IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
Introduction
IBM is an American multinational technology corporation that was founded in 1911 by Charles Ranlett Flint as the Computing-Tabulating-Recording Company (CTR).
IBM is a manufacturer and seller of various products, such as computer software, middleware, and hardware, nanotechnology, and hosting and consultancy services. IBM is also a serious innovator, filing more patents than any other company for a record 30 consecutive years between 1992 and 2022.
Over this time, some of IBM’s notable inventions include the ATM, hard disk drive, magnetic stripe card, SQL programming language, and dynamic random-access memory (DRAM).
IBM has an organizational structure characterized by product-based divisions. This allows the company to carry out its strategy of developing innovative and competitive products across multiple markets.
To that end, the company’s major operations consist of five divisions:
Global Technology Services (GTS) – mostly consisting of IT infrastructure and business process services.
Global Business Services (GBS) – this division focuses on delivering client value via consultancy in areas such as cloud, mobile, social business, enterprise applications, analytics, and smart eCommerce.
Software – middleware and operating systems software.
Systems and Technology (STG) – encompassing any business solution that requires advanced storage capabilities or computing power.
Global Financing – IBM also offers lease and loan financing to end-users and internal clients. This division also includes commercial financing to dealers and remarketers of IT products.
In some instances, GTS and GBS are collectively known as Global Services.
Function-based segments and geographic divisions
To a lesser extent, IBM’s structure is characterized by function-based segments and geographical divisions. These are explained below.
Function-based segments
To support the core global IT business and support each product-based division, there are three function-based segments:
Global Markets (this was previously known as Sales and Distribution).
Integrated Supply Chain, and
Research, Development and Intellectual Property.
Geographic divisions
Like most organizations, IBM’s geographic divisions help it manage a global business despite differences in various regional markets. This is important for IBM since the company has operations in more than 170 countries.
IBM has a total of three geographic divisions:
Americas.
Asia Pacific, and
Europe/Middle East/Africa.
Most company revenue is attributed to the Americas division, with the $28 billion generated in 2021 representing nearly 50% of IBM’s total revenue.
Key takeaways
IBM has an organizational structure characterized by product-based divisions. This allows the company to carry out its strategy of developing innovative and competitive products in multiple markets.
IBM’s structure is also characterized by function-based segments that support product development and innovation for each product-based division. These include Global Markets, Integrated Supply Chain, and Research, Development, and Intellectual Property.
Like organizations with a similar global reach, IBM’s geographic divisions help it manage operations despite differences in various regional markets. The Americas division is by far the most lucrative for IBM in terms of revenue.
In 2018, revenue was $80 billion.
Revenue decreased to $77 billion in 2019.
In 2020, revenue dropped further to $73.62 billion.
The revenue saw a significant decline in 2021, reaching $57.35 billion.
In 2022, revenue experienced a slight increase, amounting to $60.53 billion.
2019: Net income increased from $8.73 billion in 2018 to $9 billion, resulting in a 3.09% increase year over year.
2020: Net income decreased to $5.59 billion, reflecting a -37.89% change compared to 2019.
2021: Net income slightly increased to $5.74 billion, indicating a 2.68% increase year over year compared to 2020.
2022: Net income decreased significantly to $1.64 billion, showing a -71.43% change compared to 2021.
IBM Revenue Breakdown
Software revenue increased from $23.42 billion in 2021 to $25 billion in 2022, resulting in a 6.73% growth year over year.
Consulting revenue grew from $17.84 billion in 2021 to $19.1 billion in 2022, reflecting a 7.08% growth year over year.
Infrastructure revenue rose from $14.2 billion in 2021 to $15.3 billion in 2022, indicating a 7.75% growth year over year.
Financing revenue declined from $0.774 billion in 2021 to $0.645 billion in 2022, showing a -16.67% decrease year over year.
Other revenue experienced a significant drop from $1.12 billion in 2021 to $0.453 billion in 2022, resulting in a -59.55% decrease year over year.
Software:
Generated $25 billion in revenue.
Contributed $19.94 billion in gross profit.
Consulting:
Produced $19.1 billion in revenue.
Accounted for $4.86 billion in gross profit.
Infrastructure:
Brought in $15.3 billion in revenue.
Generated $8 billion in gross profit.
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IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams based on the main corporate functions (like HR, product management, investor relations, and so on).
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
