IBM gets back its momentum

By ADAM GIFFORD

In interviews he oozes the caution Big Blue has become famous for.

"It would be inappropriate for me to comment," said IBM New Zealand head Nick Lambert, switching on his Cheshire cat smile as he deflected a question about a rival firm.

Lambert has a lot to smile about these days, and he is not spending sleepless nights worrying about the competition.

It's a different scene to when he came into the job almost four years ago, when people were questioning whether the company would survive here after the axing of the police Incis database project and losing the Telecom outsourcing contract.

Since then years of losses have become accumulating profits. Last year's tally was a $34 million before-tax profit on revenue of $354 million, with an additional $11 million tax credit the cream on top.

Lambert said that was the sort of profit a multinational such as IBM would expect.

"Like most global organisations these days, they look where they will invest their money, and most are looking for at least 10 per cent return on investment.

"People are very frightened of profit in New Zealand, but I look at the organisation when I came in, with cumulative losses, to today where it is in a position where we can make acquisitions, we can invest in community relations and provide a settled future for our employees.

"Organisations that don't make money in New Zealand won't be here."

He said negative perceptions had been turned around.

"Police is now one of our strongest reference sites," said Lambert.

"We have a great relationship with the New Zealand government sector because we listen to what they want and provide them with the outcomes.

"We had problems in the late 1990s and we modified our business models here, we refined our engagement with our customers as well, to the extent we won't find ourselves in positions where we have problems," says Lambert confidently.

"I also think the public sector has refined their buying patterns so they are more inclined to go for programmes which are a number of bites at the cherry rather than the big bang. I see a much more outcome-oriented approach to any project."

He said the strong balance sheet gave IBM the freedom to manage its growth and make strategic acquisitions, such as its purchase in March of Logical CSI which added 115 people to its roster, many with skills in building IP (internet protocol) networks.

"We realised as the technology started to overlap we needed significant expertise in IP telephony and voice over IP," said Lambert.

The acquisition of consulting firm PricewaterhouseCoopers and its integration into the existing IBM Global Services consulting business has also been completed, and "it is definitely one plus one equals three".

"We have one of the largest consulting forces in New Zealand and we are recruiting."

While IBM has come under fire from Oracle chief Larry Ellison for being a services business rather than a technology company - a backhanded compliment, given how much of IBM's technology stack Oracle is now trying to offer alternatives to - Lambert said the complex nature of technology meant a strong services capacity was a must.

On top of that IBM had extraordinarily strong and broad hardware and software offerings, including the new generation of servers based on the P5 chip.

"A lot of these developments are about your ability to spend," Lambert said.

This might be the year IBM's investment in open source software really paid off.

"Linux is starting to become increasingly interesting to our customers here. There is lots of Unix expertise here, and any Unix technician worth their salt can run Linux." Dinesh Kumar from market analyst International Data Corporation said IBM New Zealand's achievement, lifting revenue from $326 million in 2002 to $354 million last year, was even more significant when you realised that that included replacing almost $70 million in revenue it lost by selling the ICMS telco billing system.

He said the momentum should continue.

"Based on what we have seen in terms of PC shipments, server shipments, some of the services contracts and the Logical integration, I would be surprised if IBM doesn't exceed $400 million revenue this current year," Kumar said.

He said Lambert and his management team had taken a very strategic approach.

"It is not about hardware ... They will get a lot of growth out of the software group and associated services."