IBM Corp. is hopeful that the Philippines is on the cusp of economic recovery, and that more local companies will be making IT investments to seize new opportunities.

"The Philippines is in a period of transition," said IBM Philippines president and chief executive officer Jack Hamill, during an exclusive briefing for the Computerworld Philippines editorial team last week. "You go through ups and downs politically and economically, but we've passed the low point, and we're on the cusp. The economic cycle is beginning to turn, confidence is returning, and the government is doing the right things."

IBM Philippines, Hamill said, has reflected the country's economic environment this year, facing serious challenges in the first half, and picking up in the third and fourth quarters.

Services

In particular, Hamill said, IBM's services business has been gaining ground as more and more local companies accept the concept of IT outsourcing.

"Outsourcing is a counter-cyclical activity for most companies," Hamill said. "As business slows, companies want to focus on their core competencies, and usually IT isn't one of them. But it is ours, and we're the dominant player in outsourcing because we offer all the components, from soup to nuts."

Local expertise, Hamill added, is backed by a global network of IT specialists from IBM offices worldwide.

These advantages have enabled IBM to rack up large regional outsourcing clients such as Westpac Bank, Japan Airlines, and Thai Farmers Bank, and local customers such as Procter & Gamble Philippines; Maynilad Water Services, Inc.; and Jollibee Foods Corp.

Hamill emphasized, however, that outsourcing is a global trend that will continue to grow in the IT world. "This isn't happening only because of a weak economy, so this is a very strategic focus for us," he said.

Worldwide, Hamill said, services account for the largest share of IBM's revenue pie, contributing about 40.6 percent in the second quarter this year. "We expect this to surpass 50 percent as we go forward," he added. The local subsidiary shows a similar revenue mix, he said.

At the moment, the bulk of IBM's service contracts in the Philippines are for help desk services, said Jose Ma. B. Gajitos, country manager for delivery operations, IBM Global Services.

"A lot of our customers are concerned with how to support users nationwide. That's one of our strengths, since we provide on-site services. So IT help desk services are complimentary to on-site support, and the bulk of our contracts are there."

Half of IBM Philippines' workforce, or 150 people are involved in services, and 20 of them are focused specifically on outsourcing, Gajitos said.

Gajitos acknowledged that some companies are still reluctant to go into IT outsourcing, but said others are warming up to the idea. "The reluctance stems from a lack of full understanding of what outsourcing means to their business," Hamill said. "It doesn't mean we'll put a whole bunch of people out of work. That's not the way it works. Our IT services include taking over (a customer's) IT department, and that means they become part of IBM."

IBM Global Services, IBM's services division is made up of three businesses -- integrated technology services, strategic outsourcing, and business innovation services.

Integrated technology services encompass business recovery consulting, networking consulting and integration, hardware and support services, business continuity and recovery services, and high availability services.

Business innovation services include e-business consulting, business management services, customer relationship management (CRM) consulting, supply chain management (SCM) consulting, Web application development consulting, and business intelligence.

Strategic outsourcing services includes e-business hosting services, IT outsourcing services, network outsourcing services, and business process management services.

Software

This year, IBM also consolidated various software brands -- including Lotus and Informix -- under the IBM Software Group. Other brands include DB2, Tivoli, and WebSphere. The consolidation, Hamill said, gives IBM the most comprehensive e- business software solutions portfolio today.

"We just integrated Informix effectively last July 1," said Victor M. Silvino, country manager for the IBM Software Group. Silvino said existing Informix customers welcomed the move, since it guaranteed that their investments in the database platform would be protected.

At the same time, Silvino described the database market as tight. "We have a lot of work to do," he said.

In particular, Silvino acknowledged that Oracle is a strong competitor in the local database market, but said IBM would leverage on the best practices from its various software operations to build up both Informix and DB2, which are being marketed as separate products by separate teams.

Silvino also said WebSphere, IBM's software platform for developing and deploying Web applications, suffered a decline in the local market after the dot-com crash last year, but it's building momentum again as companies realize that the Web is still the way to go in the long run. For these companies, Silvino added, WebSphere is a strategic investment.

Another significant development, Silvino said, is IBM's substantial investments in Linux, the free, open source operating system.

"We're still in the education stage. Some key companies have done pilots but have not implemented it company-wide," Silvino said. These pilots, he said, may later pave the way for standardization around Linux.

For his part, Enrique G. Velasco, country channels executive, said IBM's key business partners are using Linux as a way to offer server consolidation. "If you can consolidate a lot of Windows NT servers onto a Linux server, that would significantly lower the total cost of ownership in relation to Microsoft's licensing charges," Velasco said.