International Business Machines Corp, facing falling revenue from selling computer services, is finding ways to squeeze more profit from the business by automating and standardising the work.
The world's biggest computer services firm is focused on smaller, more specialised consulting and outsourcing contracts as huge multibillion-dollar service deals become rarer among cost-conscious customers.
IBM says it wants to boost profit margins in the Global Services business which accounted for about half its $91.1 billion in annual revenue last year but contributed only about a third of its pre-tax profit.
The unit, which employs about 190,000 people, has traditionally had high costs owing to the labour-intensive nature of providing business advice and information-technology services to corporate customers. Now Armonk, New York-based IBM wants to automate many of those services, from improving payroll processing to relieving traffic congestion in big cities.
"There are huge quality gains and cost reductions when you standardise things," said Cindy Shaw, an analyst at Moors & Cabot Capital Markets who has a "buy" rating on IBM shares. "By standardising services around software implementation, they can take a lot of labour and other costs out of the process."
IBM cut about 15,000 service jobs last year, mainly in Europe, a move that helped IBM boost profitability in its services business. At the same time the company has been expanding its services business in India, where it now has about 38,000 employees.
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