Software and Service Industry Research Center
BEIJING, June 16 /Xinhua-PRNewswire/ -- CCID Consulting, China's leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (HKSE: 8235), recently released its article on IBM and HP.
The income of IBM in 2006 fiscal year reached $91.6 billion; lower than that of HP, $91.6 billion. And in 2007 fiscal year, the income of HP reached $104.3 billion, up 5.6% over IBM, which was $98.8 billion. It seems that HP has exceeded IBM and the advantage to IBM is increasing.
However, this is just the first glimpse. Essentially, HP and IBM are two asymmetrical IT companies. Looking at the income structure of HP and IBM, and it is apparent that HP and IBM have different core business.
Figure 1 Income Structure of IBM and HP
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Source: 2007 Fiscal Yearly Reports of IBM & HP
The income from hardware accounts for 25% of IBM, while that of HP is more than 80%. HP's hardware sales revenue is more than three times that of IBM. On the other hand, IBM's service sales revenue is more than three times that of HP, and software sales revenue nearly nine times that of HP.
IBM 2007 fiscal yearly report shows that IBM's income has five main parts, which are GTS, GBS, S&T, Software, and GF. Income from GTS and GBS takes a share of more than a half, which shows the importance of service in IBM. All IBM businesses have turned from individuals to organizations.
Figure 2 Income Structure of IBM in 2007
http://www.ccidconsulting.com/upload/13248.jpg
Source: 2007 Fiscal Yearly Reports of IBM
On the other hand, HP's income has six main parts, which are ESS, HPS, Software, PSG, IPG, and HPFS. Income from PSG and IPG reaches more than 60%, which provide computers and image equipment for individuals and organizations. Business modes of these two departments are quite different with the other four departments due to different markets and products.
Figure 3 Income Structure of HP, 2007
http://www.ccidconsulting.com/upload/13249.jpg
Source: 2007 Fiscal Yearly Reports of HP
When talking about competition between HP and IBM, that specifies the competition of TSG, which includes ESS, HPS, and Software, to IBM.
Table 1 Income of Competitive Business Departments of IBM & HP in 2007
IBM Income HP Income
($100 Million) ($100 Million)
Service GS 541.44 HPS 166.46
Software Software 199.82 Software 23.25
Hardware S&T 213.17 ESS 187.69
Total -- 954.43 TSG 377.40
Source: 2007 Fiscal Yearly Reports of IBM & HP
This difference lies in the different strategic positioning of IBM and HP. IBM and HP chose different roads after their significant M&As. IBM positions itself as an information infrastructure architecture technology provider, while HP acts as an information infrastructure provider and provides corresponding service.
In detail, IBM completely turned to service after the acquisition to PWC's consulting services, selling architecture solutions to users through services and middleware. On the other hand, after the acquisition of Compaq, HP paid more attention to IT infrastructure providing the corresponding management services. IBM gained more added values by elongating their value chain, while HP succeeded in scale expansion by keeping costs lower through a simpler mode. These two modes rely on different market conditions. The former mode needs finer specialization divisions with lower market transaction costs, while the latter one is just contrary.
Generally speaking, the asymmetrical business structures of IBM and HP lie in different development routes. However, whether the asymmetry will emphasize their differences or chase after the same goal is still to be verified in the market.
About CCID Consulting
CCID Consulting Co., Ltd. (hereinafter known as CCID Consulting), the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM) of Hong Kong (stock code: 8235.HK), is directly affiliated with China Center for Information Industry Development (hereinafter known as CCID Group). Headquartered in Beijing, CCID Consulting has so far set up branch offices in Shanghai, Guangzhou, Shenzhen, Wuhan and Chengdu, with over 300 professional consultants after many years of development. The company's business scope has covered over 200 large and medium-sized cities in China.
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Email: liuyan@ccidconsulting.com
