners that allows it to provide customers with a complete portfolio of services and solutions, while also allowing IBM to be technology-agnostic if a client so desires. Alliances provide IGS with new sales channels, IBM/IGS incremental revenue streams and access to emerging technology. leverages • IGS has developed and maintained relationships with numerous key players in the IT alliances to offer industry, including Avaya, Cisco, Nortel, SAP, Novell and Oracle. customers a full Alliance announcements during 4Q10 included: complement of services, software • IBM and Premier Healthcare Alliance are jointly creating a new platform that will link data to more than 2,400 member hospitals and 70,000+ other care sites throughout and hardware and the United States starting spring 2011. The platform will integrate the nation’s health to strengthen its data allowing users to gain insights, measure and improve health of the population. competitive • IBM and Telvent will work together to provide smarter traffic solutions for smaller position in the cities, universities and government campuses and business districts. The solution will market use IBMs advanced analytics and Telvent’s traffic management capabilities to improve traffic control and congestion. NOTE: SEE APPENDIX OF THIS REPORT FOR A FULL LISTING AND ANALYSIS OF IBM/IGS’ ALLIANCES.24 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Alliance & Acquisition Strategies TBRSuccessful integration of companies with IP supports IBM’s top-line growthTBR Assessment of Acquisition Strategy: Acquisitions support IBM/IGS’ organic growth IBM’s ability to successfully integrate acquisitions to expand its capabilities and offeringsIBM has integrated across all its business segments (services, software and hardware) is a significant strength a number of and competitive advantage. acquisitions to • IBM continued to make acquisitions throughout 4Q10, spending approximately $6 billion expand its higher- in 2010 alone. IBM looks for companies possessing intellectual property and high-value offerings and growth/margin opportunities to support its focus on shifting its business and top- and capabilities; bottom-line growth. though many of • From 2007 to 2009, IBM spent $9 billion for 33 acquisitions, including 18 in business the acquisitions analytics; 91% of the acquisition spending was in software, and 2% on services. are in software, • IBM plans to spend $20 billion on acquisitions through 2015, or $4 billion per year, they present new focusing on the software and services segment; its goal is to double EPS in the next five service years, from $10.2 billion in 2009 to at least $11.4 billion in 2010 and at least $20 billion opportunities in 2015. IBM’s Acquisition Activity in 2010IBM closed 17 acquisitions in 2010, with an aggregate cost of $6.2 billionServices: Software: • 1Q10, National Interest Security Company • 4Q10, Netezza, Unica, BLADE Network, Clarity System, (advanced analytics for public sector); OpenPages and PSS Systems, purchased for an aggregate cost integrated in GBS of $2.9 billion • 1Q10, Wilshire Credit Corp. (mortgage • 3Q10, BigFix, Coremetrics, Datacap, Sterling Commerce servicing platform); integrated in GTS (purchased for $1.4 billion) • 2Q10, Cast Iron SystemsSystems and Technology (STG): • 1Q10, Lombardi Software, Intelliden, Initiate Systems • 3Q10, Storwize NOTE: SEE APPENDIX OF THIS REPORT FOR A FULL LISTING OF IBM/IGS’ ACQUISITIONS IN 2009 AND 201025 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Geographic Analysis TBRIGS will continue to have success in growth markets, but will also increasegrowth in major markets, which are seeing a broader recovery 4Q10 Revenue, Geo Key Changes & Drivers YTY Growth and Keep on the Radar Contribution GBS grew revenue in North America, Americas up 11% year-to-year in constant $6.71B, up TBR believes rising demand in U.S./ currency, signifying an improved 4.2% YTY; consulting and SI within the Americas market environment in the region in 45.0% of mature markets will drive growth TBR’s view, and we expect this growth revenue well into 2011. trend to continue. Despite a year-to-year decline, EMEA EMEA Slow and uneven economic sequential growth came in slightly $4.97B, recovery and tight public spending below double-digit growth figures, as down remain, but there are some local EMEA IBM saw strong demand in Southwest 3.0% YTY; economies that are growing (e.g., Europe, driven by regions such as 33.3% of Germany) and clients are investing France and Italy. revenue in IT projects. IGS is seeing its revenue expand as the APAC IBM continues to improve its organization increases work with $3.25B, up 5.6% competitive position in APAC by clients in India, Thailand, Malaysia, APAC focusing on market expansion, Singapore, Indonesia, South Korea, YTY; China, Taiwan, Vietnam, Philippines 21.8% of IT infrastructure development and Australia. projects and industry leadership. revenue IBM’s Growth Markets sector grew 13%, led by growth in the BRIC region (which was up 17%). The Growth major markets increased 5% driven by the U.S. and Southwest Europe (all year-to-year, as reported). Markets Growth markets have generated $10 billion in annual revenue since 2000, now accounting for 21% of IBM’s total revenue, and will continue to expand in share.26 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Resource Management Strategy TBRIGS is able to attract talent through training, career growth and perksStrategy IGS SERVICES HEADCOUNT TBR• IBM/IGS remains a globally integrated enterprise Total hea dcount: 245000 (+4.7% YTY) (operations and functions are located anywhere in the 250,000 world) that leverages its scale and innovative value 200,000 proposition to capture new growth. 115,000 124,000 Total Headcount• IBM focuses on developing and leveraging global delivery 150,000 Ons hore capabilities (often in lower-cost locations around the Offs hore globe) for optimum service delivery. 100,000• IBM/IGS focuses on attracting and retaining the best 110,000 130,000 50,000 talent through training, professional and career development. 0• IBM achieves service excellence through specialized skills, 4Q09 4Q10 processes, assets and tools, and information analytics. Ca l enda r Qua rter SOURCE: TBR ESTIMATES TBR IGS Efficiency Metrics (In $) 4Q09 4Q10 IGS’ Resource Management Changes Revenue per Employee $ 233,546 $ 235,345 ↑ • According to TBR estimates, IBM’s services Operating Income per Employee $ 34,352 $ 33,940 ↓ headcount increased 4.7% year-to-year to 245,000 Utilization 83.0% 86.0% ↑ in 4Q10. TBR believes the company is gradually Turnover 13.0% 15.4% ↑ hiring across key regions and lower-cost locations as demand improves.Investments • IBM is taking steps to reduce rising attrition levels,• In 4Q10, IBM opened a cloud computing lab in Hursley, especially in lower-cost locations. In addition to U.K. to help IBM partners develop and test new cloud providing perks and allowances to motivate services and build out go-to-market plans (i.e., explore people, in India, the company is curbing attrition cloud computing models, become cloud builders, by implementing a three-month notice period for application, technology and infrastructure providers, departing employees, up from the previous one- cloud resellers and aggregators). month notice (a recently implemented measure that has yet to generate results).27 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Resource Management Strategy TBRIGS’ senior leadership is focused on improving IBM’s top lineand on growing in emerging markets Samuel J. Palmisano Chairman of theOrganizational/Executive Changes BoardIBM is setting the stage for market TBR President & CEOexpansion in Thailand and Australia,two of the 20 growth markets pickedby IBM for business development. Steven A. Mills Michael E. Daniels Mark Loughridge Virginia Rometty • In Thailand, IBM appointed SVP, SVP, Global SVP,text Global Sales, Pansiree Amatayakul as managing Group Executive Technology Services, SVP, Chief Financial Marketing and director for IBM Thailand, Software and Systems IGS Officer Strategy replacing Thanwa Laohasiriwong, who recently resigned. IBM will Linda Sanford be looking to drive infrastructure J. Randall MacDonald development in Thailand though Rodney C. Adkins Frank Kern SVP, Enterprise on SVP, Demand SVP, Human Resources its Smarter Planet initiative with Systems & Technology SVP, IBM Global Transformation & IT systems and software solutions to Group Business Services support large service projects. • In Australia, IBM appointed KEY: Dr. John E. Kelly III Jon C. Iwata Andrew Stevens managing Corporate SVP & Director of IBM SVP, Marketing/ director for Australia/New Functions Research Communications Zealand. Stevens was Hardware instrumental for the integration Group of the consulting business of Robert C. Weber PricewaterhouseCoopers nearly Software Group SVP, Legal & 10 years ago. Regulatory Affairs & Services Group General Counsel SOURCE: IBM AND TBR 28 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Future Outlook TBRIGS will see more top- and bottom-line growth in 2011 as demandimproves and revenue growth and productivity initiatives take effect TBR Outlook • TBR anticipates that IGS will report top-line growth during 1Q11 with TBR 4Q10 PSBQ VENDOR POSITION AND PROJECTION: IGS external revenue increasing by 10.00 PSBQ Corporate Score 3.5% in our estimates, higher than 9.00 8.00 PSBQ Tra i l i ng 12-Month Avera ge Growth = 9.6% the 2.0% year-to-year growth 7.00 6.00 4Q10 3Q10 1Q11 Es t. reported in 4Q10. External revenue 5.00 4.00 growth will remain in mid-single 3.00 Financial digits during 2011 as IGS grows 2.00 1.00 0.00 at/above market growth (GTS and 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% GBS target markets will grow by 4% SOURCE: TBR AND IBM Qua rterl y Revenue Growth Yea r-to-yea r CAGR through 2015). • IGS will continue to focus on improving its profitability in the long run through levers such as productivity and operational excellence, high use of IP/assets that aid delivery, innovation through cloud computing and globally integrated capabilities. • IBM/IGS will continue to invest in emerging markets, acquisitions and services with strong growth and profit potential (e.g., Smarter Planet, business analytics and cloud computing). Go to Market • TBR expects IBM/IGS to focus on gaining growth in consulting & SI, as demand and signings are improving and clients are looking for revenue growth and transformation projects. • IBM will continue to extend its resources in underpenetrated nearshore/offshore locations, as well as strengthen its resources in existing regions and further its global integration. Resource • IGS will focus on reducing cost of service and improving productivity by managing utilization Management and investing in enterprise productivity (IBM is targeting $8.0 billion in productivity benefits in the next five years, up from $4.7 billion in productivity benefits over last four years through shared services, process transformation and focus on value).29 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Income Statement TBR IBM CORP. Consolidated Statement of Income (in Thousands Except per Share Data) TBR Dec. 09 March 10 June10 Sept. 10 Dec. 10 March 11 FISCAL/CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. Net Sales $ 27,230,000 $ 22,857,000 $ 23,724,000 $ 24,271,000 $ 29,019,000 $ 25,000,000 Cost of Sales 14,085,000 12,881,000 12,915,000 13,270,000 14,792,000 13,500,000 Gross Profit 13,145,000 9,976,000 10,809,000 11,001,000 14,227,000 11,500,000 SG&A 5,560,000 5,677,000 5,061,000 5,149,000 5,951,000 5,500,000 R&D 1,461,000 1,509,000 1,475,000 1,464,000 1,578,000 1,590,000 IP and Custom Development Income (313,000) (261,000) (297,000) (278,000) (318,000) (289,000) Operating Income 6,437,000 3,051,000 4,570,000 4,666,000 7,016,000 4,699,000 Other (Income) and Expenses (24,000) (545,000) (95,000) (106,000) (42,000) (45,000) Interest Expense 81,000 82,000 90,000 95,000 102,000 130,000 EBITD 6,380,000 3,514,000 4,575,000 4,677,000 6,956,000 4,614,000 Income Taxes 1,568,000 914,000 1,190,000 1,088,000 1,698,000 1,300,000 Net Income $ 4,812,000 $ 2,600,000 $ 3,385,000 $ 3,589,000 $ 5,258,000 $ 3,314,000 Net Income Per Share of Common Stock $ 3.59 $ 2.00 $ 2.61 $ 2.82 $ 4.18 N/A Common Shares Outstanding 1,340,700,000 1,301,200,000 1,296,700,000 1,272,800,000 1,258,400,000 N/A AS A PERCENTAGE OF REVENUE Net Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Sales 51.7% 56.4% 54.4% 54.7% 51.0% 54.0% Gross Margin 48.3% 43.6% 45.6% 45.3% 49.0% 46.0% SG&A 20.4% 24.8% 21.3% 21.2% 20.5% 22.0% R&D 5.4% 6.6% 6.2% 6.0% 5.4% 6.4% Operating Margin 23.6% 13.3% 19.3% 19.2% 24.2% 18.8% Other, Net -0.1% -2.4% -0.4% -0.4% -0.1% -0.2% EBITD 23.4% 15.4% 19.3% 19.3% 24.0% 18.5% Income Taxes 5.8% 4.0% 5.0% 4.5% 5.9% 5.2% Net Margin 17.7% 11.4% 14.3% 14.8% 18.1% 13.3% YEAR-TO-YEAR CHANGE Net Sales 0.8% 5.3% 2.0% 3.0% 6.6% 9.4% Cost of Sales 0.1% 4.9% 1.9% 2.6% 5.0% 4.8% Gross Profit 1.6% 5.8% 2.2% 3.5% 8.2% 15.3% SG&A -4.7% 7.8% -1.1% 2.7% 7.0% -3.1% R&D -4.4% 2.0% 2.9% 1.2% 8.0% 5.4% Operating Income 9.0% 3.2% 5.4% 4.6% 9.0% 54.0% Other, Net -40.0% -177.2% -106.8% -112.4% 5.3% 118.4% EBITD 9.8% 12.6% 7.4% 7.0% 9.0% 31.3% Income Taxes 13.5% 10.5% 2.7% -6.1% 8.3% 42.2% Net Income 8.7% 13.3% 9.1% 11.7% 9.3% 27.5% SOURCE: IBM30 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Income Statement TBR IGS PRO FORMA INCOME STATEMENT (IN $ MILLIONS) TBR CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. Global Technology Services Internal Revenue $ 347 $ 320 $ 332 $ 362 $ 299 $ 298 Global Technology Services External Revenue $ 10,051 $ 9,306 $ 9,234 $ 9,496 $ 10,165 $ 9,597 Global Business Services Internal Revenue $ 217 $ 203 $ 197 $ 199 $ 199 $ 199 Global Business Services External Revenue $ 4,580 $ 4,410 $ 4,483 $ 4,572 $ 4,758 $ 4,600 Total IGS Internal Revenue $ 564 $ 523 $ 529 $ 561 $ 498 $ 497 Total IGS External Revenue $ 14,631 $ 13,716 $ 13,717 $ 14,068 $ 14,923 $ 14,196 Total IGS Revenue (Internal + External) $ 15,195 $ 14,239 $ 14,246 $ 14,629 $ 15,421 $ 14,693 Cost of Services $ 9,645 $ 9,311 $ 9,317 $ 9,397 $ 10,049 $ 9,305 Gross Profit $ 4,986 $ 4,405 $ 4,400 $ 4,671 $ 4,874 $ 4,891 Global Technology Services $ 3,598 $ 3,201 $ 3,176 $ 3,349 $ 3,527 $ 3,330 Global Business Services $ 1,388 $ 1,204 $ 1,224 $ 1,322 $ 1,347 $ 1,561 Operating Expenses $ 2,664 $ 2,995 $ 2,295 $ 2,452 $ 2,471 $ 2,712 Total IGS Operating Income (Pre-tax Income) $ 2,322 $ 1,410 $ 2,105 $ 2,219 $ 2,403 $ 2,178 Global Technology Services Pre-tax Income $ 1,556 $ 965 $ 1,422 $ 1,524 $ 1,657 $ 1,491 Global Business Services Pre-tax Income $ 766 $ 445 $ 683 $ 695 $ 746 $ 688 AS A PERCENTAGE OF TOTAL EXTERNAL IGS REVENUE Global Technology Services External Revenue 68.7% 67.8% 67.3% 67.5% 68.1% 67.6% Global Business Services External Revenue 31.3% 32.2% 32.7% 32.5% 31.9% 32.4% Total IGS External Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Sales 65.9% 67.9% 67.9% 66.8% 67.3% 65.5% Gross Margin 34.1% 32.1% 32.1% 33.2% 32.7% 34.5% Global Technology Services 35.8% 34.4% 34.4% 35.3% 34.7% 34.7% Global Business Services 30.3% 27.3% 27.3% 28.9% 28.3% 33.9% Operating Expenses 18.2% 21.8% 16.7% 17.4% 16.6% 19.1% Total IGS Operating Income (as % of IGS External Revenue) 15.9% 10.3% 15.3% 15.8% 16.1% 15.3% Global Technology Services Pre-tax Income 10.6% 7.0% 10.4% 10.8% 11.1% 10.5% Global Business Services Pre-tax Income 5.2% 3.2% 5.0% 4.9% 5.0% 4.8% Total IGS Operating Income (as % of IGS Revenue (Internal + External) 15.3% 9.9% 14.8% 15.2% 15.6% 14.8% GTS Pre-tax Income as a % of total GTS* 15.0% 10.0% 14.9% 15.5% 15.8% 15.1% GBS Pre-tax Income as a % of total GBS* 16.0% 9.7% 14.6% 14.6% 15.0% 14.3% YEAR-TO-YEAR CHANGE Global Technology Services External Revenue 4.4% 6.3% 1.4% 0.7% 1.1% 3.1% Global Business Services External Revenue -2.7% 0.3% 3.3% 5.4% 3.9% 4.3% Total IGS External Revenue 2.1% 4.3% 2.0% 2.1% 2.0% 3.5% Cost of Services 0.2% 3.2% 2.4% 2.4% 4.2% -0.1% Gross Profit 5.9% 6.6% 1.3% 1.7% -2.3% 11.0% Global Technology Services 7.1% 7.9% 0.3% 0.0% -2.0% 4.0% Global Business Services 2.7% 3.3% 3.9% 6.2% -3.0% 29.6% Operating Expenses 5.4% 19.4% -1.6% -0.5% -7.3% -9.4% Total IGS Operating Income (Pre-tax Income) 6.4% -13.2% 4.6% 4.2% 3.5% 54.5% Global Technology Services Pre-tax Income 8.0% -12.6% 1.2% 3.6% 6.5% 54.5% Global Business Services Pre-tax Income 3.3% -14.6% 12.3% 5.5% -2.6% 54.5% * GTS and GBS pre-tax margins are calculated based on their respective internal and external revenue as reported by IBM. SOURCE: IBM AND TBR31 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Balance Sheet TBR IBM CORP. Consolidated Balance Sheets (in $ Thousands) TBR Dec. 09 March 10 June10 Sept. 10 Dec. 10 FISCAL/CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 ASSETS Current Assets Cash & Equivalents $ 12,183,000 $ 12,472,000 $ 10,325,000 $ 9,859,000 $ 10,661,000 Marketable Securities 1,791,000 1,505,000 1,916,000 1,227,000 990,000 Accounts Receivable 11,877,000 10,428,000 10,191,000 10,904,000 11,968,000 Inventory 2,494,000 2,524,000 2,595,000 2,629,000 2,450,000 Short-term Financing Receivables 14,914,000 13,083,000 13,301,000 13,592,000 16,257,000 Deferred Taxes 1,730,000 1,565,000 1,444,000 1,596,000 1,564,000 Prepaid Expenses and Other 3,946,000 4,121,000 5,124,000 4,661,000 4,226,000 Total Current Assets 48,935,000 45,698,000 44,896,000 44,468,000 48,116,000 Property, Plant, Equip. (Net of Dep.) 14,165,000 13,841,000 13,534,000 14,009,000 14,096,000 Long-term Financing Receivables 10,644,000 9,542,000 9,185,000 9,448,000 10,548,000 Prepaid Pension Assets 3,001,000 3,289,000 3,575,000 4,379,000 3,068,000 Intangible Assets 2,513,000 2,618,000 2,526,000 3,048,000 3,488,000 Goodwill 20,190,000 20,889,000 20,544,000 22,703,000 25,136,000 Other, Net 9,574,000 9,331,000 9,160,000 9,119,000 8,998,000 Total Assets $ 109,022,000 $ 105,208,000 $ 103,420,000 $ 107,174,000 $ 113,450,000 LIABILITIES & EQUITY Current Liabilities Accounts Payable $ 28,008,000 $ 26,787,000 $ 26,465,000 $ 26,979,000 $ 29,568,000 Short-term Debt 4,168,000 5,014,000 5,633,000 5,556,000 6,778,000 Income Taxes Payable 3,826,000 2,775,000 2,895,000 2,908,000 4,216,000 Total Current Liabilities 36,002,000 34,576,000 34,993,000 35,443,000 40,562,000 LT Debt, Net of Current 21,932,000 21,305,000 21,017,000 21,899,000 21,846,000 Retirement Obligations 15,953,000 15,216,000 14,598,000 15,145,000 15,978,000 Other Non-current Liabilities 12,380,000 11,962,000 11,636,000 12,329,000 11,892,000 Total Liabilities $ 86,267,000 $ 83,059,000 $ 82,244,000 $ 84,816,000 $ 90,278,000 Common Stock & PIC 41,810,000 42,665,000 43,522,000 44,328,000 45,418,000 Retained Earnings 80,900,000 82,783,000 85,323,000 88,095,000 92,532,000 Translation and Other Adj. (99,955,000) (103,299,000) (107,669,000) (110,065,000) (114,778,000) Total Stockholders Equity 22,755,000 22,149,000 21,176,000 22,358,000 23,172,000 Total Liabilities & Equity $ 109,022,000 $ 105,208,000 $ 103,420,000 $ 107,174,000 $ 113,450,000 FINANCIAL RATIOS Days Sales Outstanding 39.26 41.06 38.66 40.43 37.12 Turns on Inventory 43.22 36.44 37.08 37.17 45.71 Days Inventory Outstanding 8.44 10.02 9.84 9.82 7.99 Fixed Asset Turnover 6.75 6.92 7.11 7.12 7.11 Days Cash Outstanding 89.29 97.66 85.30 75.19 70.89 Total Asset Turnover 1.02 0.85 0.91 0.92 1.05 Debt/Asset Ratio 0.79 0.79 0.80 0.79 0.80 Current Ratio 1.36 1.32 1.28 1.25 1.19 Return on Assets 12.7% 13.1% 13.3% 13.6% 13.8% Return on Equity 80.0% 74.2% 70.0% 67.3% 66.4% Revenue/Employee ($ Thousands) $ 241,443 $ 243,657 $ 243,776 $ 244,242 $ 247,075 Number of Employees 399,409 399,400 402,000 405,500 409,950 SOURCE: IBM32 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Financial Models TBR IGS REVENUE BREAKDOWN BY BUSINESS UNIT (IN $ MILLIONS) TBR CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. Global Technology Services External Revenue $ 10,051 $ 9,306 $ 9,234 $ 9,496 $ 10,165 $ 9,597 Outsourcing $ 5,815 $ 5,454 $ 5,364 $ 5,532 $ 5,881 $ 5,607 Integrated Technology Services $ 2,395 $ 2,073 $ 2,098 $ 2,162 $ 2,381 $ 2,110 Maintenance $ 1,841 $ 1,779 $ 1,772 $ 1,802 $ 1,904 $ 1,879 Global Business Services External Revenue $ 4,580 $ 4,410 $ 4,483 $ 4,572 $ 4,758 $ 4,600 Total IGS External Revenue $ 14,631 $ 13,716 $ 13,717 $ 14,068 $ 14,923 $ 14,196 AS A PERCENTAGE OF EXTERNAL IGS REVENUE Global Technology Services External Revenue 68.7% 67.8% 67.3% 67.5% 68.1% 67.6% Outsourcing 39.7% 39.8% 39.1% 39.3% 39.4% 39.5% Integrated Technology Services 16.4% 15.1% 15.3% 15.4% 16.0% 14.9% Maintenance 12.6% 13.0% 12.9% 12.8% 12.8% 13.2% Global Business Services External Revenue 31.3% 32.2% 32.7% 32.5% 31.9% 32.4% YEAR-TO-YEAR CHANGE Global Technology Services External Revenue 4.4% 6.3% 1.4% 0.7% 1.1% 3.1% Outsourcing 18.5% 7.7% 1.6% 1.2% 1.1% 2.8% Integrated Technology Services 0.3% 1.9% -1.8% -1.9% -0.6% 1.8% Maintenance 6.2% 7.4% 4.6% 2.1% 3.4% 5.6% Global Business Services External Revenue -2.7% 0.3% 3.3% 5.4% 3.9% 4.3% IGS External Revenue 2.1% 4.3% 2.0% 2.1% 2.0% 3.5% SOURCE: IBM AND TBR33 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Financial Models TBR TBR IGS GEO REVENUE BREAKDOWN - IN $ MILLIONS CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. FISCAL QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. Total Revenue $ 14,631 $ 13,716 $ 13,717 $ 14,068 $ 14,923 $ 14,196 AMERICAS Revenue $ 6,438 $ 6,059 $ 6,216 $ 6,241 $ 6,710 $ 5,903 % of Total Revenue 44.0% 44.2% 45.3% 44.4% 45.0% 41.6% EMEA Revenue $ 5,121 $ 4,710 $ 4,384 $ 4,519 $ 4,967 $ 5,213 % of Total Revenue 35.0% 34.3% 32.0% 32.1% 33.3% 36.7% ASIA PACIFIC Revenue $ 3,073 $ 2,947 $ 3,117 $ 3,308 $ 3,246 $ 3,080 % of Total Revenue 21.0% 21.5% 22.7% 23.5% 21.8% 21.7% YEAR-TO-YEAR CHANGE Americas 4.5% 1.8% 3.5% 3.0% 4.2% -2.6% EMEA -3.7% 4.9% -5.0% -6.0% -3.0% 10.7% Asia Pacific 7.7% 8.9% 10.3% 13.9% 5.6% 4.5% SEQUENTIAL CHANGE Americas 6.2% -5.9% 2.6% 0.4% 7.5% -12.0% EMEA 6.5% -8.0% -6.9% 3.1% 9.9% 5.0% Asia Pacific 5.7% -4.1% 5.8% 6.1% -1.9% -5.1% SOURCE: TBR ESTIMATES34 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Financial Models TBR TBR IGS REVENUE BREAKDOWN - BY INDUSTRY (IN $ BILLIONS) CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. Financial Services $ 4.27 $ 4.02 $ 4.05 $ 4.22 $ 4.52 $ 4.30 Public $ 2.19 $ 2.13 $ 2.19 $ 2.22 $ 2.34 $ 2.23 Industrial $ 2.05 $ 2.08 $ 2.12 $ 1.97 $ 2.09 $ 2.09 Distribution $ 1.51 $ 1.40 $ 1.44 $ 1.55 $ 1.63 $ 1.45 Communications $ 1.48 $ 1.36 $ 1.37 $ 1.41 $ 1.51 $ 1.42 Small and Medium Business $ 2.91 $ 2.33 $ 2.35 $ 2.42 $ 2.58 $ 2.41 Other $ 0.22 $ 0.40 $ 0.20 $ 0.28 $ 0.25 $ 0.30 All Sectors $ 14.63 $ 13.72 $ 13.72 $ 14.07 $ 14.92 $ 14.20 AS A PERCENTAGE OF REVENUE Financial Services 29.2% 29.3% 29.5% 30.0% 30.3% 30.3% Public 15.0% 15.5% 16.0% 15.8% 15.7% 15.7% Industrial 14.0% 15.2% 15.4% 14.0% 14.0% 14.7% Distribution 10.3% 10.2% 10.5% 11.0% 10.9% 10.2% Communications 10.1% 9.9% 10.0% 10.0% 10.1% 10.0% Small and Medium Business 19.9% 17.0% 17.1% 17.2% 17.3% 17.0% Other 1.5% 2.9% 1.5% 2.0% 1.7% 2.1% YEAR-TO-YEAR GROWTH Financial Services -2.3% 1.9% 0.3% 5.7% 5.8% 7.0% Public 11.5% 14.7% 14.9% 7.6% 6.8% 4.8% Industrial 17.4% 32.1% 31.1% 7.5% 2.0% 0.1% Distribution 2.2% 3.3% 2.0% 6.0% 7.9% 3.5% Communications 2.4% 2.2% 0.0% -0.8% 2.0% 4.5% Small and Medium Business 4.0% -9.5% -10.7% -8.5% -11.3% 3.5% Other -58.4% -22.4% -57.6% -21.4% 15.6% -25.1% All Sectors 2.1% 4.3% 2.0% 2.1% 2.0% 3.5% SOURCE: TBR ESTIMATES35 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Financial Models TBR TBR IBM GLOBAL SERVICES OPERATING EXPENSE MODEL (IN $ THOUSANDS) CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. FISCAL QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. IGS External Revenue $ 14,631,000 $ 13,716,000 $ 13,717,000 $ 14,068,000 $ 14,923,000 $ 14,196,060 Operating Expenses $ 2,663,998 $ 2,995,144 $ 2,295,355 $ 2,452,000 $ 2,470,769 $ 2,712,409 Sales & Marketing $ 2,232,683 $ 2,221,992 $ 1,961,531 $ 2,082,064 $ 2,089,220 $ 2,254,437 General & Administrative $ 431,315 $ 773,152 $ 333,824 $ 369,936 $ 381,549 $ 457,972 SALES & MARKETING EXPENSE BREAKOUT Sales Expense $ 1,755,720 $ 1,755,374 $ 1,553,533 $ 1,644,831 $ 1,650,484 $ 1,783,260 Marketing Spending $ 476,963 $ 466,618 $ 407,998 $ 437,233 $ 438,736 $ 471,177 Advertising $ 162,500 $ 150,000 $ 157,920 $ 168,500 $ 187,500 $ 173,400 Total Sales & Marketing Expense $ 2,232,683 $ 2,221,992 $ 1,961,531 $ 2,082,064 $ 2,089,220 $ 2,254,437 SPENDING AS A PERCENTAGE OF REVENUE Operating Expenses 18.2% 21.8% 16.7% 17.4% 16.6% 19.1% Sales & Marketing 15.3% 16.2% 14.3% 14.8% 14.0% 15.9% Sales Expense 12.0% 12.8% 11.3% 11.7% 11.1% 12.6% Marketing Spending 3.3% 3.4% 3.0% 3.1% 2.9% 3.3% Advertising 1.1% 1.1% 1.2% 1.2% 1.3% 1.2% General & Administrative 2.9% 5.6% 2.4% 2.6% 2.6% 3.2% SOURCE: TBR ESTIMATES AND IBM36 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Financial Models TBR TBR IBM GLOBAL SERVICES OFFSHORE HEADCOUNT CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 EMPLOYEES India 72,000 72,700 75,000 80,000 83,000 Total Offshore Headcount 110,000 115,000 120,000 125,000 130,000 Total Headcount 234,000 235,000 237,000 242,000 245,000 Total Headcount YtY Growth -2.5% -1.7% 0.9% 3.4% 4.7% SOURCE: TBR ESTIMATES37 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Graphs TBRFinancial Strategy GraphsTBR IGS OPERATING MARGIN TBR IBM CURRENT RATIO20.0% 2.00 15.3% 14.8% 15.2% 15.6%16.0% 1.50 9.9% 1.36 1.3212.0% 1.28 1.25 1.00 1.19 8.0% 4.0% 0.50 0.0% 0.00 4Q09 1Q10 2Q10 3Q10 4Q10 4Q09 1Q10 2Q10 3Q10 4Q10 IGS PSBQ AVERAGE IBM PSBQ AVERAGESOURCE: TBR AND IBM SOURCE: TBR AND IBM TBR IBM DEBT/ASSET RATIO 1.00 0.79 0.79 0.80 0.79 0.80 0.80 0.60 0.40 0.20 0.00 4Q09 1Q10 2Q10 3Q10 4Q10 IBM PSBQ AVERAGE SOURCE: TBR AND IBM38 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Graphs TBRFinancial Strategy Graphs TBR IBM RETURN ON ASSETS 16.0% 13.3% 13.6% 13.8% 12.7% 13.1% 12.0% 8.0% 4.0% 0.0% 4Q09 1Q10 2Q10 3Q10 4Q10 IBM PSBQ AVERAGE SOURCE: TBR AND IBM TBR IBM RETURN ON EQUITY 100.0% 80.0% 75.0% 74.2% 70.0% 67.3% 66.4% 50.0% 25.0% 0.0% 4Q09 1Q10 2Q10 3Q10 4Q10 IBM PSBQ AVERAGE SOURCE: TBR AND IBM39 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Graphs TBRGo-to-Market Graphs TBR IGS REVENUE (IN $ BILLIONS) TBR IGS REVENUE GROWTH $20.0 10.0% $15.0 $14.6 $13.7 $13.7 $14.1 $14.9 8.0% $10.0 6.0% 4.3% 4.0% $5.0 2.1% 2.0% 2.1% 2.0% 2.0% $0.0 4Q09 1Q10 2Q10 3Q10 4Q10 0.0% 4Q09 1Q10 2Q10 3Q10 4Q10 IGS PSBQ AVERAGE IGS PSBQ AVERAGE SOURCE: TBR AND IBM SOURCE: TBR AND IBM TBR BACKLOG/REVENUE RATIO TBR IBM DAYS SALES OUTSTANDING 3.00 80.00 2.49 2.41 2.39 2.52 2.50 2.31 Number of Days 60.00 2.00 39.26 41.06 40.43 38.66 37.12 1.50 40.00 1.00 20.00 0.50 0.00 0.00 4Q09 1Q10 2Q10 3Q10 4Q10 4Q09 1Q10 2Q10 3Q10 4Q10 IGS PSBQ AVERAGE IBM PSBQ AVERAGE SOURCE: TBR AND IBM. SOURCE: TBR AND IBM.40 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Graphs TBRResource Management GraphsTBR GROSS MARGIN TBR IGS OPERATING EXPENSES AS A PERCENTAGE OF REVENUE 40.0% 34.1% 32.1% 32.1% 33.2% 32.7% 25.0% 21.8% 17.4% 18.2% 30.0% 20.0% 16.7% 16.6% 15.0% 20.0% 10.0% 10.0% 5.0% 0.0% 0.0% 4Q09 1Q10 2Q10 3Q10 4Q10 4Q09 1Q10 2Q10 3Q10 4Q10 IGS PSBQ AVERAGE IGS PSBQ AVERAGESOURCE: TBR AND IBM SOURCE: TBR AND IBM IGS REVENUE PER EMPLOYEE TBR (IN $ THOUSANDS AND TTM) $280.0 $233.5 $237.0 $237.6 $236.8 $235.3 $220.0 $160.0 $100.0 4Q09 1Q10 2Q10 3Q10 4Q10 IGS PSBQ AVERAGE SOURCE: TBR AND IBM41 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Graphs TBRResource Management Graphs IGS UTILIZATION RATE TBR IGS TURNOVER RATETBR 100.0% 20.0% 85.0% 86.0% 86.0% 14.6% 15.0% 15.4% 83.0% 84.0% 80.0% 15.0% 13.0% 13.5% 60.0% 10.0% 40.0% 5.0% 20.0% 0.0% 0.0% 4Q09 1Q10 2Q10 3Q10 4Q10 4Q09 1Q10 2Q10 3Q10 4Q10 IGS PSBQ AVERAGE IGS PSBQ AVERAGESOURCE: TBR AND IBM SOURCE: TBR AND IBM TBR IGS OPERATING INCOME PER EMPLOYEE (IN $ THOUSANDS AND TTM) $40.0 $34.4 $33.6 $33.9 $34.0 $33.9 $30.0 $20.0 $10.0 $0.0 4Q09 1Q10 2Q10 3Q10 4Q10 IGS PSBQ AVERAGE SOURCE: TBR AND IBM42 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRIBM/IGS’ Recent Acquisitions ESTIMATED ACQUISITION ACQUISITION SYNERGIES NO. OF COMPANY DATE EMPLOYEES Software and devices that route data and transactions toBLADE Network October and from servers, helping IBM better integrate networks N/A Technologies 2010 with its systems Extends IBM’s business analytics capabilities through October OpenPages OpenPages software that helps identify and manage risk 140 2010 and compliance Extends IBM’s business analytics initiatives through Clarity October Systems’ financial governance software that helps Clarity Systems N/A 2010 organizations automate processes for financial statement management PSS Systems provides software for analyzing, automation and implementation of information governance policies. October PSS Systems The acquisition expands IBM’s Information Lifecycle 100 2010 Governance solutions, IBM’s storage management and Smart Archive strategy. Netezza September Extends IBM’s business analytics initiatives through 500 Corporation 2010 Netezza’s analytics and data warehousing appliance Storwize’s data compression technology reduces storage Storwize August 2010 requirements and augments IBM’s storage and analytics N/A capabilities. Datacap August 2010 Strengthens IBM’s capabilities to digitize, manage and automate information assets in paper intensive verticals 40 (e.g., healthcare, insurance, public sector and finance)43 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRIBM/IGS’ Recent Acquisitions ESTIMATED ACQUISITION ACQUISITION SYNERGIES NO. OF COMPANY DATE EMPLOYEES Sterling August 2010 Software for cross-channel commerce and integration of Commerce customers, partners and suppliers across a range of 2,500 industries Unica August 2010 The acquisition of Unica allows IBM to increase its ability to Corporation (announced) aid organizations when predicting and analyzing customer 500 tendencies. July 2010 Data compression technology that improves storage Storwize N/A (announced) efficiency and data analytic capabilities Security and compliance management and automation for BigFix July 2010 N/A desktops across the enterprise Strengthens IBM’s cloud computing capabilities (cloud Cast Iron May 2010 integration software, appliances and services), business 75 Systems process and integration software portfolio By acquiring the core operating assets of Wilshire Credit Wilshire Credit March 2010 Corporation, including the Wilshire mortgage servicing 900 Corporation platform, IBM strengthens its mortgage BPO capabilities. Intelliden February Provider of intelligent network automation software, N/A 2010 extending IBM’s network management offerings44 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRIBM/IGS’ Recent Acquisitions ESTIMATED ACQUISITION ACQUISITION SYNERGIES NO. OF COST COMPANY DATE EMPLOYEES Initiate January 2010 Systems Data integrity software for information sharing 120 N/A among healthcare and government organizations National January 2010 Interest Advanced analytics and IT solutions for the public Security 1,000 N/A sector Company Lombardi January 2010 Lombardi provides BPM software and services, complements IBMs enterprise-wide process management software, and adds integrated 180 N/A solutions that automate human tasks and workflows. SPSS will expand IBMs Information On Demand software portfolio and business analytics capabilities, including the range of offerings $1.2 SPSS Inc. July 2009 1,200 available through IBM’s Business Analytics and billion Optimization Consulting organization and network of Analytics Solution Centers.45 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRIBM/IGS’ Recent Acquisitions ESTIMATED ACQUISITION ACQUISITION SYNERGIES NO. OF COST COMPANY DATE EMPLOYEES IBM acquired and will integrate Ounce Labs, a leading provider of enterprise source code security testing, into its Rational software business. Ounce Ounce Labs July 2009 45 N/A Labs technology will be offered as part of the IBM Rational AppScan family of web application security and compliance testing solutions. Exeros offers data discovery software. The $50 Exeros May 2009 acquisition strengthens IBM’s Information Agenda 50 million and BAO strategy. (TBR est.) ILOG’s Business Rule Management System (BRMS), Optimization, Visualization and Supply Chain $295 ILOG January 2009 835 Management portfolios will build on IBM’s million software and business process management.46 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Services Portfolio TBRIGS’ Portfolio of Services BUSINESS CONSULTING: IT SERVICES: Service Lines Service Lines • Business Analytics and Optimization • Business Continuity and Resiliency Services • Customer Relationship Management • End-user Services • Financial Management • Integrated Communications Services • Human Capital Management • Security Services • Strategy and Change • IT Strategy and Architecture Services • Supply Chain Management • Maintenance and Technical Support Services • Industry Expertise • Middleware Services • Midmarket Expertise • Outsourcing Services • Thought Leadership • Server Services • Site and Facilities Services • Storage and Data Services47 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Services Portfolio TBR IBM/IGS’ Vertical Industries Telecommunication Retail Banking Automotive Government • Service Provider • Merchandising • Back-office • IBM auto mktg. sales • Social services & Strategic • Consumer Driven operations and service social security Transformation Supply Chain • Front-office • IBM auto • Customs, ports & (SPST) • On Demand optimization manufacturing border mgmt. Workplace for • Risk and productivity • Enterprise Retail compliance • PLM Integration Media & • Auto common ERP/CRM Entertainment Consumer Products Financial Markets environment • Defense/national • Production and • Integrated Market • Risk and • Embedded Systems security distribution Management compliance lifecycle management • Road Charging transformation • Consumer Driven • Trade process Financial Services SolutionsCommunications Solutions • Customer sales Supply Chain transformation Electronics Health & Life Distribution Solutions Industrial Solutions and service • CP Core Financials • FM Data • Electronics Value Sciences Public Solutions transformation & HR-SAP (Japan) Management Chain Mgmt. • Life sciences • On Demand • IBM Production transformation/ Workplace for CP Insurance Solutions pharma Energy & Utilities (Japan) • Core insurance • Electronics sales & integration • Utilities network • Insurance Front service • New compliance revitalization Travel & Transport Office • PLM agenda • Customer • On Demand • Ins. Life • Embedded Systems • Healthcare operations Workplace for T&T Transformation • Lifecycle mgmt. provider/ transformation • Customer Driven aligned clinical Supply Chain for Aerospace & Defense environment T&T • Supply Chain Aftermarket Education • PLM • Enhanced campus • SAP Full Economy communication • IBM Learning Chemical & Petroleum Alignment • Upstream Petroleum BI/ODW • IBM Learning • SAP Full Economy Alignment SIS 48 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRIBM/IGS’ Quarterly Services Signings CONTRACT CLIENT DATE DESCRIPTION YEARS VALUE Deploy and manage IT infrastructure and applications in 16 African countries; consolidate and transform IT Bharti Airtel December environments into an integrated IT system, oversee 10 N/A India 2010 management of all applications, datacenter operations, servers, storage and desktop services; applications support (CRM, billing, self-service)Federal Health Contract extension to provide communications and December $110 Department technology support services, as well as oversee the 4 2010 million Australia health department’s technology renovation Allied Implement a new cloud computing model to consolidate Command December and integrate technology capabilities for Command and N/A N/ATransformation 2010 Control programs; IBM will develop the computing NATO environment to share a common operating environment. Embed security into online care system to safeguard American Well December patient information; integrate security services and skills N/A N/A United States 2010 into application development processes As part of the Smarter Cape Cod initiative, IBM will deploy technology for more efficient management of Barnstable Spring December physical infrastructure, protection of natural resources, County, Mass. 2011 N/A 2010 and opportunities for economic growth. Phase 1 will United States (Phase 1) design a Strategic Information Office and a Center of Excellence for Water Resources.49 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRIBM/IGS’ Quarterly Services Signings CONTRACT CLIENT DATE DESCRIPTION YEARS VALUE Smarter Healthcare initiative throughout the country; Government of November IBM, ActiveHealth Management and Medens Corporation N/A N/A Puerto Rico 2010 will deliver cloud services to help physicians share and exchange health information. Working with Finnair to deliver personalized customer Finnair November service and analyze passenger expertise; IBM is providing N/A N/A Finland 2010 consulting expertise, methodology and software to capture, mine and analyze information. €28 million Samlink November IBM will manage the IT operations for over 400 bank 5 (or $37 Finland 2010 branches and develop a desktop cloud offering. million) Cabinet Office November IBM signed a Memorandum of Understanding to provide N/A N/AUnited Kingdom 2010 efficiency strategies. In a new contract, IBM is to manage Westpac’s main Westpac November infrastructure services in addition to providing critical risk 5 N/A Australia 2010 mitigation services. StarBev November IT infrastructure services (datacenter, help desk, end-user Multimillion 5 Czech Republic 2010 support) and overall service management € Bank of Ireland November Manage the Bank’s IT infrastructure (desktop, servers, 5 N/A Ireland 2010 mainframes, local area networks and service desk)50 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRIBM/IGS’ Quarterly Services Signings CONTRACT CLIENT DATE DESCRIPTION YEARS VALUE Create Smarter Healthcare infrastructure; provide ITCentral Norway support to all of the hospitals in Norway to improveRegional Health November coordination and reporting of health information; 4 $120 million Authority 2010 develop an SAP-based solution to be used for upgrading Norway finance and logistic systems throughout Norway Nevada Clark IBM has been signed to integrate its business analytics County Family October software into the department’s process for efficient N/A N/A Services 2010 delivery of social services. United States Pyro October IBM will develop, test and manage Pyro’s products and 5 $19 million India 2010 solutions. ABN AMRO extended its services agreement with IBM ABN AMRO October whereby IBM will build and provide an integrated IT N/A N/A Netherlands 2010 infrastructure platform. IBM will take over the operation of Petrom’s datacenter Petrom October services, including cloud computing, hosting, installation, 10 N/A Romania 2010 business continuity, on-site backup and disaster recovery. IBM will provide management services and technologyDanish Defense October infrastructure to the Ministry’s resource management 7 N/A Denmark 2010 system.51 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRIBM/IGS’ Quarterly Services Signings CONTRACT CLIENT DATE DESCRIPTION YEARS VALUE Air New October IBM will provide business and technology services Zealand 5 N/A 2010 through mainframe and virtual hosting services. New Zealand Jet Airways September Business transformation and IT services (infrastructure 10 $62 million India 2010 and application support) Bharti Airtel IT infrastructure and application services to support September Limited client’s mobile communications network in 16 African N/A N/A 2010 India countries; deal will be finalized in 4Q10 Sunoco August IBM will provide managed business process services N/A N/A United States 2010 along with application support services to Sunoco. Orbitz will utilize IBMs Global Expense Reporting Orbitz August Solution to provide corporate travel customers more N/A N/A United States 2010 options and flexibility in its management and documentation of travel expenses. Transform the client’s IT environment into a more Blue Cross responsive, competitive and flexible model. Services June 2010 5 N/A Blue Shield include end-user technical support and hosting of client’s external website. Quippo- Provide technical support to overhaul client’s IT WTTIL June 2010 infrastructure in India, deploy server and storage 5 N/A India support, provide networking and security services52 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRIBM/IGS’ Quarterly Services Signings CONTRACT CLIENT DATE DESCRIPTION YEARS VALUECanal + Group June Digital supply chain transformation deal in which IBM will N/A N/A France 2010 improve television programming processes and systems ElectraCard Manage client’s disaster recovery site at IBM’s June Multimillion- Services (ECS) datacenter in Bangalore and client’s primary IT 10 2010 dollar India infrastructure located in Mumbai Provide customer care services for versions of Yahoo June products in Arabic languages and provide support for Yahoo N/A N/A 2010 Europe, the Middle East and North Africa in nine languages Provide business process management, IT infrastructure SulAmerica May services, app. maintenance, construction of a dedicated 12 $200 million Brazil 2010 service center Source, host and operate business IT infrastructure; IBM National will host NBN’s procurement, asset management and Broadband May accounting, provide scalable infrastructure solution that Network Co. 2 N/A 2010 includes servers, storage and operating systems, as well (NBN) as a flexible hosting environment to support NBN’s Australia growing operations.53 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRIBM/IGS’ Quarterly Services Signings CONTRACT CLIENT DATE DESCRIPTION YEARS VALUE Hilton April Hosting and management services for Hilton’s N/A N/A Worldwide 2010 technology platforms Broadridge Financial April IT services (datacenter, network support and IT 10 N/A Solutions 2010 operations) and business alignment agreements United States Core IP network maintenance and support services; TelstraClear March Multimillion- critical maintenance and support management 3 New Zealand 2010 dollar services U.S. General IT system modernization; next-generation IT February Services architecture to support the GSA’s Integrated 8 $74.4 million 2010 Administration Acquisition Environment Ministry of €56 million February Design, develop and implement a finance Finance, Slovak 3 (or $75 2010 information system Republic million) Cybersecurity and analytics for an IGS-developed U.S. Air Force February 10 cloud computing infrastructure to support defense N/A United States 2010 months and intelligence networks Sandhar Technologies February Remote infrastructure management covering server, 5 N/A Ltd. 2010 network and security management India54 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRIBM/IGS’ Application Vendors Partnership Highlights COMPANY SCOPE OF PARTNERSHIP IBM and SAP have helped customers build end-to-end CRM solutions, including mySAP CRM, IBM DB2, WebSphere MQ, IBM eServer iSeries and IBM eServer xSeries. The two also have joint solutions for business intelligence, ERP, PLM and SCM. The latest development of the SAP IBM/SAP relationship is the expansion of the partnership through the introduction of an optimized DB2 Database that improves performance and availability of SAP solutions running on DB2. IGS was one of Oracle’s first global strategic alliance partners and is recognized as an Oracle Global Certified Advantage Partner, a title reserved for partners that have consistently Oracle demonstrated the highest level of competency and commitment to Oracle. IBM BCS has teamed with Oracle for more than 16 years. IBM delivers industry and process expertise, along with implementation methods, tools and accelerators. Since 1999, IBM and Siebel Systems have worked together to deliver a broad range of open, Siebel Systems scalable and carefully integrated solutions. The latest development in the IBM/Siebel (part of Oracle) relationship is an extension of the partnership to offer hosted CRM solutions. IBM and Cisco leverage their strengths in internet infrastructure, e-business systems (applications, middleware, servers) and services (systems integration, support, outsourcing etc.) and deliver end-to-end internet business solutions for e-business transformation. The Cisco Systems alliance offers customers e-business security, availability and applications performance, as well as speech-enabled self-service solutions to contact centers. In the alliance’s latest development, Cisco will sell IBM’s Lotus Sametime directly through its 1,200 channel partners spread throughout the world.55 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRIBM/IGS’ Application Vendors Partnership HighlightsCOMPANY SCOPE OF PARTNERSHIP IBM BCS and Dassault Systemes provide customers with product lifecycle management services, which optimize product development processes. The partnership providesDassault business transformation consulting, implementation, integration and managed services forSystemes the CATIA, ENOVIA and SMARTEAM families of products, and also introduces, integrates and implements Dassault Systemes’ software solutions. IBM BCS and i2 manage other companies’ value chains by providing comprehensive solutions for supply and demand chains. The services accelerate optimization andi2 Technologies collaboration across the entire value chain and allow supply and demand management and timely response to unpredictable events. IBM and Red Hat have joined together to help customers accelerate Linux adoption on the IBM eServer zSeries mainframe. The solutions include IBM’s Integrated Facility for Linux engine and subscription of Red Hat Linux Enterprise v.4 for zSeries systems. The twoRed Hat companies are also working together with educators on Linux skills-building and curriculum development. The alliance will help institutions educate students and develop their skills on Linux and IBM software and servers. IBM and Avaya formed an alliance to integrate Avaya’s VoIP technology with IBM’s enterprise e-mail, web conferencing and instant messaging offerings (Lotus Notes andAvaya Domino). The alliance will enable “click-to-call” capabilities in e-mail and instant messaging products across Lotus Notes, Domino and IBM Lotus Sametime. IBM will use audio conferencing provided by Avaya Meeting Exchange with Lotus’ web conferencing solutions.56 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRPhysical Infrastructure and Worldwide LocationsIGS’ Global Delivery Center Network IBM’s Technology and Business Capabilities Americas EMEA APAC Global Delivery • Brazil • Slovakia • China Centers • Argentina • Poland • India • Romania • Vietnam • Hungary • Philippines • Egypt • Australia • South Africa Research Labs • San Jose, CA • Israel (Haifa) • India (New Delhi, • Maryland • Switzerland (Zurich) Bangalore) • New York • China (Beijing) • Austin, TX • Japan (Tokyo) Software & Hardware • Mexico • Poland • China Labs • Brazil • Israel • India • Argentina • Egypt • South Korea • Russia • Vietnam • Malaysia • Singapore • Australia Cloud Computing • Brazil • South Africa • China Centers • Poland • India • Germany • South Korea • Vietnam57 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix – Tables TBRPhysical Infrastructure and Worldwide LocationsIGS’ Global Delivery Center Network IBM’s Technology and Business Capabilities Americas EMEA APACInnovation Centers • Brazil • Czech Republic • Australia • Austin, TX • Denmark • China • Chicago, IL • France • India • Dallas, TX • Germany • Japan • San Mateo, CA • Hungary • South Korea • Waltham, MA • Ireland • Malaysia • Israel • Philippines • Italy • Vietnam • Morocco • Netherlands • Poland • Romania • Russia • Slovakia • South Africa • Spain • Sweden • Switzerland • Turkey • Ukraine • U.K.Market and Industry • Mexico (retail) • Russia (oil & gas) • India (telecom, finance)Leadership Centers • Brazil (finance) • Australia (electricity) • South Korea (finance) • China (rail, telecom, health, electricity)58 IGS 4Q10 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
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