RealTime IT News

IBM Unveils New Unit, Buys Consultancy

In an attempt to sidestep the slowdown in the IT services sector and revitalize its struggling chip business, IBM Corp. on Monday unveiled a new business unit -- IBM Engineering & Technology Services.

Big Blue said the new business group, which has been operating in stealth mode since June, would target electronics companies looking for help in design and production management of advanced electronics for their products.

The Armonk, New York-based technology giant has shifted more than 700 engineers to the new business and general manager Pat Toole expects the staff to increase to more than 1,000 by next year.

The launch of the new unit comes as research firm IDC is lowering the 2002 worldwide IT services growth rate to 6.7 percent, a reduction of almost 4 percent the earlier forecast growth rate of 10.6 percent for the year.

IDC said the bleak outlook for the sector also caused a revision of its 5-year-forecast, noting that the 2002 discrepancy is the result of "two market assumptions built into our forecast that did not hold true."

Even as Big Blue is anticipating spending on enterprise to help push the new business unit, IDC found that spending on many IT services actually declined during 2002. "Second, the anticipated pick-up in demand by the middle of 2002 is now not expected until the last quarter of 2002, and a full recovery is not expected until the spring of 2003," IDC said, in explaining its revised forecast.

"From an IT services perspective, project-oriented IT services markets such as systems integration, IT consulting, and custom application development suffered more severely than anticipated, and in aggregate, their 2002 growth rates were revised downward nearly 5 percentage points," it said.

IBM's new unit, which will be based in nearby Somers, New York, will offer services in four basic categories. It will hawk business process optimization such as intellectual asset management; electronic design (verification), web hosting and enablement; technology migration (consulting or training for SOI technology) and manufacturing consulting.

It will also sell chip-focused services like silicon optimization, circuits, arrays; frequency and power tradeoffs; yield analysis and chip/module/board optimization.

IBM said the Engineering & Technology Services would also sell services targeting component and platform development; system level optimization and hardware/software integration.

It would also outsource technology for chip fabrication and offer full product development outsourcing for semiconductor and system solutions.

"Our value proposition can be summed up in a single word -- access," general manager Toole said. "We're taking a skills-on-demand approach...We also will be a portal into other parts of IBM, such as financing, research and development and consultants who innovate, integrate and accelerate time-to-market."

Toole said the new unit would target a variety of industry segments, including IT, communications, defense, aerospace, consumer electronics and automotive.

IBM announced Medtronic, Inc., the New York Stock Exchange, Sony Computer Entertainment, Consumer Direct Link, Inc. and Minolta as the first list of big-name clients for the new business unit.

The launch of the new unit comes on same day Big Blue announced it would take over EADS Matra Datavision, a consultancy group owned by European aerospace group EADS.

Financial terms of the buyout were not disclosed. Big Blue plans to combine the EADS Matra Datavision into its Product Lifecycle Management (PLM) group, which helps design and engineer cars and aircraft.

IBM, which has identified the PLM business unit as a key segment of its e-business strategy, said the acquisition would help tap into the lucrative PLM services market. The PLM services market is expected to reach $5.5 billion in 2006, according the latest research from IDC.