Global Financing Gains Well Earned Trust

For followers of IT industry news, it was hard to miss IBM's recent management announcement, effective September 1, naming Sam Palmisano as the company’s new President and Chief Operating Officer, and John Thompson as its Vice Chairman. Along with that news came word of an organizational shift, as well - now eight major operating units or "business centers" within IBM would report directly to Palmisano.

The announcement illustrated Lou Gerstner's continued push to select, invest in, and promote those areas within his company that show the greatest promise for future growth. All of this is good news.

Now, let's take a closer look at those eight operating units. The biggest surprise, perhaps, was Global Financing, which joins Global Services, Sales & Distribution, Technology Group, Software Group, Storage Systems Group, Server Group, and Personal Systems Group on that A-list. An IBM division that's been around since 1981, Global Financing has always reported to IBM's Chief Financial Officer.

While this organizational shift may appear subtle, it speaks volumes about the company's view of—and belief in—its financing operation, and that unit’s ability to thrive as a freestanding profit center.

Historically, Global Financing has represented the largest chunk of IBM’s acquired debts. And while those debts perhaps necessitated a tight link to IBM’s purse strings, the reporting structure also provided the division with a sort of "buffer" from the watchful gaze of other internal sales units.

Now that buffer is gone – a clear sign that IBM has confidence in Global Financing’s performance to date, and its ability to manage the risks (and huge portfolio) inherent in running a worldwide financing operation.

There's another story to be told here, too. Several newspapers and business journals that reported on Gerstner's announcement in July did not mention Global Financing in their pieces. One IBMer chalked that omission up to a lack of public perception of Global Financing because of its traditional low profile. But clearly, by virtue of the business unit's main function—to help customers finance or lease their IT purchases—it does not possess the same glamour as, for example, the Personal Systems Group (PSG), which rolls shiny new products off the assembly lines, and into consumers’ homes and businesses.

Yet whatever the reason for that lack of coverage, it seems that Global Financing’s recent elevation in status illustrates a vote of trust on the part of IBM company management – and one well earned. The division's performance since 1981 has been impressive. With approximately $40 billion in assets—almost half of IBM's total assets—Global Financing represented 13 percent of IBM's pre-tax income for 1999. It currently conducts business with more than 125,000 customers in 40-plus countries around the world, and provides IT financing or leasing for at least 90 of today's Fortune 100 companies.

Global Financing has expanded its plans to include IBM's business partners and value added resellers, to offer customers one consolidated finance package that includes not just hardware, but also software, support services and e-business solutions – including those purchased from non-IBM providers.

Clearly, IBM seeks to remain cooperative to its customers, and instrumental to its marketers and sales force. But now there's an added emphasis, or a second story, as well. Global Financing is stepping up to the plate as its own profit center, and doing so in an admirable way.

It's an exciting move forward for Joe Lane, general manager of the Global Financing unit for the past year. But it's no less significant for Big Blue overall, and for the customers who turn to Global Financing for IT financing and leasing solutions.

There's a lot going on within this unit that used to be bundled under the IBM Credit Corporation umbrella. If you haven't started hearing the buzz yet, stay tuned!

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