Strategic CIO // Executive Insights & Innovation
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1/4/2010
11:35 AM
Bob Evans
Bob Evans
Commentary
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IBM Bankrolls EHR Projects

IBM is funding big electronic health-records projects for Siemens and three other companies in moves that offer an intriguing glimpse at one of the company's emerging strategies: IBM is leveraging its vast financial resources to win new business from customers that want not only IT products and services but also the cash to purchase it.

IBM is funding big electronic health-records projects for Siemens and three other companies in moves that offer an intriguing glimpse at one of the company's emerging strategies: IBM is leveraging its vast financial resources to win new business from customers that want not only IT products and services but also the cash to purchase it.From a Bloomberg.com article:

IBM has signed financing agreements with Siemens Healthcare, which develops electronic medical records, and three other health-care businesses whose clients are converting data into digital form . . . .

Doctors and hospitals in the U.S. can win federal stimulus funds if they begin keeping medical records electronically. By financing the projects, IBM earns interest on the loans and gains potential clients for its hardware, software and services, said Christine Chang, a New York-based analyst for technology- research firm Ovum Plc.

In addition to Siemens Healthcare, IBM is providing financing to Lavender & Wyatt Systems Inc., Healthcare Management Systems Inc. and SCC Soft Computer, according to the article.

IBM CEO Sam Palmisano described last year how his company was planning to pursue revenue from the federal government's so-called stimulus programs by offering up-front funding to companies caught in the cash-flow squeeze that began in late 2008 and intensified in early 2009. We laid out IBM's strategy in a piece called Sam Palmisano's Grand Strategy For IBM Revealed In $5B Global Financing Plan, and here are a few excerpts from that column:

"IBM's plan to offer $5 billion to fund IT projects until government so-called stimulus money begins to flow around the world highlights CEO Sam Palmisano's transformation of the company away from commodity hardware and into high-margin financing, software, and services. Because the focus of those government-funding packages, as Palmisano said recently, is "not just on creating jobs to fill potholes and fix bridges." At a time when many traditional lenders are unable to lend $5 million, much less $5 billion, because they're still recovering from the financial-industry meltdown, IBM has no such problem -- its cash position has never been so strong. So last week IBM said it would offer $5 billion in financing to help customers "mind the gap" until the so-called stimulus money begins to flow in China, the United States, and other countries around the globe. And having earmarked $2 billion for Europe, $2 billion for the United States and Canada, and $1 billion for the Asia-Pacific region, IBM understandably expects much of that funding will be used to purchase its very own products and services. "IBM Global Financing stimulus financing will mainly target enterprises and municipalities looking to implement technology projects consisting of a majority portion of IBM hardware, software and technology services components," said an IBM press release. "Financing also can be applied to non-IBM technology as part of a larger IBM solution. . . ."

"Doesn't sound much like a computer company, does it? Or a software company? Or just a financing company? In fact, it sounds a lot like a business- and technology- and financial-services company with deep industry expertise.

"And those are not accidents -- they're all the results of very conscious efforts Palmisano has undertaken in the past several years to drive the company's sweeping transformation, which I touched on recently as Palmisano flat-out told the analysts, "We got it all." And they've come about as Palmisano has methodically prepared IBM to be ready to pounce on these massive government-funded programs by divesting itself of hardware businesses and products that have lapsed into commodities, while putting increasing emphasis on what he calls "annuity-type" businesses."(end of excerpt)

Indeed, IBM's funding of these four electronic health-records initiatives underscores an essential point in the world of business technology: the best providers of IT products and services are evolving rapidly from suppliers of the stuff you have purchased from them in the past to co-creators of new types of value you will require to remain competitive and successful in a very different future.

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