IBM vs. Dell: Lessons for Australian Global Business Strategy

Introduction: Two Business Events with Global Implications

Two recent business events and their analysis have significant implications for the Australian government and businesses operating both domestically and internationally. The first concerns the ongoing struggle to get an IBM payroll and financial management system functioning correctly as part of Queensland Health's payroll infrastructure. The article Contract Signed Before Payroll System Proven to Work (Paull, 2013) illustrates how difficult it is to implement an enterprise-wide healthcare IT system with accuracy and precision. The second article, Dell Sparks Bidding War as New Offers Emerge (Sydney Morning Herald, 2013), illustrates how challenging the privatization of a publicly held multinational corporation can be.

The article Contract Signed Before Payroll System Proven to Work (Paull, 2013) provides insight into how difficult this problem continues to be, and how much time and financial resources are being wasted in attempting to find a resolution. There are many lessons for Australian government and businesses, with reverberating effects throughout international business. At the center of Queensland Health's payroll system challenges is the lack of effective strategic IT planning and an effective change management strategy that can be audited for performance. Both of these elements — strategic IT planning encompassing the broader objectives of the organization, and an effective change management strategy — are essential for any IT system's success (Fickenscher & Bakerman, 2011). The need for effective change management is particularly critical when process and system integration is prevalent in the design (Ball, 2000).

Implications for Australian Government and Global Business

The second article, Dell Sparks Bidding War as New Offers Emerge (Sydney Morning Herald, 2013), discusses the strategies that CEO and founder Michael Dell is employing to sell his company to private investors. The situation has major implications for the Australian government, as the Dell case will set a precedent in international business with regard to the sale of a multinational corporation. The privatization aspects of Dell are already reshaping elements of Australian business strategy, with manufacturers considering how they might rely on comparable strategies to gain greater freedom of financing and operations, removed from the pressures of pleasing shareholders and reporting all significant financial events.

Both articles illustrate how the expectations of government stakeholders must be taken into account for any enterprise-wide strategy to succeed. The first article shows what happens when stakeholder needs are ignored and confused within the context of a system structure. The lack of change management planning integrated with business process management (BPM) and business process re-engineering (BPR) is critically important for any global IT strategy to succeed (Fickenscher & Bakerman, 2011). IBM's failure at Queensland Health underscores how critical it is to account for the needs and requirements of government stakeholders. The lack of insight into these requirements led to the creation of a system that is practically unusable with any degree of reliability (Paull, 2013). This failure also demonstrates what happens when a change management strategy has not been established as a unifying element across the entire enterprise (Fickenscher & Bakerman, 2011). Queensland Health becomes an iconic example of what happens when an IT strategy goes completely wrong and fails to account for the needs of government and business stakeholders. The implications for global business include diminished trust in IT, and locally, it causes chaotic financial transactions within the healthcare facility — disrupting transactions, trading, and trust, three core components of a growing economy.

The second article illustrates the contrasting approach of keeping government stakeholders actively involved, as Dell strives to maintain open communication with the United States Securities and Exchange Commission (SEC) and other government entities that hold significant influence over the transaction. In Dell Sparks Bidding War as New Offers Emerge (Sydney Morning Herald, 2013), it is apparent that Michael Dell is excelling at stakeholder management while simultaneously seeking the best possible price for his company. By doing so, he is ensuring the transaction will be approved and that he will gain the freedom necessary to grow the business into a more services-oriented model. Dell's exceptional expertise in supply chain management (Kapuscinski, Zhang, Carbonneau, et al., 2004) and its continued investment in collaborative systems (Walters & Rainbird, 2007) are world-recognized. The lessons for global businesses in general, and Australian businesses specifically, are that effective stakeholder management delivers exceptional return on investment (ROI). Dell is also demonstrating that all of these factors can be orchestrated to ensure consistency across government and business sectors through well-executed stakeholder management.

Both articles offer a glimpse into how organizations can either choose to remain cognizant of their industries — defining how they set and achieve customer expectations — or allow those expectations to languish and be ignored. The latter decision leads to chaos, confusion, and market failure. Dell has chosen to remain cognizant of and actively influence the forces shaping its business model as it transitions from a public to a private company (Sydney Morning Herald, 2013). Dell has also worked to brief suppliers, created barriers to market entrants by avoiding sweeping changes to its existing product and service strategies, and briefed its largest enterprise customers on the transition. Dell has even devised a strategy for dealing with the rise of substitute products and services, creating a series of low-end PCs running the Microsoft Windows 8 operating system. What Dell is doing is following the framework of Porter's Five Forces model (Porter, 2008).

An analysis of Dell's supply chain (Gunasekaran & Ngai, 2005), build-to-order product strategies (Gunasekaran & Ngai, 2009), and approach to inventory management (Kapuscinski et al., 2004) — used in conjunction with information gathered from Dell's filings with the U.S. Securities and Exchange Commission — indicates that the PC industry is growing through rapid consolidation. The effects of low-cost production are not only driving down prices and profitability; the entire nature of competition in the industry is also changing quickly. Entirely new form factors are emerging and driving down barriers to entry for competitors in adjacent markets. All of these factors together are leading to much greater levels of competitive rivalry in the market.

Stakeholder Management: Contrasting Approaches

What is immediately apparent from the analysis is that R&D costs are shifting from the traditional PC form factor to tablets and smartphones, and manufacturing is quickly moving to China for these devices. This analysis also shows that Dell is already facing an entirely new series of market entrants, including those from the traditional smartphone industry — Ericsson, Nokia, Google with its Android operating system on tablets and smartphones, and Microsoft itself. This is reflected in the new market entrants dimension of the Five Forces model. Another concerning aspect of the analysis is the increasing bargaining power of suppliers, which continues to force consolidation in the market. What is most difficult to control yet most important to Dell's success is the bargaining power of buyers, and this behavioral shift is occurring so rapidly that Dell must go private in order to finance the re-architecting of its business model and sustain growth (Sydney Morning Herald, 2013).

As the Five Forces analysis indicates, this will be difficult to accomplish given the massive amount of change occurring in the industry. Dell will need to develop a more effective series of services based on its build-to-order manufacturing expertise (Gunasekaran & Ngai, 2009) and its depth of insight in managing supply chain models to more effectively fulfill customized product and service requests (Holweg & Pil, 2001). These represent the core of Dell's future, and the Five Forces analysis illustrates how challenging it would be to remain a product-centric business over time. Clearly, the analysis points toward the necessity of becoming a services business.

For IBM, there is a comparable series of challenges in orchestrating its services strategies to manage the implementation of a complex healthcare financial system at Queensland Health. IBM has largely ignored the Five Forces dynamics and created chaos in the process. The lack of process orchestration shows that IBM is failing to understand and manage the bargaining power of suppliers effectively. The core requirements of the project center on healthcare professionals who collectively constitute the stakeholders of a complex payroll processing system (Paull, 2013). From a project management standpoint, the critical task is to focus on the bargaining power of suppliers as system integration partners and create a unified project plan capable of successfully meeting multiple stakeholder needs. This challenge is compounded by the bargaining power of buyers, who are also requiring IBM to construct a system that can be quickly used to address complex supply chain, procurement, and strategic sourcing challenges (Paull, 2013).

IBM has also allowed a greater threat from new market entrants through its ineffective management of stakeholder requirements. What is evident from the cited article is that there is no significant IT change management plan in place to ensure a smooth transition from previous systems. The highest-performing IT implementations typically include a series of processes for capturing and translating stakeholder requirements into specific product and feature definitions (Fickenscher & Bakerman, 2011). As a result of this lack of focus, the project will most likely need to be completely redone.

Analysis Using Porter's Five Forces Model

This project illustrates how critical it is for a global service provider to remain cognizant of the many stakeholder requirements it faces and to consider how best to orchestrate its service partners. Had IBM taken an iterative approach using the Five Forces model, it would have discovered how disconnected the processes were that it was attempting to unify, and worked to fill the gaps in coverage. This would also have led to much higher levels of stakeholder participation and greater fidelity to the specific goals of the project. Instead, there is widespread confusion and a lack of focus on stakeholder requirements. As noted earlier, this system will most likely need to be completely replaced and the entire process started over. Using the Five Forces model to determine how Queensland Health could be made more effective would have led to a more cohesive strategy, unified by a common framework. The greatest challenge of any IT project is ensuring a high level of change management that accounts for stakeholder requirements (Ball, 2000). A more systematic approach would have led to success.

Both articles — Contract Signed Before Payroll System Proven to Work (Paull, 2013) and Dell Sparks Bidding War as New Offers Emerge (Sydney Morning Herald, 2013) — provide examples of how stakeholder requirements could have been more effectively managed. Both cases also demonstrate how critical it is to account for compliance requirements from the Australian government, local businesses, and the global business community. The IBM example shows how the absence of a strategic framework leads to chaos, while the Dell case shows how well-orchestrated a privatization effort can be when such a framework is in place. Both also reflect the need to manage expectations across governments and local and global business communities through the effective use of information.

Ball, L.D. 2000, "IT education success strategies for change management," Information Systems Management, vol. 17, no. 4, pp. 74–77.

By, B.P. 2013, "Michael Dell Offered Lower Price for His Shares to Make Dell Deal Work," LBO Wire.

Conclusion

Walters, D. & Rainbird, M. 2007, "Cooperative innovation: a value chain approach," Journal of Enterprise Information Management, vol. 20, no. 5, pp. 595–607.

Wilmot, R.W. 1987, "Change in Management and the Management of Change," Long-Range Planning, vol. 20, no. 6, p. 23.