Why Buffett Invested in IBM: It’s Not Tech, It’s the Support

by Eloqua on November 14, 2011 in Revenue Performance Management

IBM is enjoying the effect of the “Buffett Bounce,” after the billionaire investor, Warren Buffett, revealed on CNBC Monday that his firm bought more than $10 billion worth of the company’s stock.

The news came as a shock to the industry. Buffett has famously avoided purchasing any investments in tech stocks. Why the sudden interest in Big Blue?

Many will treat Buffett’s investment as a tacit approval of the technology sector, especially the SaaS industry, which has been performing well in the midst of a weak turbulent market. But that conclusion is overly simplistic, skipping over a number of factors that no doubt influenced Buffett’s jump into the sector. Most importantly, it ignores the IBM strength that likely attracted Buffett: it’s deep level of service the company provides.

The succinct reason Buffett has stayed away from investing in tech companies was because he couldn’t understand them – what they offered, the solutions they provided.

Two decades ago, IBM would have been one of these companies. Then a primarily seller of hardware, you needed to be pretty geeky to understand exactly what the company sold. But IBM realized that selling products wasn’t enough, and deepened its commitment to driving customer success.  The company looked at what snags held customers back from achieving the results and proposing sustainable solutions – at times going as far as running aspects of a client’s operations.

(If you want a clear example of this, check out this graphic explaining how IBM identified the source of a client’s issue, suggested technology, implemented benchmarking and provided operational dashboards.)

The result is an easy-to-understand revenue generating strategy even a luddite can get behind. As Buffett put it, IBM is a “company that helps IT departments do their job better”, the kind of solution that “no had ever gotten fired” for selecting.

Obviously, there are pieces of IBM’s business Buffett probably doesn’t concern himself with. What he’s responding to is IBM’s commitment to ensuring customer success. Under that paradigm it’s not enough to simply sell a sophisticated product. You have to provide a stronger level of services and support with the clear mission of seeing the client succeed.

This is what Revenue Performance Management (RPM) is all about. Sure, technology plays an important role in moving the client forward. But RPM goes beyond that to help businesses identify, implement and continually improve upon new revenue opportunities, as well as boost the performance of current revenue cycles.

A revenue performance management provider doesn’t just hand clients a new tool. It gives them a whole new workshop and the education they need to become master craftsmanship.

IBM’s strategy isn’t about tech. It’s about building successful customers. That’s a strategy Buffett can easily understand.

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