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                                                                                       T EC H N O L O G Y B U S I N ES S R ES EAR C H , I N C .



                                                                                     A RETROSPECTIVE ANALYSIS OF IBM
                                                                            CORPORATE X86-BASED SERVER CUSTOMER SATISFACTION


IBM Inspires Customer Delight by Consistently Meeting High
  Customer Expectations for Product and Service Integrity
                                                                                      Julie Perron, CSAT Project Manager
                                                                                                January 10, 2011
Executive Summary
IBM EXHIBITS AN UNCANNY ABILITY TO DEPENDABLY MEET HIGH CUSTOMER
EXPECTATIONS
The IBM System x server brand has long been recognized for exceptional product and service
quality. Customers expect consistency in these attributes, and the results of TBR’s x86-based
Customer Satisfaction Study confirm that this is precisely what IBM customers continue to
experience with the brand. For the past five quarters, IBM has ranked No. 1 in TBR’s study by
differentiating itself in an increasingly dynamic marketplace. During this period of IBM
domination in the study, the company has accumulated 12 incidences of competitive strength
across six of the study’s categories. TBR assigns competitive strengths when a player
demonstrates brand differentiation by scoring substantially above industry averages and more
effectively meeting (or exceeding) customer expectations. Meanwhile, competitors have not been
awarded strengths of any kind during the period, and Dell was cited with five cases of competitive
warnings or weaknesses.
TBR                                                                                         x86-BASED SERVER SATISFACTION
                                                                                            PERFORMANCE DIFFERENTIATION,
                                                                                         Past 5 Reporting Periods (3Q09 through 3Q10)
                                                                                Sources: TBR x86-based Servers: Corporate IT Buying Behavior & Customer Satisfaction Studies
 # Incidences Where TBR Assigned Competitive Strengths or




                                                            14
                                                            12                                                                              Phone Support, 1
                                                                                                                                                                                                   STRENGTHS



                                                            10                                                                               Delivery Time, 1
                                                                                                                                       Management Tools, 2
                                                             8
                                                                                                                                         Energy Efficiency, 2
                                                             6
                  Warnings/Weaknesses




                                                                                                                                                Virtualization
                                                             4                                                                                   Solutions, 3
                                                             2                                                                                    Hardware
                                                                                                                                                 Reliability, 3
                                                             0                                                            HP: 0
                                                                                          Energy Efficiency, -2           Competitive
                                                             -2
                                                                                          Management Tools, -2            Strengths,
                                                                                                                                                                                                   WARNINGS




                                                             -4                                                           Warnings or
                                                                                          Phone Support, -1
                                                             -6                                                           Weaknesses
                                                                                                                          Assigned                                   IBM: 12 Competitive
                                                             -8
                                                                         Dell: 5                                                                                      Strengths Awarded;
                                                            -10   Warnings/Weaknesses                                                                              0 Warnings/Weaknesses

                                                            -12    Cited, 0 Strengths

                                                            -14

                                                                         Dell                                              HP                                                  IBM
TECHNOLOGY BUSINESS RESEARCH, INC.                                                                              www.tbri.com                                                   P: (603) 929-1166    pg. 1
TBR




                                                                                                             CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES
While IBM continues to outrank competitors, TBR has also observed solidly improving
performances by the company’s challengers in recent quarters. Overall improvement in the
ratings has been driven by the exuberance of x86-based server decision-makers who are reacting
to new solutions purchases in 2010 following an extended period of significant spending cuts.
During 2009, many companies were forced to forgo new systems acquisition, resulting in
continued reliance on aging equipment to handle increasingly demanding workloads. Satisfaction
scores subsequently declined during 2009; however, IBM was more successful than competitors
in keeping customer disappointment at a bare minimum. With 2010 representing perhaps the
largest corporate refresh in history, all three competitors’ satisfaction scores increased
substantially, often achieving new historical highs. This increase was a function of customer
disappointment having essentially dropped off the map, replaced by increasing customer delight –
as exhibited by the growth in scores at the highest echelon of TBR’s satisfaction scale. However,
despite the high customer enthusiasm that enveloped all three vendors’ scores in the 2010
studies, IBM’s consistency throughout the previous year paid off. This enabled IBM to continue to
differentiate itself by earning competitive strengths, while competitors have been unable to do so
during the period. The performances of HP and Dell were largely overshadowed by IBM’s more
solid ratings.
In preparing this summary, TBR analyzed IBM’s competitive performances in the past six quarters




                                                                                                                                                 SM
within our Corporate IT Buying Behavior & Customer Satisfaction Studies in the x86-based server
segment. This retrospective analysis focuses on the evidence supporting the premise that IBM has
been successful in consistently delivering what customers expect relative to quality and integrity




                                                                                                             STUDY HIGHLIGHTS
in the IBM System x server brand. Based on this analysis, TBR attributes IBM’s strong
performances in TBR’s study to the interrelated effects of five underlying principles:
     1. Solid leadership across areas relating to product integrity and performance – IBM has
         exhibited significantly higher customer satisfaction across the key areas of hardware
         quality/reliability, energy efficiency, virtualization and manageability. These are all high-
         priority areas with customers in the current server environment.
     2. Consistency and stability – IBM has displayed steady leadership in key areas over the long
         term where competitors’ ratings have exhibited volatility and, during 2009, considerable
         weakening. During the economic stress and tough environment of 2009, IBM’s
         satisfaction ratings held up to the pressure while competitors’ succumbed.
     3. Successfully meeting high customer expectations – IBM customers express expectations
         for quality and service that exceed those of competitors’ customers. One might expect
         IBM to have been hindered in having to meet high customer expectations; however, the
         company transformed this challenge into a distinct competitive advantage.
     4. Capitalizing on customer delight – IBM customer delight continues to grow in our study,
         with IBM earning the greatest proportions of perfect ratings. This level of enthusiasm, the
         magnitude of which has been unattainable by competitors, has driven IBM to its past five
         No. 1 rankings in TBR’s study.
     5. Enhancing customer loyalty – By exploiting its longstanding reputation for reliability and
                                                                                                             January 10, 2011




         support, IBM has seen a substantial increase in stated customer loyalty and advocacy for
         the brand during the past five quarters.




TECHNOLOGY BUSINESS RESEARCH, INC.             www.tbri.com                         P: (603) 929-1166    pg. 2
TBR
In-Depth Analyses




                                                                                                                                                                                                                                           CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES
3Q10 WRAP-UP: IBM EARNS ITS FIFTH CONSECUTIVE NO. 1 RANKING IN TBR’S X86
SERVER CUSTOMER SATISFACTION STUDY
In TBR’s 3Q10 x86-based Server Customer Satisfaction Study, based on the views of 481 IT
decision-makers in North America, IBM earned its fifth straight No. 1 ranking and its fourth
consecutive singular (unshared) top ranking. IBM’s 3Q10 position was enhanced by exceptionally
competitive performances across hardware reliability (IBM’s third competitive strength in the
past five quarters), virtualization solutions (its third in the past four quarters), and its first
competitive strength for delivery time. IBM also scored higher than the industry average for its
server value rating, but not by enough of a magnitude for TBR to award an additional competitive
strength. IBM’s solid performances in these areas contributed to a Weighted Satisfaction Index
(WSI) position at a comfortable distance over competitors, leading to a continuing No. 1
placement in 3Q10.
TBR                                MEAN SATISFACTION POSITIONS AMONG x86 SERVER COMPETITORS, 3Q10
  6.60

  6.40                                                                                                                 Dell                       HP                                IBM

  6.20

  6.00




                                                                                                                                                                                                                                                                               SM
  5.80

  5.60




                                                                                                                                                                                                                                           STUDY HIGHLIGHTS
  5.40

  5.20

  5.00
                                                                                       Delivery Time
                                                  Overall Value



                                                                  Parts Availability




                                                                                                                                                                Energy Efficiency
                                                                                                                                                Ease of Doing




                                                                                                                                                                                                           Satisfaction
                                                                                                                                                                                          Virtualization




                                                                                                                                                                                                                          Grand Mean
                                    Management




                                                                                                       Phone Support



                                                                                                                              On-site Support
             Quality/Reliability




                                                                                                                                                                                                             Overall
                                                                                                                                                  Business
                                      Server
                    H/W




                                        SOURCE: TBR.




IBM CONTINUES TO MAINTAIN LEADERSHIP ACROSS AREAS DEFINING PRODUCT
INTEGRITY AND MANAGEMENT
Customer expectations for x86 server hardware reliability and quality have always topped the list
of priorities within the customer experience. In today’s environment, customers face significant
                                                              challenges driven by limited
 TBR      HARDWARE RELIABILITY SATISFACTION HISTORICAL        memory capacity and growing
  6.60
                            ANALYSIS                          complexities where IT professionals
                                                              are attempting to optimize
  6.40
                                                              performance for specific workloads.
  6.20
                                                              Overall, x86 server customers are
  6.00
                                                              looking for innovations that will
  5.80
                                                              greatly enhance their abilities to
                                                                                                                                                                                                                                           January 10, 2011




  5.60
       1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
                                                              simplify these requirements. TBR’s
         SOURCE: TBR.
                       Dell       HP          IBM
                                                              hardware quality and reliability
                                                              metric is the cornerstone for this
perception of solutions innovation. IBM has outperformed competitors throughout the past five
quarters, earning competitive strengths in three of those periods.


TECHNOLOGY BUSINESS RESEARCH, INC.                                                                          www.tbri.com                                                                                        P: (603) 929-1166      pg. 3
TBR




                                                                                                                   CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES
               ENERGY EFFICIENCY SATISFACTION HISTORICAL           In covering customer satisfaction
  TBR
                               ANALYSIS                            with       energy    efficiency      and
   6.00
   5.80
                                                                   virtualization solutions, TBR has
   5.60                                                            observed a steady rise in the stated
   5.40                                                            importance of these capabilities.
   5.20
                                                                   Today, energy efficiency and
   5.00
   4.80
                                                                   virtualization        are        critical
        2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10          components of a customer’s
        SOURCE: TB R.      Dell      HP       IBM                  perceptions of product integrity and
                                                                   value. The movement of more
                                                                   mission-critical applications to the
x86 platform has created an increased emphasis on reliability. The ability to simplify installations
through virtualization, while improving power consumption and management, are all part of the
overall value proposition in the
                                                          VIRTUALIZATION SATISFACTION HISTORICAL
datacenter. Within both categories, IBM TBR                               ANALYSIS
has exhibited greater resistance to          6.30

downward trends experienced by its           5.80
competitors during 2H09, and improving
                                             5.30




                                                                                                                                                       SM
performances during 2010. IBM
subsequently earned TBR’s competitive        4.80
strength standings in two quarters for              2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10




                                                                                                                   STUDY HIGHLIGHTS
                                                                         Dell        HP         IBM
energy efficiency and in a total of three    SOURCE: TBR.


quarters for virtualization solution satisfaction during the past five quarters. IBM is the only
competitor to have ever been awarded strengths within these two categories.

Systems management became a source of increasing dissatisfaction for x86 server customers
during 2009. The effects of these frustrations have been exemplified by ratings declines
throughout 2009; however, IBM’s satisfaction scores were again comparatively more resistant to
                                                                  the      trends,      where
 TBR                                                              competitors’          scores
              SERVER MANAGEMENT TOOLS SATISFACTION
                                                                  incurred substantial value
                       HISTORICAL ANALYSIS
                                                                  losses. While competitors’
  6.40
  6.20
                                                                  scores rebounded in 2010,
  6.00                                                            IBM’s score improvement
  5.80
  5.60
                                                                  kept pace with the
  5.40                                                            industry, enjoying two
  5.20                                                            consecutive quarters of
  5.00
       1Q08 2Q08 3Q08 4Q08 1Q09  2Q09 3Q09 4Q09  1Q10 2Q10 3Q10   substantially     improved
                                                                  ratings.
                           Dell      HP           IBM
SOURCE: TBR.
                                                                                                                   January 10, 2011




TECHNOLOGY BUSINESS RESEARCH, INC.                www.tbri.com                           P: (603) 929-1166     pg. 4
TBR
THE ABILITY TO MAINTAIN CONSISTENCY AND STABILITY OF THE SATISFACTION




                                                                                                                                                                                                        CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES
EXPERIENCE DEFINES IBM’S LEADERSHIP STATUS
IBM’s continuing domination of the competitive field for the past five reporting periods has been
driven by its greater resistance to downward pressures experienced by the competition during
2009, when the Great Recession forced spending cutbacks and customer satisfaction levels
suffered. However, during these challenging times, IBM’s satisfaction ratings held steady, which
                                                                    positioned IBM to build upon
 TBR      CORPORATE X86-BASED SERVER WEIGHTED SATISFACTION          this solid foundation, as
                     SCORES 2Q09 THROUGH 3Q10
   90                                                               customer exuberance began
   88                                                               to build with the easing of
   86                                                               economic hardships within
   84                                                               corporate America. While
   82
                                                                    competitors’           scores
                                                                    improved in 2010, IBM
   80
                                                                    started from a higher
   78
          2Q09    3Q09      4Q09    1Q10     2Q10      3Q10
                                                                    position,     enabling    the
                                                                    company to continue to place
                                                                    in the No. 1 ranking from
                          Dell          HP           IBM
 SOURCE: TB R.                                                      3Q09 to 3Q10.




                                                                                                                                                                                                                                            SM
IBM TURNS A POTENTIAL CHALLENGE INTO AN ADVANTAGE BY CONSISTENTLY
MEETING SOME OF THE HIGHEST CUSTOMER EXPECTATIONS IN THE INDUSTRY




                                                                                                                                                                                                        STUDY HIGHLIGHTS
IBM customers have typically expressed above-average expectations for x86-based server quality
and service; they have been conditioned to do so through their positive experiences with the
brand. In the 3Q10 study, IBM customers registered particularly high demands on server
reliability, delivery time, technical support, management tools and virtualization solutions. With
the way TBR tallies its WSI rating, high expectations that have not been effectively met (low or
moderate satisfaction) can have negative implications for the score calculation. Alternatively, a
high-expectation category with high satisfaction translates into an advantage. IBM capitalized on
high expectation/high satisfaction conditions across the three areas where competitive strengths
were awarded in 3Q10 – hardware reliability, delivery time and virtualization solutions.
                                   X86-BASED SERVER VENDOR COMPETITIVE GAP ANALYSIS 3Q10
               TBR
                                                                                           Ease of Doing
                                                                           Delivery Time




                                                                                                                               Manageability




                                                                                                                                                                                 Expectation
                                                    Overall Value




                                                                                                                                                                                 Fulfillment
                                    Replacement




                                                                                                                                                              Virtualiz ation
                                     Availability




                                                                                             Business




                                                                                                                                  Server




                                                                                                                                                 Efficiency
                     Reliability
                     Hardware




                                       Parts




                                                                                                                                                  Energy
                                                                                                           Support



                                                                                                                     Support
                                                                                                                     On-site
                                                                                                           Phone




              40


              60                                                                                                                                                                Exceed
                                                                                                                                                                                s
              80


             100                                                                                                                                                                 Fully
                                                                                                                                                                                                        January 10, 2011




                                                                                                                                                                                 Meets
             120


             140                                                                                                                                                                 Short
                                                                                                                                                                                 of
             160

                                                                    Dell                                     HP                                IBM
          SOURCE: TB R.




TECHNOLOGY BUSINESS RESEARCH, INC.                                                                  www.tbri.com                                                                P: (603) 929-1166   pg. 5
TBR
IBM HAS BEEN THE MOST SUCCESSFUL AT ENGENDERING CUSTOMER DELIGHT




                                                                                                                                                                                                                                     CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES
Achieving customer delight in the scoring (earning as many Perfect 7 ratings as possible) should
be the goal of any vendor in any industry. TBR knows that several factors can drive customer
enthusiasm, including customers’ need to become periodically energized by the advent of next-
generation solutions. While all three competitors introduced new x86 server series in early 2010,
                                                                and all three simultaneously
TBR SATISFACTION WITH HARDWARE QUALITY/RELIABILITY              benefitted from resumed server
                         BY CATEGORY, 3Q10
 70%                                                            spending, IBM appears to have
 60%                                                            tapped additional methods for
 50%                                                            driving enthusiasm with its brand.
 40%
                                                                Within the critical category of
 30%
 20%                                                            hardware reliability, IBM earned
 10%                                                            two-thirds of its scores at the
  0%                                                            Perfect 7 level of the scale, while
              <5           5             6           7
                                                                competitors were not nearly as
   SOURCE: TB R.         Dell       HP        IBM
                                                                effective at encouraging such
                                                                exuberance.
Across all the satisfaction categories in 3Q10, IBM earned an average 35% Perfect 7 ratings versus
competitors’ average of 28%. In addition to hardware reliability, IBM instilled a greater sense of




                                                                                                                                                                                                                                                                         SM
customer delight versus competitors across the areas of server value, parts availability, ease of
doing business, virtualization, management tools and delivery time.




                                                                                                                                                                                                                                     STUDY HIGHLIGHTS
          TBR
                                         PROPORTIONS OF DELIGHTED CUSTOMERS BY CATEGORY, 3Q10
        70%
        60%
        50%
        40%
        30%
        20%
        10%
         0%
                                                                                                                                                                         Delivery Time
                                         Overall Value




                                                                                                                                                                                                                Average
                                                                         Parts Availability




                                                                                                                                                                                         Energy Efficiency
                                                                                              Ease of Doing
                                                         Phone Support




                                                                                                                                    Management




                                                                                                                                                       On-site Support
                                                                                                                  Virtualization
                   Quality/Reliability




                                                                                                Business




                                                                                                                                       Tools
                          H/W




                                                                                                                Dell               HP            IBM
                                          SOURCE: TB R.



IBM’S CONSISTENCY IN MEETING CUSTOMER EXPECTATIONS DRIVES STRONGER
CUSTOMER LOYALTY
The customer loyalty rating tends to serve as a lagging indicator in TBR’s studies. A competitor
that builds a story of customer satisfaction success can expect to see further rewards in its
                                                           customer loyalty rating. The customer
   TBR     X86-BASED SERVER LOYALTY 3Q08 THROUGH 3Q10
  4.6                                                         loyalty rating is a measure of a
  4.5
                                                              customer’s likelihood to continue to
                                                                                                                                                                                                                                     January 10, 2011




  4.4
  4.3                                                         purchase the brand and advocate for
  4.2
  4.1                                                         that brand at their organization. While
  4.0                                                         this   pattern tends to            reflect
  3.9
  3.8                                                         strengthening of the loyalty rating, TBR
       3Q08   4Q08 1Q09    2Q09 3Q09 4Q09 1Q10 2Q10   3Q10
                      Dell           HP           IBM
                                                             observes that solid loyalty can also be an
    SOURCE: TBR.




TECHNOLOGY BUSINESS RESEARCH, INC.                                                                            www.tbri.com                                                                                   P: (603) 929-1166   pg. 6
TBR
indication of market share leadership. In HP’s case, its loyalty ratings have typically dominated the




                                                                                                                            CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES
competition, including many times when HP was not a top-ranked contender in the satisfaction
competition. IBM’s loyalty success has been more recent, with its strengthening ratings finally
reaching parity with HP by 3Q10. TBR believes IBM’s recent success in the loyalty competition
resulted from consistently meeting high expectations, even during the difficult year of the
recession (2009).


Summary
TBR’S ASSESSMENT OF IBM’S CUSTOMER SATISFACTION SUCCESS POINTS TO CURRENT
STABILITY AND LEADERSHIP AT JUST THE RIGHT TIME
TBR believes IBM has benefited in our study by continuing to keep its pipeline of new solutions
announcements full and ongoing, despite reduced IT spending patterns in 2009, when the
company kept customer interest piqued through continual messaging regarding its fifth
generation of enterprise X-Architecture. By the time spending resumed within U.S. corporations,
IBM was in an ideal position to move the bar further toward customer delight, as there were no
significant customer disappointments with which to grapple. This was not the case with IBM’s
competitors, for whom customer dissatisfaction had increased during 2009, forcing these
companies to work harder to restore customer confidence. By 2010, IBM enjoyed significantly




                                                                                                                                                                SM
higher numbers of truly delighted customers (i.e., those assigning Perfect 7 ratings to IBM across
several categories in the study).




                                                                                                                            STUDY HIGHLIGHTS
TBR also recognizes a few additional successes for IBM in the study results that appear to have
been rightly timed against market conditions. One has to do with delivery time, which became
increasingly relevant in 2010 due to renewed purchasing of current generation x86-based server
solutions. IBM remained on top of this challenge by successfully meeting extremely high customer
expectations, as these customers anticipated the arrival of new solutions after an extended
purchasing drought. IBM’s other noteworthy success in 3Q10 involves the perception of server
value. At a time of renewed purchasing, companies are looking at both the price tag and the
professed cost-of-ownership calculations, as customers cautiously resume new acquisitions. In
spite of the ostensible optimism of 2010, decision-makers remain wary of committing capital
expenditures. In the cases of both delivery time and server value, IBM earned significantly higher
numbers of perfect satisfaction ratings versus the competition.
                                                         TBR
TBR                                                                      SATISFACTION WITH SERVER VALUE
                SATISFACTION WITH DELIVERY TIME
                       BY CATEGORY, 3Q10
                                                                                BY CATEGORY, 3Q10
   50%                                                      60%
   40%                                                      50%

   30%                                                      40%
                                                            30%
   20%
                                                            20%
   10%
                                                            10%
    0%
                <5          5        6            7            0%
                                                                          <5        5           6             7
                         Dell   HP       IBM
                                                                                        Dell   HP       IBM
SOURCE: TB R.                                             SOURCE: TBR.
                                                                                                                            January 10, 2011




TBR believes the manner in which IBM is handling memory expansion, the use of solid state disk
drives and systems flexibility play into a simple message of ROI that customers can easily
recognize. IBM has spread its focus across every avenue of the value proposition in this market
space, hitting upon requirements around power consumption, memory, I/O, networking and
essentially the datacenter’s entire fabric. Through all of this, IBM has been successful in


TECHNOLOGY BUSINESS RESEARCH, INC.                    www.tbri.com                                  P: (603) 929-1166   pg. 7
TBR
articulating its ROI messaging, and has even been perceived as a company with reasonable




                                                                                                             CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES
pricing, a development in TBR’s studies that clearly breaks with the past. As part of its goal to
keep customer enthusiasm optimized, IBM continued to broaden its x86 server line in August, by
introducing AMD Opteron-based four-socket servers with unique space-saving designs in a 2U
form factor. IBM also announced a two-socket Intel Xeon 5600-based server with the lowest cost-
per-terabyte in the IBM portfolio.


About the Studies
In early 1997, Technology Business Research, Inc. decided to take on the responsibility of filling a
relatively vacant industry niche by developing and implementing what would ultimately become
an industry-standard measurement for PC customer satisfaction. TBR’s goal was to originate a
repeatable methodology for tracking end-user customer satisfaction at medium and large North
American enterprises on a quarterly basis. The project quickly rose to its current status as a
reliable, consistent and timely measurement of customer satisfaction among IT managers.
TBR’s Corporate IT Buying Behavior & Customer Satisfaction Studies (published in four separate
volumes each quarter covering Desktops, Notebooks, x86-based Servers and Service & Support)
have been conducted since the first quarter of 1997. For vendors, distributors, large end-users
and the investment community, this program has become the preeminent tactical tool for




                                                                                                                                                 SM
monitoring customer satisfaction from quarter to quarter. These studies have been designed to
“grow” with the industry without sacrificing their basic integrity as dependable, objective tracking
tools.




                                                                                                             STUDY HIGHLIGHTS
TBR’s x86-based Server Customer Satisfaction studies have been published quarterly since their
inception in 1Q97. The 3Q10 study, published in November 2010, was based on the views of 481
x86 server decision-makers at midsized and large corporations in the United States and Canada,
representing a total installed base of nearly 650,000 x86-based servers and a purchase intent of
over 200,000 units during the next 12 months.


About TBR
TBR specializes in providing in-depth and timely insights within the computer, software, telecom,
mobility and professional services industries. These critical insights can provide value to all levels
of your organization: executive, sales, marketing, product and business development, finance,
procurement, and others. We deliver this intelligence in a format that is uniquely responsive and
tailored to your needs, and we do so as an objective source, which allows you to look at the
market from a fresh, impartial perspective.
                                                                                                             January 10, 2011




                                                                    XSL03030-USEN-00




TECHNOLOGY BUSINESS RESEARCH, INC.             www.tbri.com                         P: (603) 929-1166    pg. 8

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Retrospective Analysis

  • 1. TBR T EC H N O L O G Y B U S I N ES S R ES EAR C H , I N C . A RETROSPECTIVE ANALYSIS OF IBM CORPORATE X86-BASED SERVER CUSTOMER SATISFACTION IBM Inspires Customer Delight by Consistently Meeting High Customer Expectations for Product and Service Integrity Julie Perron, CSAT Project Manager January 10, 2011 Executive Summary IBM EXHIBITS AN UNCANNY ABILITY TO DEPENDABLY MEET HIGH CUSTOMER EXPECTATIONS The IBM System x server brand has long been recognized for exceptional product and service quality. Customers expect consistency in these attributes, and the results of TBR’s x86-based Customer Satisfaction Study confirm that this is precisely what IBM customers continue to experience with the brand. For the past five quarters, IBM has ranked No. 1 in TBR’s study by differentiating itself in an increasingly dynamic marketplace. During this period of IBM domination in the study, the company has accumulated 12 incidences of competitive strength across six of the study’s categories. TBR assigns competitive strengths when a player demonstrates brand differentiation by scoring substantially above industry averages and more effectively meeting (or exceeding) customer expectations. Meanwhile, competitors have not been awarded strengths of any kind during the period, and Dell was cited with five cases of competitive warnings or weaknesses. TBR x86-BASED SERVER SATISFACTION PERFORMANCE DIFFERENTIATION, Past 5 Reporting Periods (3Q09 through 3Q10) Sources: TBR x86-based Servers: Corporate IT Buying Behavior & Customer Satisfaction Studies # Incidences Where TBR Assigned Competitive Strengths or 14 12 Phone Support, 1 STRENGTHS 10 Delivery Time, 1 Management Tools, 2 8 Energy Efficiency, 2 6 Warnings/Weaknesses Virtualization 4 Solutions, 3 2 Hardware Reliability, 3 0 HP: 0 Energy Efficiency, -2 Competitive -2 Management Tools, -2 Strengths, WARNINGS -4 Warnings or Phone Support, -1 -6 Weaknesses Assigned IBM: 12 Competitive -8 Dell: 5 Strengths Awarded; -10 Warnings/Weaknesses 0 Warnings/Weaknesses -12 Cited, 0 Strengths -14 Dell HP IBM TECHNOLOGY BUSINESS RESEARCH, INC. www.tbri.com P: (603) 929-1166 pg. 1
  • 2. TBR CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES While IBM continues to outrank competitors, TBR has also observed solidly improving performances by the company’s challengers in recent quarters. Overall improvement in the ratings has been driven by the exuberance of x86-based server decision-makers who are reacting to new solutions purchases in 2010 following an extended period of significant spending cuts. During 2009, many companies were forced to forgo new systems acquisition, resulting in continued reliance on aging equipment to handle increasingly demanding workloads. Satisfaction scores subsequently declined during 2009; however, IBM was more successful than competitors in keeping customer disappointment at a bare minimum. With 2010 representing perhaps the largest corporate refresh in history, all three competitors’ satisfaction scores increased substantially, often achieving new historical highs. This increase was a function of customer disappointment having essentially dropped off the map, replaced by increasing customer delight – as exhibited by the growth in scores at the highest echelon of TBR’s satisfaction scale. However, despite the high customer enthusiasm that enveloped all three vendors’ scores in the 2010 studies, IBM’s consistency throughout the previous year paid off. This enabled IBM to continue to differentiate itself by earning competitive strengths, while competitors have been unable to do so during the period. The performances of HP and Dell were largely overshadowed by IBM’s more solid ratings. In preparing this summary, TBR analyzed IBM’s competitive performances in the past six quarters SM within our Corporate IT Buying Behavior & Customer Satisfaction Studies in the x86-based server segment. This retrospective analysis focuses on the evidence supporting the premise that IBM has been successful in consistently delivering what customers expect relative to quality and integrity STUDY HIGHLIGHTS in the IBM System x server brand. Based on this analysis, TBR attributes IBM’s strong performances in TBR’s study to the interrelated effects of five underlying principles: 1. Solid leadership across areas relating to product integrity and performance – IBM has exhibited significantly higher customer satisfaction across the key areas of hardware quality/reliability, energy efficiency, virtualization and manageability. These are all high- priority areas with customers in the current server environment. 2. Consistency and stability – IBM has displayed steady leadership in key areas over the long term where competitors’ ratings have exhibited volatility and, during 2009, considerable weakening. During the economic stress and tough environment of 2009, IBM’s satisfaction ratings held up to the pressure while competitors’ succumbed. 3. Successfully meeting high customer expectations – IBM customers express expectations for quality and service that exceed those of competitors’ customers. One might expect IBM to have been hindered in having to meet high customer expectations; however, the company transformed this challenge into a distinct competitive advantage. 4. Capitalizing on customer delight – IBM customer delight continues to grow in our study, with IBM earning the greatest proportions of perfect ratings. This level of enthusiasm, the magnitude of which has been unattainable by competitors, has driven IBM to its past five No. 1 rankings in TBR’s study. 5. Enhancing customer loyalty – By exploiting its longstanding reputation for reliability and January 10, 2011 support, IBM has seen a substantial increase in stated customer loyalty and advocacy for the brand during the past five quarters. TECHNOLOGY BUSINESS RESEARCH, INC. www.tbri.com P: (603) 929-1166 pg. 2
  • 3. TBR In-Depth Analyses CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES 3Q10 WRAP-UP: IBM EARNS ITS FIFTH CONSECUTIVE NO. 1 RANKING IN TBR’S X86 SERVER CUSTOMER SATISFACTION STUDY In TBR’s 3Q10 x86-based Server Customer Satisfaction Study, based on the views of 481 IT decision-makers in North America, IBM earned its fifth straight No. 1 ranking and its fourth consecutive singular (unshared) top ranking. IBM’s 3Q10 position was enhanced by exceptionally competitive performances across hardware reliability (IBM’s third competitive strength in the past five quarters), virtualization solutions (its third in the past four quarters), and its first competitive strength for delivery time. IBM also scored higher than the industry average for its server value rating, but not by enough of a magnitude for TBR to award an additional competitive strength. IBM’s solid performances in these areas contributed to a Weighted Satisfaction Index (WSI) position at a comfortable distance over competitors, leading to a continuing No. 1 placement in 3Q10. TBR MEAN SATISFACTION POSITIONS AMONG x86 SERVER COMPETITORS, 3Q10 6.60 6.40 Dell HP IBM 6.20 6.00 SM 5.80 5.60 STUDY HIGHLIGHTS 5.40 5.20 5.00 Delivery Time Overall Value Parts Availability Energy Efficiency Ease of Doing Satisfaction Virtualization Grand Mean Management Phone Support On-site Support Quality/Reliability Overall Business Server H/W SOURCE: TBR. IBM CONTINUES TO MAINTAIN LEADERSHIP ACROSS AREAS DEFINING PRODUCT INTEGRITY AND MANAGEMENT Customer expectations for x86 server hardware reliability and quality have always topped the list of priorities within the customer experience. In today’s environment, customers face significant challenges driven by limited TBR HARDWARE RELIABILITY SATISFACTION HISTORICAL memory capacity and growing 6.60 ANALYSIS complexities where IT professionals are attempting to optimize 6.40 performance for specific workloads. 6.20 Overall, x86 server customers are 6.00 looking for innovations that will 5.80 greatly enhance their abilities to January 10, 2011 5.60 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 simplify these requirements. TBR’s SOURCE: TBR. Dell HP IBM hardware quality and reliability metric is the cornerstone for this perception of solutions innovation. IBM has outperformed competitors throughout the past five quarters, earning competitive strengths in three of those periods. TECHNOLOGY BUSINESS RESEARCH, INC. www.tbri.com P: (603) 929-1166 pg. 3
  • 4. TBR CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES ENERGY EFFICIENCY SATISFACTION HISTORICAL In covering customer satisfaction TBR ANALYSIS with energy efficiency and 6.00 5.80 virtualization solutions, TBR has 5.60 observed a steady rise in the stated 5.40 importance of these capabilities. 5.20 Today, energy efficiency and 5.00 4.80 virtualization are critical 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 components of a customer’s SOURCE: TB R. Dell HP IBM perceptions of product integrity and value. The movement of more mission-critical applications to the x86 platform has created an increased emphasis on reliability. The ability to simplify installations through virtualization, while improving power consumption and management, are all part of the overall value proposition in the VIRTUALIZATION SATISFACTION HISTORICAL datacenter. Within both categories, IBM TBR ANALYSIS has exhibited greater resistance to 6.30 downward trends experienced by its 5.80 competitors during 2H09, and improving 5.30 SM performances during 2010. IBM subsequently earned TBR’s competitive 4.80 strength standings in two quarters for 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 STUDY HIGHLIGHTS Dell HP IBM energy efficiency and in a total of three SOURCE: TBR. quarters for virtualization solution satisfaction during the past five quarters. IBM is the only competitor to have ever been awarded strengths within these two categories. Systems management became a source of increasing dissatisfaction for x86 server customers during 2009. The effects of these frustrations have been exemplified by ratings declines throughout 2009; however, IBM’s satisfaction scores were again comparatively more resistant to the trends, where TBR competitors’ scores SERVER MANAGEMENT TOOLS SATISFACTION incurred substantial value HISTORICAL ANALYSIS losses. While competitors’ 6.40 6.20 scores rebounded in 2010, 6.00 IBM’s score improvement 5.80 5.60 kept pace with the 5.40 industry, enjoying two 5.20 consecutive quarters of 5.00 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 substantially improved ratings. Dell HP IBM SOURCE: TBR. January 10, 2011 TECHNOLOGY BUSINESS RESEARCH, INC. www.tbri.com P: (603) 929-1166 pg. 4
  • 5. TBR THE ABILITY TO MAINTAIN CONSISTENCY AND STABILITY OF THE SATISFACTION CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES EXPERIENCE DEFINES IBM’S LEADERSHIP STATUS IBM’s continuing domination of the competitive field for the past five reporting periods has been driven by its greater resistance to downward pressures experienced by the competition during 2009, when the Great Recession forced spending cutbacks and customer satisfaction levels suffered. However, during these challenging times, IBM’s satisfaction ratings held steady, which positioned IBM to build upon TBR CORPORATE X86-BASED SERVER WEIGHTED SATISFACTION this solid foundation, as SCORES 2Q09 THROUGH 3Q10 90 customer exuberance began 88 to build with the easing of 86 economic hardships within 84 corporate America. While 82 competitors’ scores improved in 2010, IBM 80 started from a higher 78 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 position, enabling the company to continue to place in the No. 1 ranking from Dell HP IBM SOURCE: TB R. 3Q09 to 3Q10. SM IBM TURNS A POTENTIAL CHALLENGE INTO AN ADVANTAGE BY CONSISTENTLY MEETING SOME OF THE HIGHEST CUSTOMER EXPECTATIONS IN THE INDUSTRY STUDY HIGHLIGHTS IBM customers have typically expressed above-average expectations for x86-based server quality and service; they have been conditioned to do so through their positive experiences with the brand. In the 3Q10 study, IBM customers registered particularly high demands on server reliability, delivery time, technical support, management tools and virtualization solutions. With the way TBR tallies its WSI rating, high expectations that have not been effectively met (low or moderate satisfaction) can have negative implications for the score calculation. Alternatively, a high-expectation category with high satisfaction translates into an advantage. IBM capitalized on high expectation/high satisfaction conditions across the three areas where competitive strengths were awarded in 3Q10 – hardware reliability, delivery time and virtualization solutions. X86-BASED SERVER VENDOR COMPETITIVE GAP ANALYSIS 3Q10 TBR Ease of Doing Delivery Time Manageability Expectation Overall Value Fulfillment Replacement Virtualiz ation Availability Business Server Efficiency Reliability Hardware Parts Energy Support Support On-site Phone 40 60 Exceed s 80 100 Fully January 10, 2011 Meets 120 140 Short of 160 Dell HP IBM SOURCE: TB R. TECHNOLOGY BUSINESS RESEARCH, INC. www.tbri.com P: (603) 929-1166 pg. 5
  • 6. TBR IBM HAS BEEN THE MOST SUCCESSFUL AT ENGENDERING CUSTOMER DELIGHT CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES Achieving customer delight in the scoring (earning as many Perfect 7 ratings as possible) should be the goal of any vendor in any industry. TBR knows that several factors can drive customer enthusiasm, including customers’ need to become periodically energized by the advent of next- generation solutions. While all three competitors introduced new x86 server series in early 2010, and all three simultaneously TBR SATISFACTION WITH HARDWARE QUALITY/RELIABILITY benefitted from resumed server BY CATEGORY, 3Q10 70% spending, IBM appears to have 60% tapped additional methods for 50% driving enthusiasm with its brand. 40% Within the critical category of 30% 20% hardware reliability, IBM earned 10% two-thirds of its scores at the 0% Perfect 7 level of the scale, while <5 5 6 7 competitors were not nearly as SOURCE: TB R. Dell HP IBM effective at encouraging such exuberance. Across all the satisfaction categories in 3Q10, IBM earned an average 35% Perfect 7 ratings versus competitors’ average of 28%. In addition to hardware reliability, IBM instilled a greater sense of SM customer delight versus competitors across the areas of server value, parts availability, ease of doing business, virtualization, management tools and delivery time. STUDY HIGHLIGHTS TBR PROPORTIONS OF DELIGHTED CUSTOMERS BY CATEGORY, 3Q10 70% 60% 50% 40% 30% 20% 10% 0% Delivery Time Overall Value Average Parts Availability Energy Efficiency Ease of Doing Phone Support Management On-site Support Virtualization Quality/Reliability Business Tools H/W Dell HP IBM SOURCE: TB R. IBM’S CONSISTENCY IN MEETING CUSTOMER EXPECTATIONS DRIVES STRONGER CUSTOMER LOYALTY The customer loyalty rating tends to serve as a lagging indicator in TBR’s studies. A competitor that builds a story of customer satisfaction success can expect to see further rewards in its customer loyalty rating. The customer TBR X86-BASED SERVER LOYALTY 3Q08 THROUGH 3Q10 4.6 loyalty rating is a measure of a 4.5 customer’s likelihood to continue to January 10, 2011 4.4 4.3 purchase the brand and advocate for 4.2 4.1 that brand at their organization. While 4.0 this pattern tends to reflect 3.9 3.8 strengthening of the loyalty rating, TBR 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 Dell HP IBM observes that solid loyalty can also be an SOURCE: TBR. TECHNOLOGY BUSINESS RESEARCH, INC. www.tbri.com P: (603) 929-1166 pg. 6
  • 7. TBR indication of market share leadership. In HP’s case, its loyalty ratings have typically dominated the CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES competition, including many times when HP was not a top-ranked contender in the satisfaction competition. IBM’s loyalty success has been more recent, with its strengthening ratings finally reaching parity with HP by 3Q10. TBR believes IBM’s recent success in the loyalty competition resulted from consistently meeting high expectations, even during the difficult year of the recession (2009). Summary TBR’S ASSESSMENT OF IBM’S CUSTOMER SATISFACTION SUCCESS POINTS TO CURRENT STABILITY AND LEADERSHIP AT JUST THE RIGHT TIME TBR believes IBM has benefited in our study by continuing to keep its pipeline of new solutions announcements full and ongoing, despite reduced IT spending patterns in 2009, when the company kept customer interest piqued through continual messaging regarding its fifth generation of enterprise X-Architecture. By the time spending resumed within U.S. corporations, IBM was in an ideal position to move the bar further toward customer delight, as there were no significant customer disappointments with which to grapple. This was not the case with IBM’s competitors, for whom customer dissatisfaction had increased during 2009, forcing these companies to work harder to restore customer confidence. By 2010, IBM enjoyed significantly SM higher numbers of truly delighted customers (i.e., those assigning Perfect 7 ratings to IBM across several categories in the study). STUDY HIGHLIGHTS TBR also recognizes a few additional successes for IBM in the study results that appear to have been rightly timed against market conditions. One has to do with delivery time, which became increasingly relevant in 2010 due to renewed purchasing of current generation x86-based server solutions. IBM remained on top of this challenge by successfully meeting extremely high customer expectations, as these customers anticipated the arrival of new solutions after an extended purchasing drought. IBM’s other noteworthy success in 3Q10 involves the perception of server value. At a time of renewed purchasing, companies are looking at both the price tag and the professed cost-of-ownership calculations, as customers cautiously resume new acquisitions. In spite of the ostensible optimism of 2010, decision-makers remain wary of committing capital expenditures. In the cases of both delivery time and server value, IBM earned significantly higher numbers of perfect satisfaction ratings versus the competition. TBR TBR SATISFACTION WITH SERVER VALUE SATISFACTION WITH DELIVERY TIME BY CATEGORY, 3Q10 BY CATEGORY, 3Q10 50% 60% 40% 50% 30% 40% 30% 20% 20% 10% 10% 0% <5 5 6 7 0% <5 5 6 7 Dell HP IBM Dell HP IBM SOURCE: TB R. SOURCE: TBR. January 10, 2011 TBR believes the manner in which IBM is handling memory expansion, the use of solid state disk drives and systems flexibility play into a simple message of ROI that customers can easily recognize. IBM has spread its focus across every avenue of the value proposition in this market space, hitting upon requirements around power consumption, memory, I/O, networking and essentially the datacenter’s entire fabric. Through all of this, IBM has been successful in TECHNOLOGY BUSINESS RESEARCH, INC. www.tbri.com P: (603) 929-1166 pg. 7
  • 8. TBR articulating its ROI messaging, and has even been perceived as a company with reasonable CORPORATE x86-based SERVER CUSTOMER SATISFACTION STUDIES pricing, a development in TBR’s studies that clearly breaks with the past. As part of its goal to keep customer enthusiasm optimized, IBM continued to broaden its x86 server line in August, by introducing AMD Opteron-based four-socket servers with unique space-saving designs in a 2U form factor. IBM also announced a two-socket Intel Xeon 5600-based server with the lowest cost- per-terabyte in the IBM portfolio. About the Studies In early 1997, Technology Business Research, Inc. decided to take on the responsibility of filling a relatively vacant industry niche by developing and implementing what would ultimately become an industry-standard measurement for PC customer satisfaction. TBR’s goal was to originate a repeatable methodology for tracking end-user customer satisfaction at medium and large North American enterprises on a quarterly basis. The project quickly rose to its current status as a reliable, consistent and timely measurement of customer satisfaction among IT managers. TBR’s Corporate IT Buying Behavior & Customer Satisfaction Studies (published in four separate volumes each quarter covering Desktops, Notebooks, x86-based Servers and Service & Support) have been conducted since the first quarter of 1997. For vendors, distributors, large end-users and the investment community, this program has become the preeminent tactical tool for SM monitoring customer satisfaction from quarter to quarter. These studies have been designed to “grow” with the industry without sacrificing their basic integrity as dependable, objective tracking tools. STUDY HIGHLIGHTS TBR’s x86-based Server Customer Satisfaction studies have been published quarterly since their inception in 1Q97. The 3Q10 study, published in November 2010, was based on the views of 481 x86 server decision-makers at midsized and large corporations in the United States and Canada, representing a total installed base of nearly 650,000 x86-based servers and a purchase intent of over 200,000 units during the next 12 months. About TBR TBR specializes in providing in-depth and timely insights within the computer, software, telecom, mobility and professional services industries. These critical insights can provide value to all levels of your organization: executive, sales, marketing, product and business development, finance, procurement, and others. We deliver this intelligence in a format that is uniquely responsive and tailored to your needs, and we do so as an objective source, which allows you to look at the market from a fresh, impartial perspective. January 10, 2011 XSL03030-USEN-00 TECHNOLOGY BUSINESS RESEARCH, INC. www.tbri.com P: (603) 929-1166 pg. 8