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International Business Machines Corporation Company Statistics Company: International Business Machines Corporation Location: Armonk, New York Founded: 1914 CEO: John F. Akers 1991 Revenues: $64.8 billion 1991 Support Service Revenues: $12.97 billion Service Employees: 17,000 (U.S.) Products IBM manufactures and markets a broad array of products including: mainframe computer, super minicomputer, minicomputer, and microcomputer systems; workstations; personal computers; systems software; graphics equipment; printers; card equipment; disk equipment; magnetic tape equipment; memory; terminals; data collection equipment; financial terminals; MICR equipment; multi-media data entry terminals; POS terminals; monitors; teleprinters; scanners; controllers; PC boards; micro accessories; network processors/management; LAN products; modems; multiplexers; converters; terminal emulator boards; branch exchange equipment; voice messaging equipment; voice I/O; switch/patch equipment; data communication support equipment; and security equipment. IBM also provides educational and training materials, and related supplies and services in support of its products. Service Mission/Target Market MULTIVENDOR PC/LAN AND NETWORK SUPPORT SERVICES According to IBM's 1991 Annual Report, "IBM is in the business of helping people solve problems through the use of advanced information technologies. IBM creates value by offering products and services that help customers succeed. These offerings include: services, software, systems, products, and technologies. Through its worldwide marketing and services companies, business partners, and strategic alliances, IBM offers unique solutions and skill to address each customer's individual needs (Source: 1990 Annual Report). The emphasis on services products is clearly indicated in IBM's strategic directions to provide customer solutions. IBM service and support is aimed at the operations and support portion of customers' MIS arena. IBM services keep customers' two fundamental goals in mind: cost and efficiency. IBM's attention has been placed on providing "total solutions to customers, emphasizing the role of traditional remedial support and non-traditional offerings." IBM believes that customers have three critical requirements: reduce operating costs; reduce the complexity of managing and utilizing information technology; and develop critical skills to maximize technology. Via its technology and, very importantly, its services, IBM hopes to meet and exceed customers' expectations in these three areas. IBM is committed to Services Leadership in the 1990s because it perceives tremendous opportunities for growth in the services segment of its future worldwide marketplace. By 1995 IBM is hoping to drive its service and software revenue contribution to equal 45% of its total revenue base. Furthermore, the company's "Market Driven Quality" which extends throughout the IBM organization incorporates service and support quality as being a fundamental part of its mission. Service Offerings MULTIVENDOR SERVICES IBM will service "all" vendors' equipment. In its early stages of being a multivendor service provider, it did so mainly by swap-out, requiring little technical expertise. The exception was Hewlett-Packard printer equipment which IBM service personnel repaired themselves. However, with IBM's recent openness to business partners and OEM opportunities, and the growth of open systems, it can be expected that IBM will increase its involvement in the multivendor service arena. At this writing, IBM continues to limit its direct repair of other vendors' products to peripheral options, but not CPU platforms. For multivendor CPU platform service, IBM subcontracts the repair requirement to appropriate business partners. Today an estimated 70% of IBM's multivendor service efforts are delivered by IBM `service' business partners. It is also important to note that IBM will not take on a customer's multivendor service requirement if: 1) IBM cannot meet the customer's service and support needs, and 2) if there is not a significant business opportunity for IBM in its role in delivering or managing the customer's multivendor service and support requirements. Technical Services Management Technical Services Management (TSM) is IBM's primary multivendor service offering. Following a slow start, IBM's Technical Services Management Program has grown considerably. The company claims to be more flexible in meeting customers requirements and enlisting a broader range of service partners to meet those service requirements. Technical Services Management (TSM) provides IBM coordination and management of non-IBM information processing equipment maintenance in a mixed-vendor environment, including vendor dispatching, IBM coordination of vendor maintenance activities and problem tracking/status reporting. Service Management is an option under TSM in which IBM will form alliances with maintenance vendors to provide hardware maintenance for the customer's prescribed coverage on selected non-IBM products. TSM is designed to be tailored by customers to meet their hardware maintenance requirements in a mixed-vendor environment. Combining TSM with existing IBM service and maintenance offerings provides IBM customers with a comprehensive service solution from IBM. TSM consists of three modular offerings: o Repair Coordination: is the base offering that provides IBM coordination and management of non-IBM equipment maintenance in a mixed-vendor environment. It includes the following: o A single phone number (1-800-IBM-SERV) for all service requests on non-IBM products, 24 hours a day, seven days a week o IBM dispatching of service vendors for non-IBM product repair o IBM vendor coordination of maintenance activities and escalation as required to resolve the customer-reported problem o Problem tracking and status updates at the customer's request o Maintenance Coordination: is an option in which IBM assumes a leadership role in coordination of scheduled hardware maintenance activities to minimize customer outages. This includes predictive maintenance, media maintenance assistance on tape and DASD, and coordination of Engineering Changes, installations, and discontinuances on selected non-IBM information processing equipment in the customer's data center. Repair Coordination is included in Maintenance Coordination. o Service Management relieves the customer of the burden of identifying expert maintenance vendors, contract negotiations, contract administration and invoice reconciliations. IBM will form alliances with maintenance vendors to provide hardware maintenance for the customer's prescribed coverage on selected non-IBM products. IBM's contract with the customer will provide for consolidated IBM monthly customer billing for the contracted maintenance. Repair Coordination is included in Service Management. Note: With Repair Coordination and Maintenance Coordination, customers continue their contracts with other service organizations for hardware maintenance of the non-IBM equipment. IBM acts as the customer's designated representative in coordinating multivendor maintenance activities. IBM also provides multivendor desktop support for end users. End User Support (EUS) is IBM's first major end user support offering of a portfolio of services that will be aimed at increasing productivity at the desktop. In the near future, IBM will expand its multivendor end user support targeting LAN start-up and administration services. End User Support End User Support (EUS) is the first of a series of End User Service offerings for personal computer and PC-compatible workstation products and software. This service has been developed in response to customer requests for IBM to provide help-desk service to its end users. EUS is a remote help-desk facility for users of IBM and non-IBM PC workstation products and commercially available PC software products that run on these workstations. This offering allows unlimited toll-free hotline calls for user assistance in Problem Analysis, Problem Management and Trend Analysis. EUS, which recognizes the customer's mixed-vendor workstation environment, is intended to make IBM the servicer of choice for workstation end-user service and support needs. The following services are provided by EUS: o Problem Analysis: Under Problem Analysis, an end user calls 800- 825-USER and speaks directly with an EUS specialist to determine the source of the problem. The specialist works with the end user to determine whether usage assistance is required or whether the source of the problem is a hardware or software malfunction. o Problem Management: Problem Management encompasses usage assistance, hardware service coordination and software service coordination. EUS works with the caller until a resolution of the problem is provided or until the person or organization able to provide a solution is identified. o Usage Assistance: Usage assistance involves a wide range of information and assistance. EUS can provide information about the operation of hardware or the use of a software program. This may vary from giving general information about a program's capabilities or helping an end user with a functional task, to assisting with an installation procedure. The specialist can provide instructional information, clarify documentation and manuals and provide technical references. If problem analysis indicates a user error, the EUS specialist assist the end user in correcting the problem so that the work can continue. Whether an end user wants information or needs help with a problem, EUS provides assistance at the time it's needed. o Hardware Service Coordination: If the problem is determined to be a hardware malfunction, EUS contacts the appropriate source to resolve the problem. For hardware products that are covered under an IBM Maintenance Agreement, IBM Network Support, or IBM Multiple Vendor Services, the EUS specialist contacts IBM SERV to request hardware service on behalf of the customer. For other hardware products, the specialist reports the problem and requests hardware service through a designated contact within the customer account. o Software Service Coordination: If the source of the problem is software, EUS contacts the appropriate source, whether it is IBM or another vendor, for a resolution. If a software fix is available to the customer at no charge, EUS arranges for it to be sent to the customer. If a charge is associated with the fix, EUS informs the customer's designated contact that a fix is available and how it can be obtained. o In the case of a software malfunction in a product that is not warranted or is no longer supported by the vendor, EUS attempts to resolve the problem by using available public information. o For problems identified in a customer's network or host application, EUS contacts the appropriate support organization and reports the problem. For a customer who has an IBM Network Support agreement, the Network Support Center is contacted, or problems are reported directly to the customer's designated contact for problem resolution. o Trend Analysis: IBM provides the customer with a monthly report that gives a summary of the customer's EUS call activity. This report can be an effective management tool to assist in the analysis of trends and to identify areas in which action can be taken to enhance user productivity, such as education. IBM is available to assist in report interpretation upon request from the customer. Highlights o Single point of contact for PC workstation support o Customers can select from two EUS service coverage options: o 7 a.m. to 7 p.m. local customer time, Monday through Friday o 24 hours a day, 7 days a week oSingle toll-free number (800-825-USER) to obtain support for most IBM and non-IBM PC workstation hardware and software o An EUS specialist to assist the end user remotely to answer questions and resolve problems experienced in the use of PC workstation products o Unlimited toll-free hotline calls o Remote diagnosis capability o Personalized service using tailored customer profiles o Knowledgeable personnel with access to account history files o Monthly reports summarizing the customer's EUS call activity PC/LAN SUPPORT SERVICES IBM's networking offerings have traditionally been targeted at Wide Area Networks (WANs) as opposed to Local Area Networks (LANs). To date, IBM has no formalized support offering that specifically addresses LAN support, though this type of support is known to be delivered on a customized basis, oftentimes through IBM Business Partners. There are components from IBM's broad range of services that are applied to the PC/LAN service environment. Increasingly the IBM Trading Areas, which are responsible for the local delivery of IBM services, are developing services to meet individual customer requirements, including PC/LAN services. It is important to note that IBM is currently pursuing a number of strategies to meet customers' LAN support needs. At this writing, the firm is piloting new IBM support products that address customers' LAN start-up and LAN administrator support needs. In addition to these pilot programs, IBM's agreement with Novell states that IBM will market, service and support current and future NetWare products, though no specific IBM PC/LAN support product has been announced to date. However, with this strategic marketing partnership, IBM has launched a new VAR program called the Value-Added Enhancement Program to recruit resellers specializing in PC/LAN solutions, support and service. IBM Maintenance Agreement (MA)-PC Products Today, IBM's service/support organization offers three basic service programs to cover PC products found in LANs. o IBM On-site Repair (IOR): The vendor will respond within four hours to provide service at the user's location. This option is available on a 24 x 7 basis only. o IBM On-site Exchange (IOE): IBM will respond within four hours of receiving a service call and deliver an exchange machine at the user's site, disconnect the failed system, connect the new machine, verify its operation, and remove the failed system from the site. o Customer Carry-in Repair (CCR): Under this cost-efficient approach, the user will carry the failed unit to a designated IBM location or have it returned to the vendor via a national courier service. IBM will then repair the unit and ship it back to the user. o IBM's option for Customer On-Site Exchange (COE) was withdrawn, effective March 1, 1991. Customers under a COE contract were automatically upgraded to an IBM On-Site Exchange level of service for the remaining term of their existing contract or warranty period at no additional charge. IBM's Warranty Option allows customer to upgrade their product warranty service to one of the service levels described above. This option is available for a one-time fee that varies with the product covered. In addition to the standard hardware repair services, IBM offers PC LAN cabling services as part of the Customized Operational Services umbrella (described in full within the IBM Network Services portion of this publication) and within IBM Problem Management Productivity Services, a LAN-based help-desk offering. Connectivity Services The expansion of the traditional computer room with fiber connected products provides the customer with a variety of possible solutions to their requirements. The Consulting module will provide a high-level physical design in narrative form and will contain descriptions and specifications of cabling components and accessories required to meet the customer's unique requirements. It does not include any detailed design and floor plans. This narrative would typically be given to an architectural and engineering (A/E) firm when new construction or major renovations are being done at the customer site. Design Services The design module deliverables provide the required information and specifications to allow for a successful installation of a cabling system by a qualified contractor. Descriptions and specifications of cabling components and accessories required to meet unique customer requirements include: o Detailed design data including estimated loss budgets o Floor plans depicting cable paths o Wiring closet detail drawings o Materials list Installation Support Services Three Installation Support Services options complement the Design Services module for customers who do not have the required skills and experience to perform these tasks or elect not to utilize their resources for these tasks. Installation Support Services are available only for cable designs that are provided in the IBM Design Services Modules. Bidding Services IBM will assist the customer in selecting a qualified contractor to install the Customized Operational Services-designed cabling system by use of competitive bidding. The service includes the following: o Assisting the customer in the selection of qualified contractors to participate in the bidding o Attending a bidder's conference, if requested by the customer o Conducting a walkthrough of the site with the contractors selected to participate in the bid, if requested by the customer o Acting as the technical focal point for any questions the customer may have o Performing a technical review and technical evaluation of bidder responses to ensure the design requirements are met Project Supervision This option is for the customer who already has, or will select, its own contractor and wants IBM to supervise the project. IBM will monitor the installation of the cabling design to ensure that the system is installed in accordance with the design specifications. Information obtained during monitoring will be provided to the customer. The service includes: o Installation inspections to determine that the correct materials are being installed o Determining that the design documentation is being used correctly o Reporting any discrepancy to the customer o Providing the customer with progress reports Installation Turnkey Installation Turnkey provides a complete installation of the designated connectivity solution. The customer may designate a specific contractor, subject to IBM review of acceptability. IBM will monitor and ensure a completed, high quality installation, and will provide Project Management. Highlights of the Installation Turnkey options are: o Total IBM Project Management including installation scheduling o Single point of contact Problem Management Productivity Services Problem Management Productivity Services (PMPS) utilizes expert systems and knowledge bases to help automate the problem determination time and accelerate resolution times. The features of this offering include: o Automated Data Collection: Captures user data by designating the layout of call screens and information fields; pre-loads user information from a profile database; prompts fields mandatory for each record; and tracks the history of call reporting operations. o Automated Application Sign-On/Sign-Off: Provides single terminal access and single keystroke log-in and log-out procedures. o Expert Systems: Allows the help desk operator to zero in on a problem by asking a series of questions of the user until a conclusion is reached; and provides an expandable shell for augmenting the expert system features to apply to the customer's specific applications or business processes. o Electronic Problem Reporting: Automates problem routing from the help desk operator to the host problem management system and IBM's problem management system; automates status updates of information such as Calls Received, Call Dispatched, On-site, and any fix information entered by the IBM Representative with a single key stroke. o Management Information and Controls: Provides a comprehensive history of calls, allowing flexibility in processing information related to help desk activities; and generates reports from data processed by a customer-chosen statistical analysis program. o Installation and Support: Analyzes current problem management processes, in order to make customized improvements and install them; provides on-site usage training for help desk operators; and provides ongoing support to stay current on enhancements and to provide answers to "how to" questions. NETWORK SUPPORT SERVICES As stated in the above PC/LAN segment of this profile, IBM's Network Support Services are components of the firm's general array of support/service programs and tools. IBM uses a combination of general offerings and special bid solutions to meet customer's network support needs and requirements. Below are some of the programs IBM offers that specifically apply to the network environment. Technical Services Network Support Technical Services Network Support (TSNS), a program introduced to help IBM customers identify problems in their network facilities and to manage the resolution of the problems, was discontinued as a discreet formal offering due to lack of customer interest. Today, IBM offers TSNS-type services as a special bid service option. These services may include one or more of the following: o Customized network service to meet the customer's business needs o Assume network problem management from problem identification to fix verification o Coordinate mixed-vendor environments for problem isolation and resolution activities o Provide IBM Network Support Center (NSC) service, available 24 hours per day, seven days per week with in-depth skills/resources o Utilize advanced network monitoring and diagnostic tools o Apply service to voice, data, and integrated voice/data networks. There is a Probe Option to Network Support for Data, Voice, and TI networks. With this option, probes are installed on the critical components of the customers' network to identify and eliminate network problems before they happen. They proactively monitor and test the network and are vendor/protocol independent. Customized Operational Services Customized Operations Services (COS) is an "umbrella" for many of IBM's non-traditional services. Among them are services designed for network design and implementation. Customized Operational Services provide comprehensive portfolios of services that extend IBM support beyond the information processing products and focus on providing customer solutions for the physical environment in which these products must function. Customized Operational Services are made up of four specific offerings, each of which provides an array of services to meet unique customer needs. The four offerings are: Site Planning, Connectivity, Data Center and Relocation. Site Planning o Site Readiness: Providing specifications, floor layouts and a project plan and verifying readiness of single or multiple sites. o Contractor Management: Coordinating contractor schedules and procuring the materials necessary to complete the site. Includes all services offered under Site Readiness. Customized Operational Services Express, an enhancement to Contractor Management, provides complete project planning and management of mid-range systems installation with a minimum of active participation. In addition, a limited five-year warranty is provided on the installation (workmanship and materials), air conditioners (parts), and uninterruptible power systems (parts and labor). The marketing representative provides an immediate, estimated price range, which is followed by a firm, fixed price within four working days. It is IBM's intent to have all contractor activities completed within 30 days of obtaining permits. o Installation Management: Installing IBM equipment and eligible non- IBM equipment. Includes hardware setup, software loading, customizing and network testing. Connectivity o Consulting Services: Reviewing connectivity requirements and providing a high-level narrative description and specifications. o Design Services: Providing a complete connectivity design with drawing, documentation and configuration diagrams to enable a qualified contractor to install the connectivity solution. o Installation Support Services: Bidding services, project supervision and installation turnkey to complete the offering of a total connectivity solution. Data Center o Land Evaluation: A study of a site's characteristics and utilities. If more than one site is evaluated, each is ranked on the basis of location, available utilities, and aesthetics. o Land Analysis: A study of surface and sub-surface conditions of the selected site to determine its characteristics and suitability for construction. o Building Evaluation: An analysis of an existing building to determine its suitability for the customer's needs to house people, equipment, and functional activities. o Planning: Identification of the customer's needs and preparation of recommendations and guidelines regarding design, work-flow and adjacencies diagrams, order of magnitude estimate and preliminary schedule and recommendations on contract options. o Design: Selection and direction of design team to design a facility that is functional, efficient and architecturally expressive of the functions housed. The design integrates architectural and engineering features in accordance with the established design criteria. Design services are offered only together with Construction or Construction Consulting and may not be separated. o Design Consulting: Review of the design efforts of the customer's consultant to ensure the design solutions comply with the customer's needs. o Bidding: Assisting the customer in the evaluation and selection of bidders, preparation and issuance of bid documents for the purpose of obtaining competitive proposals and receipt and analysis of bids for customer's approval. o Construction: As the customer's agent, IBM awards a construction contract to a contractor who will perform the construction work, including the provision of labor and materials. The work is done in accordance with the drawings and specifications approved by the customer and the agreed-to cost and schedule. IBM provides project management to ensure that the work proceeds and is completed in accordance with all contractual documents. Construction Services are offered together with Design and may not be separated. o Construction Consulting: When the construction contract is awarded and managed by others at the customer's request, IBM ensures that the consultant's design, which is based on the customer's needs, is properly implemented and executed. Construction Consulting Services are offered together with Design or Design Consulting and may not be separated. Relocation o Project Planning and Management: Provides a comprehensive project relocation plan; serving as a single interface for managing multiple vendors and movers. o Site Fit-Up: IBM can provide services to prepare the installation site for air conditioning, chilled water, floor cutouts, etc. o Mover Services: Managing and procuring a common carrier during relocation of IBM and non-IBM equipment. o Hardware Services: Disconnecting, packing, unpacking, reinstalling and testing relocated IBM and non-IBM equipment. o Equipment Modification: IBM installs customer-provided IBM parts, then tests and qualifies the equipment for a maintenance agreement. This service is available on selected IBM products. Highlights o Unique services that complement customer's staff o IBM skills and expertise to meet customer's site requirements o One source for all relocation, design, and installation activities o Expert advise when needed without paying hourly labor rates Network Traffic Analysis Network Traffic Analysis (NTA) was developed by IBM to provide customers with the ability to analyze the virtual route traffic flow of their SNA network through interaction with an expert system, IBM's Virtual Route Analyzer (VTA). The Network Traffic Analysis identifies performance problems and provides the recommendations to solve those problems with a reduced level of skill and resources from the customer. Included are: o Twenty-four hour, seven day access to knowledge-based system o Continual updating of knowledge-based system to support evolving telecommunications technologies o Identification of data flow parameters to maximize network performance o Recommendations for solutions to congestion and bottlenecks that have evolved over time o Expansion planning to provide orderly growth o "What if" analysis to eliminate guess work o Cost effective solutions available upon demand o Critical skills available to focus on other business needs o Technical guidance and assistance available from the NTA Support Center o Monthly NTA usage reports NetView NetView simultaneously functions as a software product and as a network management service. NetView provides many of the functions for monitoring and controlling key aspects of network operation and for tracking the status of network components. In addition to its diagnostic capabilities, it provides automatic recovery from many network component failures. Service Delivery MULTIVENDOR, PC/LAN AND NETWORK SUPPORT SERVICES IBM's Principal Period of Maintenance (PPM) is 24 hours per day, seven days per week, with no holiday exceptions. Time and materials repair is restricted to 8:00 a.m. to 5:00 p.m. local time, Monday through Friday. IBM does not guarantee response times, but operates under a "best effort" guideline. Instead, IBM sets internal targets for response time which are four hours for PCs and two hours for all other equipment. IBM claims that 70% of customer service needs are responded to within two hours. Response time is measured by the time when a service call is placed by the customer (by calling 1-800-IBM-SERV) until the time the service technician arrives at the customer site. As soon as the service call is received at the central dispatch, it is relayed to a Customer Engineer (CE) at one of IBM's Support Centers for problem identification and resolution. If it is determined that the problem is hardware-related and the customer has a Maintenance Agreement, a Field Engineer (FE) is contacted via "the brick," a hand-held terminal. The FE has one hour to respond by calling the customer. If not, the Field Manager is notified. The FE is responsible for prioritizing his/her calls. Hence, the call can go into a delayed response classification if the customer agrees. The customer defines the criticality of the situation. IBM currently has 17,000 service employees in the U.S. that deliver service and support. Service Marketing/Pricing MULTIVENDOR SERVICES While the early product focus for multivendor support was PCs, the array of both products and services has broadened. For example, IBM may now be called upon, under a multivendor contract, to support high-end (3090) and mid-range (AS/400) equipment as well as other data center facilities such as UPS, air conditioning systems and telecommunications. Presently, IBM is targeting three specific candidates for the TSM offering. Included are large accounts that have multiple data centers, availability problems, a desire for one-stop shopping, and large costs associated with coordinating vendor maintenance; emerging large accounts with 308X, 4381, or 3090 equipment, multivendor confusion jeopardizing availability, a growing network and data center, and limited coordination skills; and mid-range multivendor environments looking for simplified coordination and management and one-stop shopping. IBM's customers may elect this coverage under the IBM Customer Agreement services option. Over 90% of these arrangements are believed to involve Service Management where IBM holds the service contract although the actual service may be provided through subcontract arrangements with other service organizations. For local requirements, preference is understood to be given to IBM's Business Partners, while for those requiring national coverage, larger third-party firms are utilized. An IBM marketing or service representative meets with the customer to identify the operating environment, the IBM and non-IBM equipment to be covered, and the reporting and service requirements. All IBM sales representatives are responsible for selling services. There are dedicated service marketing personnel who assist the sales representatives with specific questions regarding service. The customer is then required to provide a "letter of notification" to non-IBM vendors explaining IBM's role. Then, IBM's TSM coordinator prices the package and negotiates a contract with the customer. TSM is priced strictly on a bid basis, however, IBM estimates that a typical customer's service costs would increase 4% above the cost of the IBM MA alone. The following three pricing examples may be useful: o A large data center: One (1) STC tape subsystem, (2) Memorex subsystems, (1) Digital small processor, (3) Hewlett-Packard plotters/printers, (2) Hewlett-Packard laser printers, (1) Amdahl large processor, and (250) Compaq and Apple PC subsystems would have a TSM monthly charge of $439 for Repair Coordination. o A mid-range data center: One (1) Memorex DASD subsystem, (1) Data General small processor, and (5) Hewlett-Packard plotters would have a TSM monthly charge would be $67 for Repair Coordination. o A small data center: One (1) Data General small processor and (3) Decision Data Printers would have a monthly TSM cost of $37 for Repair Coordination. The addition of Maintenance Coordination would approximately double these prices. Below is a table of pricing elements IBM uses to bid multivendor TSM efforts. Repair Maintenance Product Category Coordination Coordination -------------------------------------------------------- Tape Subsystems $ 28 $ 47 DASD Subsystems $ 8 $ 26 Small/Intermediate - Processor/ Controller Subsystem $ 4 $ 10 Mechanical Devices $ 11 $ 17 Non-Impact Printers $126 $132 Large Processors $ 6 $ 12 PC Subsystems $ 2 N/A PC/LAN SUPPORT SERVICES PC hardware, software, and related service agreements are sold directly to end users by IBM's service marketing representatives. IBM's account executive is supported by a technical marketing staff in pre- and post- sales situations. Both the marketing representative and the technical support person receive a commission on each sale. Direct sales are supported by a variety of printed marketing materials, videos, seminars, and mail campaigns. PC products and related service agreements are also sold through two indirect channels: industry remarketers and dealers, each with its own commission and support requirements from IBM. IBM estimates that maintenance costs are generally between 5% and 10% of users' total information systems budgets. IBM focuses on a number of factors when determining pricing levels in cost of ownership. These include purchase price (including warranty, shipping, and installation), maintenance costs, staff requirements, education, and operating environment. NETWORK SUPPORT SERVICES Depending upon the type of system the customer has, there are a variety of service offerings, as described above. However, IBM's real strength is its ability to customize offerings with a quick bid process. IBM operates under a "no reasonable offer is refused" basis. Technical Services Network Services was IBM's most comprehensive network service offering and the one primarily positioned to customers. At this time, TSNS type support is only offered on a special bid basis. The pricing for TSNS was less than 10% of the annual Maintenance Agreement fee. The Probe Option for Data networks costs 10% to 40% of the MA; 20% of the span cost for T1 networks; and $20 to $50 per trunk per month for Voice network probe support. Customized Operations Services are priced as the name implies. There are no guidelines published for these services. Network Traffic Analysis costs $500 per hour and may be selected for any number of hours. There is a three-hour/month minimum. When the contract hours are exceeded, the rate is $10 per minute. NTA comes with one user ID with an additional user ID provided for each additional six hours of contracted connect time. Additional user IDs cost $75 each. IBM suggests that to estimate the number of hours required, multiply the number of CPUs plus communications controllers in the network times a factor of 0.3 to give the base hours for the contract. Perception/Evaluation MULTIVENDOR SERVICES The concept of customers wanting simplified maintenance management (i.e., single point of contact) is a popular one, according to IBM. While the percentage of subscribers had been relatively low until recently, IBM has experienced significant growth of the program. The outlook for the TSM program remains a positive one. According to IBM, the customer will perceive faster problem resolution due to there being a single source for service (i.e., reduced "finger pointing"), IBM ownership of a problem from its identification to its resolution, and a state-of-the-art support structure. The customer will also recognize the benefits of maximized system availability through improved coordination of changes and preventive maintenance. Additionally, there will be a perceived higher efficiency in service management. IBM has learned, though, that the "service manager role" is only as good as its service business partner. Problems in the quality of service provided by some of the firm's service partners has left IBM's multivendor support weak. Positive partnerships outweigh the negative ones so the firm continues to move forward with its TSM program. The firm is also smoothing out its ability to effectively respond to customers' needs through the special bid process. After two years of tough learning experiences, IBM feels its bid process is efficient, effective and competitive. It also believes that the growth in its special bid prowess is making the firm more flexible to meet clients' broad range of needs then it ever has been in the past. PC/LAN SUPPORT SERVICES IBM has recently positioned its PC and PC/LAN offerings as "partnership- based" support programs, filling in the gap between IBM and reseller support. IBM is seeking to respond to the customer's search for more simplicity in their service relationships. As the number of desktop systems, applications that run on them, and networks grow, so will, according to IBM, the user's desire for a single point of contact and responsibility. As noted, IBM lacks, (at this time) a service offering dedicated to the LAN environment. Instead, it must rely on packaging components from other existing portfolios (hardware service and WAN environment services) in order to deliver a "customer solution" or customize a support offering at the local level. But with recent LAN support pilot programs, strategic alliances (e.g., the Novell Technical Support Alliance) and new network reseller recruitment activity, it is expected that IBM will be able to offer a standard PC/LAN network support offering, filling in this present gap in its service and support portfolio. One should not expect IBM to be a formidable PC/LAN service/support provider overnight, even with its new Novell alliance. In the interim, it is clear that the firm plans to leverage established PC/LAN providers in the marketplace while it plays "catch up" in the multivendor Novell LAN marketplace. NETWORK SUPPORT SERVICES IBM has enhanced its network support offerings by adding such services as Network Traffic Analysis, and providing added assistance in the areas of network problem management and network engineering and design. While lack of customer interest in some of its Network Support offerings caused IBM to withdraw some programs, it is currently reviewing its network support strategy. Today, IBM's network support services are available from IBM, but typically the solution is generated by the firm's special bid process. Canada/Latin America IBM SERVICE, CANADA As of mid-year 1992, IBM Canada, along with IBM U.S., reports into the IBM North America Marketing and Services organization. It has 8,400 employees and $2.1 billion in total revenues. Previously, IBM Canada was a separate "country" organization. While the details and impact of this new organization and reporting structure are not fully known at this time, it appears that IBM Canada and IBM U.S. will move toward a more homogeneous business strategy. Historically, there has been some synergy between the two organizations, but in regard to service, IBM Canada is selective as to which services it announces to the Canadian market. IBM Canada has leveraged many of the service product concepts of the IBM U.S. organization, though it tends to bid services on an engagement (i.e., per customer) basis as opposed to announcing/marketing packaged service offerings as is typical of the IBM U.S. organization. As its name suggests, the geographic area of coverage for IBM Canada includes all of the Canadian provinces. It compares itself in revenue size and employee headcount to one of the IBM U.S. Area organizations, of which there are now seven in the U.S. As such, its total revenue contribution is approximately $2.5 billion, or roughly 10% of the entire U.S. revenue contribution. IBM Canada total employees number 10,000, with approximately 6,000 in the combined marketing and services organizations. Like IBM U.S., IBM Canada provides a broad array of services to meet customer needs, including multivendor services, network services, and PC/LAN support services. Traditional maintenance services are delivered via an IBM Maintenance Agreement in support of broader network services. Network Services are delivered by the Network Support Organization, a separate group within the IBM Canada organization. Services are bid on a customized basis, and include such services as: network management/ administration; LAN design; LAN management. Today, Novell LAN support is limited. IBM Canada has extensive service marketing literature which closely resembles IBM U.S. services literature. It develops its own service pricing strategy in keeping with the Canadian market and local laws. IBM SERVICE, LATIN AMERICA The IBM Latin America Marketing and Services organization comprises Mexico, South America and the Dominican Republic, and selected other islands. IBM Latin America has 9,000 total employees and $2.8 billion in 1991 revenue. Central America has a unique relationship with IBM, characterized as a "giant dealer channel"; IBM determined that the most effective way to conduct business was to "sell off" this area, while maintaining an equity share in the company that "owns IBM" for Central America. Due to the trade and marketing constraints (and political uncertainties) imposed by many of the governments of these countries, IBM has not been able to aggressively pursue business opportunities as is common in other free markets. Another major hurdle impacting business opportunity in this geographic area is the lack of a unified telecommunications infrastructure which negatively impacts IBM's abilities to deliver service/support electronically. As such, IBM Latin American countries do not represent a "homogeneous" geographic entity (like the IBM U.S. organization) with each country at a different level of sophistication, and are "years behind" due to technology and infrastructure. However, IBM Latin America is pursuing a similar service direction and strategy as the rest of the IBM organization worldwide, including professional services and outsourcing opportunities at the country level to varying degrees. Because each of the individual countries in the IBM Latin America geographic territory are autonomous business units, there are varying levels of market opportunity, installed customer base, revenue, personnel, direct service staff, expertise, etc. For example, Brazil represents over half of the total business in all of IBM Latin America, and employs a service staff of approximately 700 -800 employees. On the other extreme is a country like Ecuador which has a service staff of 20. The headquarters location for IBM Latin America is in Mount Pleasant, New York. IBM maintains a "major" presence in: Mexico, Brazil, Venezuela, Chile, Columbia, Argentina, and Ecuador. IBM has a "minor" presence in Bolivia and Paraguay. In these countries, IBM has its own direct maintenance organizations, though the size varies from extremes. Historically, these various services organizations delivered only traditional maintenance services, which is similar to the IBM Maintenance Agreement. Approximately four years ago, these countries, in varying degrees, began expanding into account level support and value-added services, and term contracts (two and three year contracts). At this time, a bundled "System Service Availability" account level support contract is being promoted, which includes hardware maintenance, software defect support, and technical support. This base level of service provides some degree of consistency throughout the Latin America region. Each country in the IBM Latin America develops its own service marketing literature and its own service delivery strategy. However, service marketing personnel at the corporate level assist local countries by providing models and suggestions for successful service marketing and delivery offerings. PC LAN Support and networking services are identified as a growing area of opportunity in value-add services for Latin America, driven primarily by local customer needs, and secondarily, by IBM technical expertise. Today, PC/LAN and network support is strictly defect support, with network design and configuration services being delivered by other local companies. With the expansion of an open market economy in this geography in October 1992, some trade restrictions will be lifted which will allow foreign countries such as IBM to pursue such business opportunities previously not open to them. For example, the Brazilian government has, up until this time, restricted all PC and mid-range computer systems sales to Brazilian companies who also supported the equipment. Because IBM has not had a strong direct PC or peripheral technical presence, it has not built up LAN and network technical support skills in this area. It is believed that this will change with a movement to an open market in many countries.