Estimation and comparison of competitors' costs

Abstract

This report estimates the cost per billable employee of the company's competitors in the domestic market. A comparison of IBM's cost with the competitors cost is made to identify areas where IBM has significantly higher costs and to identify options to reduce costs in these areas. The study suggests that IBM has significantly higher costs for IT services, Occupancy and Support services. Overall IBM's costs are significantly higher as compared to its competitors. Though a part of this increase in costs can be attributed to the geographically diverse nature of the company and to its policies, for e.g. Global contracts with AT and T results in a higher bandwidth cost for IBM India vis-a-vis leasing the same bandwidth from a local service provider or the global policy which prevents ownership of leases with periods longer than 5 years results in higher occupancy costs, it also signifies greater percentage of non-billable/support employees and a lower level of automation within the processes employed by the company. Significant cost savings can be achieved by using simpler versions of web based applications for e.g. Lotus Notes Lite in place of Lotus Notes, shifting to local service providers and obtaining long term leases on office space, though it must be considered is that most of these options would make the company's processes and vendors India specific and hence create significant exit barriers for the company.