IBM execution issues

IBM reported a bad quarter. These things happen - though when IBM sneezes, the whole tech sector often catches a cold.

More concerning are some systemic issues  in its services arm - its biggest single business unit. For a while now I have noticed IBM proposals have moved to roughly a third US badged employees, a third contractors and the rest offshore (either employee or outsourced contract) model. While this is in line with what a Bechtel does in construction or a Boeing does in aerospace, I am not convinced IBM, big as it is, has the deep program management capabilities or methods needed to manage such staffing diversity or team complexity. Worse, from a buyers perspective and IBM's overall competitiveness, the savings from lower cost contractors or offshore staff are often not being passed along.

Time for buyers  to seek more pricing transparency (and appropriate pricing for contractors and offshore components) and to hold IBM's feet to the fire for better team staffing and management.  Vendors like Infosys have shown they can make gross margins of 40%+ plus on offshore models - so IBM can be similarly healthy and delight its buyers' budgets at the same time with better delivery execution.