Bloomberg News

IBM Puts Its Researchers to Work on Consulting Tasks

March 14, 2013

International Business Machines Corp. (IBM:US)’s Bridget Van Kralingen, its head of business services, is pulling more of the company’s thousands of researchers out of isolated labs and having them tackle customer problems, a bid to give it an edge in data-intensive consulting projects.

One out of every four IBM researchers are now helping automate tasks such as marketing, sales or services for clients, rather than sticking to behind-the-scenes work on software or engineering, Van Kralingen said in an interview. Customers can come to a new lab that combines consulting with research, or researchers are getting sent out on client projects to study analytical questions that haven’t been answered before.

IBM is trying to capitalize on its brain trust at a time when its consulting work is getting increasingly complex. The company has 3,000 researchers across 12 labs, and they’re weighing questions ranging from replicating the human brain to predicting traffic patterns. By putting more of them in touch with customers, IBM looks to improve its business analytics -- the ability to mine corporate data to discover patterns or make better decisions.

“There will be increasing fusion between the skills of a consultant, who is practical, and the skills of a researcher, who I think is more analytical and future-oriented,” Van Kralingen said. Working on new ways for businesses to reach customers “requires more of an analytical research-oriented and experimental mindset,” she said.

Revenue Goal

IBM is aiming for $20 billion in sales from business analytics by 2015, more than double the 2010 figure. IBM has hired or shifted 8,100 people to solving data-analysis issues in the last three years, Chief Executive Officer Ginni Rometty said in an annual letter to shareholders. IBM also has the largest private mathematics department in the world and has devoted 400 of those staffers to data analysis.

“Two decades ago, 70 percent of our researchers were working in materials science, hardware and related technology,” Rometty said in the letter. “Even the one in 10 working in software were focused on operating systems and compilers.”

The new customer-focused lab was started with a joint investment from Van Kralingen’s division and the research side of the company that will total in the hundreds of millions, IBM said. The company shifted 100 scientists and more than 200 consultants to the project. Armonk, New York-based IBM spends about $6 billion a year in total on research and development.

Share Gains

IBM’s analytics prospects have helped fuel a stock rally this year, sending the shares into record territory. The shares (IBM:US) rose 1.8 percent to $215.80 at the close today in New York, bringing their year-to-date gain to 13 percent.

Grupo Financiero Banorte SAB, a Mexican bank, signed a $1 billion deal to work with IBM’s new lab over the next 10 years on customer-experience technology. The companies said this week that the project will increase the bank’s return on equity to more than 20 percent. Shares of the Mexican company jumped 3.6 percent to 98.93 pesos today, reaching a record high.

The bank was looking to differentiate its offering from competition, especially on mobile, CEO Alejandro Valenzuela said in an interview.

“If this platform was just the next best thing, we would be out of business really fast,” he said.

IBM also has researchers collaborating with customers in one of its most intensive projects -- the effort to commercialize its Watson artificial-intelligence system for use in the health and finance fields. Watson helps answer questions about diagnosing cancer, for example, based on the millions of pages of medical journals and case studies it has stored.

“It gives us a level of evidence and confidence around very complex challenges,” Anne Altman, a general manager at IBM, said today at a Bloomberg Link Big Data conference in Washington. The approach lets businesses study giant sets of information, rather than having to focus on a specific categories or geography.

“We are no longer going to be thinking in terms of segments,” Altman said.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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