IBM has shown us that services are a great way to keep your revenue stable or even growing in a slowdown. When companies slash jobs they still need to get work done and this is where companies with strong service arms come in.
I believe we will see a few classes of tech and communications companies this year and next. Those companies with services revenue will outperform and those without may struggle.
Here is an excerpt from an article on IBM’s earnings in a Hudson Valley newspaper:
In 2008, 40 percent of IBM’s profit came from software, 42 percent from services and just 9 percent from hardware.
In the fourth quarter, IBM’s consulting arms reported new services signings of $17.2 billion, with 24 deals greater than $100 million. IBM’s services backlog at Dec. 31 was $117 billion.
Revenue in Global Technology Services was down 3.7 percent to $9.6 billion from $9.9 billion a year ago. Global Business Services revenue was down 4.5 percent to $4.7 billion from $4.9 billion a year ago.
$117 billion is just an awe-inspiring sum and it is almost incomprehensible. Obviously this amount shows tech and tech services are at least somewhat resistant to the current economic environment.
See also: FCC Selects IBM for DTV Call Center