IBM NZ Aims to Recoup Massive Losses

AUCKLAND (04/14/2000) - IBM Corp.'s New Zealand subsidiary plans to return to profit this fiscal year after losing more than NZ$100 million (US$49.8 million) in the past four years.

"I think we can get there, though it may take two years," says Australasian CEO David Thody. "We're at a level now where we can start growing the business again. We'll qualify that month by month, quarter by quarter."

IBM has stabilized its headcount at 750 compared to the 1000 staff it has traditionally had.

Thody, a New Zealander who joined IBM in 1979, was appointed to the top job last July. He was previously director of marketing and operations.

"We've reworked the company to focus on e-business and customer needs," he says. "We've taken all our lines of business and given them a strong e-business focus."

A major issue IBM New Zealand has had in recent years is matrix management reporting to Australia. That will still exist but Thody is adamant that the local operation has to have a culture of making decisions and "getting on with it."

"New Zealand can't get caught up in bureaucracy. It stands on its own and has all the delegation to make its own decisions. We have to get people who make decisions in front of the customer. You can't run a business in New Zealand from New York or Sydney."

There have been suggestions within the industry that IBM could resolve its problems in New Zealand by becoming a sales agency. That won't happen, says Thody. "We are committed to the New Zealand market. Abdication is not in my vocabulary."

As part of the e-business strategy, IBM may look at investment in dot-com startups in New Zealand, he says. "I'm not into the new economy versus the old economy; rather, (I'm) into the way companies transact their business."

IBM has pulled its RS/6000 business into the same group as the Sequent purchase, now known as WebSphere, with staff of 35. Thody has one target in mind -- Sun -- which he says is very much the flavor of the day.

He says Sequent has been strong in New Zealand and is "one of the most successful Sequent operations in the world". AS/400 business has also been strong in the past six months and S/390 business remains solid.

As part of reworking the business -- and on the back of the major outsourcing loss at Telecom -- the infrastructure for outsourcing has been consolidated in Auckland.

"We're seeing outsourcing moving away from big deals into the mid-market area," Thody says. "It's very quickly going to Web hosting. The big (outsourcing contracts) are few and far between in New Zealand."

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