IBM 2009 Annual Report: The Landscape For Growth

The 2009 IBM Annual Report was released yesterday.

It includes a letter from our chairman and CEO, Sam Palmisano, which very clearly articulates both where IBM has been over the past decade, and probably more importantly, outlines the direction it’s going this year and beyond.

I would encourage you to check out the full IBM annual report package online firsthand here.

In the letter, Sam outlines “the landscape for growth,” which suggests that IBM is positioning itself aggressively for an upswing in the business cycle.

Specifically, he outlines four key areas (which I’ll come to in a moment), but he prefaces it by stating that IBM doesn’t believe that clients will, as they may have in the past, simply invest in IT because history is destined to repeat itself and they’re going to open their wallets for the new, new IT thing as the recessionary clouds lift.

No, rather, he asserts that IBM’s position is that clients will invest where they believe they can gain value (preferably quickly), and where they can continue to gain efficiencies and competitive advantage.

And he asserts that IBM is well positioned as a company to uniquely take advantage of that opportunity.

Now, to the four areas of emphasis and IBM investment in 2010.

They include the growth markets, which have expanded their contribution to IBM’s geographic revenue by a point a year since 2005, and at least 8 points faster than major markets over the past three years.

Going forward, both mature and emerging markets are building out and integrating their physical and digital infrastructures, and in­fusing the resulting systems with intelligence. More than $2 trillion in fiscal stimulus has already been earmarked by governments around the world, and IBM is uniquely positioned to benefit from these large business and technology opportunities.

Second, data captured across a new spectrum of inputs (including data ranging from the “Internet of Things” [think sensors, RFID, etc.] and even the social media) is already leading to immense new business analytics opportunities.

Hence IBM’s $10B investment over the past couple of years in acquiring Cognos, SPSS, and investing in the 4,000+ strong Business Analytics and Optimization practice.

All this information—the knowledge of the world, the flow of markets, the pulse of societies—can now be turned into insight through sophisticated mathematical models — where once we inferred, now we know.

Where once we interpolated and extrapolated, now we can determine.

The historical is giving way to the real-time, and even the predictive.

Next, the opportunity presented by the Cloud and Next-Generation Data Center.  As the planet becomes instrumented, interconnected and intelligent, the computing model is evolving to support it.

Think of it as the industrialization of IT.

Over the past generation, digital infrastructures have become complex and inefficient, so it’s time to optimize them through automation, creating systems that are highly tuned to the specific workloads they run and to new consumption and delivery models, such as clouds.

The data center is shifting from being a single physical place to something more like the Internet, a diverse set of services fueled by IT.

This provides far more choice and flexibility, which is of particular interest to the many businesses and governments that want simply to consume some services they once built, maintained and provided themselves.

And fourth, and finally, all of these growth strategies come together in the opportunity IBM calls the “smarter planet.”

This is not a metaphor. It describes the infusion of intelligence into the way the world actually works, the way that almost anything—any person, any object, any process or any service, for any organization, large or small—can now become digitally aware, networked and intelligent.

This means that industries, infrastructures, processes, cities and entire societies can be more productive, efficient and responsive.

IBM developed this agenda and strategic initiative in the summer of 2008, and  launched it that autumn—at the peak of the economic crisis. We did so because we believed it represented a pragmatic way to address the very problems that were transfixing the world.

After just a year, it is clear that our belief was correct. The idea of “smarter systems” is resonating with decision-makers in both the private and public sectors. We are seeing these systems being implemented in every major industry and across every region of both the developed and developing worlds.

And they are creating measurable economic and societal value.

So, I would invite you to learn more and read the full report — it can certainly tell you where IBM went recently.

But, it’s the roadmap for building a smarter planet at a company on the verge of its centennial — which continues to be one of the most interesting, vibrant, and yes, even relevant places to work in the world and on the world — that it gets really interesting.