Big Blue? Try Huge Blue. International Business Machines (IBM) is the world's top provider of computer products and services. Among the leaders in almost every market in which it competes, the company focuses primarily on its growing services business, which accounts for well over half of sales. While IBM made its name in computer hardware, the company's information technology, business services, and software units are now among the largest in the world. The company is also one of the largest providers of semiconductors, and its computing hardware legacy lives on in the form of its industry-leading enterprise server and data storage products lines. IBM serves customers globally across most industries.
In 2011 the company polished off its first hundred years in business by naming its first female CEO. At the beginning of 2012, IBM handed over the reins to its SVP and group executive of sales, marketing, and strategy, Virginia "Ginni" Rometty, naming her president and CEO. Former CEO Samuel Palmisano stayed on as chairman.
IBM continues to use an aggressive acquisition strategy to augment its own R&D as it expands and refines its mix of business software and IT services. The company steadily buys small firms with technology or expertise that expand or complement its product lines and service selection. It made more than 100 acquisitions in the first decade of the 2000s, and in 2010 the company announced plans to spend about $20 billion on acquisitions over the next five years. IBM's plan for growth is nothing if not effective. The company's annual revenue is hovering around the $100 billion mark, and 2010 was the fifth consecutive year that it achieved a double digit increase in net income.
A key area of focus for IBM is the development of applications and services to support cloud computing. The company is designing software tools for managing and optimizing access to corporate information stored at data center facilities by the growing number of businesses looking to outsource or enhance their network and data management efforts. The trend also serves to further IBM's "Information Agenda," which is an initiative geared toward providing customers with better data analysis technology. The company has positioned itself to offer a wide array of enterprise software tools and processes to better harness and analyze the rapidly expanding volumes of data generated by the global growth in digital communications and commerce.
In 2012 its acquisition of contract and supply chain management software provider Emptoris, was another step in building its cloud offerings, specifically in procurement management. To further advance its analytics software holdings IBM acquired DemandTec that year for $440 million. DemandTec specializes in cloud-based software (boosting IBM's Software-as-a-Service portfolio) used to analyze price, promotion, and other merchandising and marketing data for companies trying to determine the best product mix and prices based on customer buying activity.
IBM paid $387 million in late 2011 to acquire Toronto-based risk analysis software developer Algorithmics to extend its analytics expertise for financial services clients in particular. Algorithmics specializes in tools used to manage market, liquidity, credit, operational, and insurance risk, among other areas. Also that year IBM acquired software developer Q1 Labs as part of an ongoing effort to build its network and data security holdings. Q1, a specialist in data analysis tools used to detect abnormal or suspicious network behavior, became a part of IBM's new security systems division, led by Q1's CEO; the unit also comprises ten other security businesses acquired by IBM, including Tivoli and Rational, as well as other security product and service operations. As the year came to a close, IBM furthered its Smarter Cities initiative with the purchase of Dublin-based Cúram Software, a social enterprise management software provider. Cúram (Irish Gaelic for "care and protection") develops software to help improve the operational effectiveness of government social programs in areas such as human services, labor, health, social security, and military agencies.
In 2010 IBM bought Web analytics software maker Coremetrics, data compression tool developer Storwize, and document digitization and data management application maker Datacap. Its other data-centric purchases that year were of Netezza, which makes data analytics appliances used in data warehouses, for about $1.7 billion, and blade server and Ethernet switch maker BLADE Network Technologies. BLADE, which became part of IBM's Systems and Technology group, also developed virtualization software used to integrate and simplify networks in cloud computing environments. The acquisitions were part of IBM's efforts to better compete with Cisco, HP, and Oracle in the market for corporate data-center network management. IBM's purchase of security software developer BigFix fed into this as well by expanding its corporate security products lineup.
Also in 2010 IBM bought OpenPages, a developer of financial risk and compliance management software that has partnered with IBM for several years, as well as Texas-based business process management software maker Lombardi. It also bought PSS Systems, a developer of software used to analyze and automate information governance policies for large volumes of business data, while also automating the disposal of unneeded information, and it acquired Toronto-based Clarity Systems, a developer of software used to collect and prepare financial statements for electronic filing with the SEC and other regulatory agencies. These acquisitions were part of IBM's expansion of its business data analytics offerings to support risk and compliance management, areas which have become priorities for businesses needing to effectively identify financial and operational risks across all parts of their enterprises.
IBM acquired the Sterling Commerce subsidiary of AT&T in 2010 for about $1.4 billion in cash. Sterling Commerce makes software that helps businesses create and integrate networks of customers, partners, and suppliers. The Sterling Commerce deal complemented IBM's portfolio of applications that enable customers to automate and manage business processes across functions such as marketing, selling, ordering, and fulfillment. It also provided IBM with a more complete platform for business process automation by adding to its selection of middleware, the code that connects disparate software components and applications.
All of these efforts support the company's global strategy of providing complete backend data communications and processing systems (made up of its software and computing equipment) to large corporate, public sector, and education clients. Its systems are used for such purposes as automating health care records and facilities management at hospitals in Spain, managing high-volume payment processing for large banks and other financial services providers in Russia, automating service delivery and billing for telecommunications providers in India, and analyzing consumer shopping patterns to improve the flow of merchandise through the global supply chain.
IBM's international business has become increasingly important to the bottom line. With clients in about 170 countries, overseas sales account for more than half of total revenues. The company's businesses in developing markets in Brazil, China, India, and Russia have been particularly active. IBM continues to seek opportunities outside the mature markets of North America, Europe, and Japan.
Efforts to reposition itself as a full-service technology services company with a global focus have paid off for IBM both in terms of sales growth and profits. The company's forward-looking approach to corporate planning is also evident in its research and development programs, which consistently lead the tech industry in patent awards; it received about 5,800 in 2010 alone, the most ever for a single company in one year. IBM's R&D efforts put it at the forefront of such diverse fields as nanotechnology and quantum computing.