Logo

How IBM Became A Multinational Giant Through Multiple Business Transformations

Table of contents, here’s what you’ll learn from ibm’s strategy study:.

  • How an accurate diagnosis of your organization’s most pressing challenge can help you form a coherent strategy to overcome it.
  • How developing your strategic instinct to recognize change early and decisively transforming your business rely on unifying your organization towards a single direction.
  • How focusing on short-term financial gains is putting your long-term survival and profitability in jeopardy.

IBM stands for International Business Machines Corporation and is a multinational technology corporation with over 100 years of history and multiple inventions that are prevalent today. Its headquarters are in Armonk, New York, but it operates in over 170 countries.

Institutional investors own over 55% of IBM, while around 30% belongs to mutual funds, and individual investors own less than 1%. Since 2020, IBM’s current Chairman and CEO is Arvind Krishna.

IBM’s market share and key statistics:

  • Total assets of $28.999B as of September 30, 2022
  • Revenue of $57.35B billion in 2021
  • Total number of employees in 2022: 345,000
  • Brand value of $ 96,992B in 2021
  • Market Capitalization of over $130B as of December 2022

File:IBM Southbank building against March sky.jpg

Humble beginnings: How did IBM start?

IBM was founded in 1911 as the Computing-Tabulating-Recording Company (CTR) in Endicott, New York, United States.

CTR was the product of three and a half amalgamated companies:

  • The Tabulating Machine Company
  • The International Time Recording Company
  • The Computing Scale Company
  • The Bundy Manufacturing Company

The company’s founding was very well-timed. It coincides with the profound shift of the United States’ agricultural economy to an industrial one. At that time, inventions and innovations were introduced at an unprecedented rate, evolving people’s way of life and defining our modern lifestyle.

File:Hollerith census machine.CHM.jpg

The company’s success at these times was due to the wide range of products it offered that were in high demand in industrializing economies from time recording clocks and commercial scales to various mechanical data handling systems, tabulating machines.

But it was CTR’s corporate culture and managerial practices that enabled it to pioneer and serve that demand.

IBM’s scammy and problematic birth

The birth of IBM was the result of the vision and leadership of CTR's first president, Charles Ranlett Flint.

Charles Ranlett Flint sketch

Flint was notorious for combining companies, creating monopolies, and having other people manage them while he simply owned stocks. That’s what he intended to do with the creation of CTR as well.

Here are the companies that formed what later became IBM:

  • In 1900, Flint bought  The Bundy Manufacturing Company , the inventor of the “punch card” that allowed factories to convert working hours into salaries. The company was quite successful due to increased demand from emerging factories and the founder’s acute business skills. Flint merged the company with the International Time Recorder (ITR).
  • ITR  was the core of CTR. By the time Flint created CTR, ITR was already a business group and an established player in selling and maintaining time recorders with an international presence. Flint had bought out almost all of his competitors, effectively creating a mini-monopoly.
  • The next company that formed CTR was the  Computing Scale Company . A marginally profitable company that had created a commercial scale for small merchants like butchers and cheesemakers. It was part of Flint’s vision of mechanical data handling.
  • The fourth and last company that formed CTR was  The Tabulating Machine Company . The main product of the company was the punch card tabulating equipment that automated parts of a manual and very labor-intensive process. It sped up “data entry,” increased accuracy, and reduced costs dramatically. It was Herman Hollerith’s invention, the second founder of CTR.

The merging of these three and a half companies didn’t make “business sense” at the time, nor was it the result of a careful business strategy.

At least not in the way we mean it today. It was a technical scheme that would allow Flint to protect his investment even if one of the companies wasn’t profitable and he had to sell it. Because, as it turns out, ITR was prosperous, and the tabulating business was slowly growing even though it required huge capital reinvestments. But the computing part of CTR was dying.

As a result, the child of this amalgamation was overvalued by twice its actual value.

This inflated value was supported by a loose argument of “economies of scale” since all these businesses were “measuring stuff.” From its very first days:

  • The stock was overvalued
  • The company was heavily in debt
  • There were a lot of internal clashes
  • The three businesses had no synergy
  • There was little attention to innovation
  • The board of directors only cared about profits
  • The customer and employee treatment was poor

In short, IBM was born with some of the worst conditions for any company.

IBM’s coherent business strategy that got it out of the pit

Just three years after its creation, in 1914, the company changed its culture, executive team, and product line.

In ten years, it went through an astounding business transformation.

The move that initiated this transformation was the hiring of Thomas J. Watson Sr. as general manager for the company. The previous leader of the company was simply a credibility mark that Flint had implanted to draw investors. Watson’s influence on the company, however, is so monumental that he is considered the third founder of CTR, who shaped it into IBM.

IBM President Thomas J. Watson 1920s

Watson carried out a series of initiatives that laid the foundation for what would later become America’s largest technology company of the previous century:

  • He built a mighty salesforce and a training program called “Sales School” that every salesperson had to graduate from.
  • He brought clarity of purpose with frequent communication of goals and performance measures.
  • He aligned daily actions with measurable targets that were part of the company’s strategy. He effectively created a culture of execution.
  • He created a new line of products in the data-processing industry.
  • He implemented initiatives to bring people from the three different divisions close together.
  • He improved efficiencies by bringing product developers and manufacturing staff into the same building enabling cross-functional support and information exchange.
  • He cultivated a system of shared beliefs and practices that empowered employees to make decisions that were consistent with the company’s priorities.
  • He trained customers on how to use their products, gaining valuable feedback and ideas.

Watson spent half of his career as a valued employee of the National Cash Register Company (NCR), where he learned everything he knew about running a business. When he came to CTR, he brought all of his knowledge with him. It included: the development of the salesforce, budget and personnel practices, and even some executives that worked for his previous employer.

Watson was a highly motivated, optimistic, and conservative man of principle. During his tenure, CTR grew and consistently developed its product lines to cover a wide range of business machinery.

He took CTR from a scammy amalgamation to a respectable and healthy organization giving it a new name: International Business Machines (IBM).

Key Takeaway #1: Diagnose the challenge and tackle it with a coordinated strategy 

When Watson became general manager, the company was rotten. However, he was ambitious and driven. His approach transformed the firm and affected the company’s journey for many generations. It can be summarized into two distinct steps.

When faced with a crumbling organization:

  • Diagnose the most important challenge. Make an honest  swot analysis . Watson found that CTR had a dying division (weakness), a profitable one (strength), and a promising one (opportunity). He based his approach on these findings.
  • Devise a coherent and executable strategy. Create a strategic plan that addresses this challenge and coordinates resources. Watson applied all his expertise to developing a salesforce to seize the opportunity he found while internally reforming the company.

Watson practically transformed IBM’s culture into an improved copy of NCR’s culture. His experience fitted like a glove in IBM’s challenges. Some could argue that he happened to be a hammer who found its nail. Others that he found a nail and shaped himself into a hammer.

Whatever is true, his results were undeniable.

IBM’s Golden Period: the strategy and tactics IBM used to penetrate the computer industry

IBM went through the Great Depression and came out of it stronger, wealthier, and healthier.

It also went through World War II, which gave the company an explosive push that was hard to maintain once the war ended. IBM’s activities during WWII were plentiful and… complicated. One thing is certain, among the most important initiatives of Watson was the financial support of every IBMer’s family who went to join the fight and the promise that once the war was over, they would regain their job in the company.

As a result, once WWII ended, the company had more than 25% increased workforce at its disposal while a huge part of its revenue-generating business vanished nearly overnight: the military contracts.

Here’s how IBM faced these new challenges.

IBM System 360 Model 30 central processor unit (CPU)

IBM’s corporate strategy against an increased workforce and a vanished revenue stream

Watson recognized the problem from the beginning. His strategy may have been simple, but the flawless execution made all the difference since it wasn’t without obstacles.

The strategy had two key pillars, both focusing on technological advancement:

  • Improve, marginally, current products whose demand was still high. The strategic objective was to expand sales on those product lines to generate immediate cash and keep the business floating.
  • Invest in R&D of advanced electronics, a new technology that wasn’t fully understood nor ready to be commercialized. This was a necessary bet for the future of IBM.

It was obvious to Watson that the company should, one way or another, lead or at least ride a new wave of innovation and technological advancement. And that wasn’t possible with the company’s current product lines, internal structure, and culture.

IBMs Deep Blue, the first computer to win a match against a world champion.

The technological and business transformation that IBM went through was an undertaking that few high-tech companies have managed to pull off. Especially when so many stakeholders’ survival is dependent on the company’s well-being. Shareholders, banks that had provided loans, and employees were all highly incentivized to keep the status quo as is and fight against the transformation. “Since we’re selling, why change?” they thought.

This kind of resistance is typical when industry-reshaping technology emerges. Kodak went through the same but, unlike IBM, succumbed to stakeholder resistance, retained its status quo, and eventually died.

IBM’s strategic pivot faced a list of major challenges:

  • The best minds in advanced electronics were not working at IBM.
  • Advanced electronics was a relatively new industry that nobody could really understand or predict what problems it would solve and what use businesses would find in it.
  • New and strong players emerged while old rivals were still actively competing. Remington Rand was an old and active foe while researchers were leaving universities to start new companies and develop systems for the U.S. Army like ENIAC. The reason was that the US government was issuing funding programs investing millions in this new technology. Whoever demonstrated enough expertise and promise was winning the funding, conducting research, innovating, and reaping the benefits.
  • Sales resisted the new technology, clinging to its old and tested practices and propositions. In other words, sales and engineering weren't aligned. 

The tactics IBM implemented to overcome these challenges and not only survive but also transform as a business in a record time are numerous. Since we can’t really know every single one of them, we’ll go through some of the most important events and principles that enabled the company to devise the solutions it needed.

How IBM overcame the challenges of its strategic pivot

The event that marked IBM’s transformation and sealed its strategic pivot was Watson’s son, Tom, entering the business.

Tom was a bright and ambitious young man who, with the help of his father’s influence and a series of chance events, became IBM’s Executive Vice President at the age of 33.

Tom understood the emerging new technology, and so he led that part of the business. On the other hand, Watson didn’t understand how it worked, so he focused on the more familiar, traditional and still revenue-producing product lines. The two clashed regularly and intensely on many issues. But it’s important to mention that their arguments were never focused on whether IBM needed to transform and adopt advanced electronics. They agreed on that part. They clashed only on the cadence of the transformation and the policies they put in place.

This distinction is crucial because it reveals that the company wasn't divided at its core, the direction everybody moved was the same. The clash between the old and the new was extremely productive because:

  • The company started building critical mass in electronics by reinvesting earnings and rental cash flow. It didn’t rely on government funding, but rather it developed its capacity slowly and safely.
  • In order to catch up with the industry’s velocity with its bootstrapped approach, IBM’s advanced electronics department had to do things differently. So it cultivated a  culture of transparency  and  accountability  where information flowed freely.
  • The  604 Electronic Calculating Punch , the world's first mass-produced electronic calculator, was IBM’s first highly profitable product that came out of this approach.
  • The firm used its active customer network to understand customer needs and prioritize improvements on the data processing machines. Thus it created machines with validated demand.
  • The whole process enabled IBM to create “an infrastructure of knowledgeable customers, salesmen, and servicemen for electronic computers.”

As soon as the 1950s came, IBM entered the electronic computing market and became a highly competitive player. After that, it changed its strategy, took on larger computer projects, and became more dependent on federal funding to offset the associated risk.

It continued to accumulate knowledge and expertise, improving its processes and products.

Key Takeaway #2: Develop your strategic instinct and adapt fast

Develop your ability to recognize change and quickly transform your business to respond to it. To perform a successful business transformation, unite the organization towards a single direction.

If the need for change is clear at the top, it’s a matter of implementation and policies. It’s not easy, but it’s far more successful to lead a united organization than a two-headed one. So when you perform a business transformation:

  • Define the direction or destination as clearly as possible.
  • Align senior leadership with the desired direction.
  • Build guiding policies that take you from the old to the new. Don’t simply kill the old, transform it.
  • Treat the transformation as an idea worth spreading. Take advantage of your strengths and apply the  Law of Diffusion of Innovations .

The decline during the last decade and IBM’s enterprise strategy to return to the top

IBM slowly but surely started shifting its business model again in the late half of the past century and the following decades.

This time, the strategic pivot was more fundamental. The company shifted from “components to infrastructure to business value.” In other words, it shifted from manufacturing computers and new technologies to offering IT consulting and integration services.

This is reflected in its revenue percentages by segment. In 1980, 90% of IBM’s revenue was generated from hardware sales. By 2015, the company was generating over 60% of its revenue from services and less than 10% from hardware sales.

However, the journey wasn’t as smooth as in past transformations.

The challenges of the consulting industry that has left IBM behind in the last decade

The shift, this time, was taking place less effectively.

The company was selling fewer and fewer pieces of hardware each year while its revenues from consulting services weren’t increasing as fast. The company wasn’t investing as much in R&D, and it entered the new era of computing with an extreme focus on financials.

In 2006 and in 2010, the company's leadership announced “Roadmap 2010” and “Roadmap 2015,” respectively. These were financial goals that were mistakenly used as strategic guiding policies. And to the company’s detriment, they dictated decision-making on every level.

Here are key facts that indicate this extreme financial focus was a terrible strategy at the worst timing:

  • IBM’s new CEO, Virginia Marie “Ginni” Rometty, didn’t enjoy employee support. Due to her merciless tactics and her relentless focus to please the stakeholders, employee morale, and thus productivity, was at an all-time low.
  • Revenue was decreasing year over year.
  • “Rebalancing the workforce,” AKA layoffs, became a regular quarterly tactic to make the numbers.
  • Current and ex-IBMers were losing faith and becoming less and less content with leadership.
  • Despite the lack of growth, stocks continued rising, paying dividends and high Earnings Per Share (EPS). That was the result of “financial gimmicks” like massive stock buybacks or stashing assets and profits outside of the US to avoid taxes.
  • Extreme focus on cutting back costs. Using overseas “global delivery skills,” AKA cheaper workers and even docking 10% of salaries to offer training to employees while charging high-end prices for IBM’s services.

But you can only cut costs for so much and save that much. There is a limit to how much cost-cutting you can do until you hurt operations and production. And IBM reached that limit well before 2015, the year “Roadmap 2015” was promising $20 EPS.

By the end of 2014, the company had amassed a huge debt, its hardware profitability had taken a nosedive, its margins had declined, the executive leadership forwent their personal annual incentive payments for 2013, and it abandoned the Roadmap.

To save the company, leadership had to come up with a radically different strategy. And it did. The 5 “imperatives” strategy was much more attractive to all the stakeholders and would prove to be much more effective.

IBM’s 5 imperatives and its strategy to recovering its past glory

IBM’s biggest weaknesses in the first one-and-a-half decade of the current century have been financial performance and strategic blunders.

But if it had no strengths to leverage, then it wouldn’t be alive today. And its size is one of them. IBM is huge. For example, as of 2018, the company employed around 378.000 people and commanded one of the largest collections of PhDs in computer science and technology. IBM generates over $50 billion in revenue annually with consistently large profits. In 2017, the company had over $8 billion in cash.

The “five imperatives'' were a strategy that focuses on actual performance and not financial engineering to be successful.

The five imperatives were:

  • Cybersecurity
  • Cloud computing
  • Social networking
  • Mobile technologies

The company made several acquisitions to close the competitive gap in all of those focuses while it shifted resources to support those initiatives. As a result, it surpassed its competition with  analytics software  and its capabilities to manage and analyze massive bodies of data. With a $2 billion acquisition of SoftLayer, it caught up with  cloud computing  and extended its services to include  cybersecurity.  A partnership with Apple Computer offered the promise of  portable computing and app development  platforms lodged in cloud servers. Finally, IBM offered management consulting as much as software services through its  social networking  focus.

ibm business plan

IBM's Strategy has focused even more in recent years, integrating the imperatives into two major pillars: hybrid computing and Artificial Intelligence (AI).

It puts everything under the umbrella term: Digital Transformation.

IBM’s focus on digital transformation propels it into the future

IBM’s future looks promising, and its strategy is putting it back at the center of computers and technology. In January 2018, the company announced its first quarter of YoY revenue increase since 2012.

ai-powered-autonomous-labs

It focuses once again on delivering value to its customers by addressing the crucial challenges that accompany every digital transformation:

  • Managing the increased complexity of heterogeneous enterprise IT environments.
  • Extracting valuable insights from available data.
  • Sustaining operational competitiveness against disruptive market changes.
  • Increased cyber threats and increasing cost of cybersecurity.
  • A cohesive end-to-end execution of solutions that address all of these matters.

The way IBM addresses these challenges and chooses to differentiate itself is by adopting a platform-centric hybrid cloud approach paired with advanced AI capabilities. The infrastructure relies on Linux, containers, and Kubernetes as the architectural foundation.

In layman’s terms, the value proposition of the company is the sustainable and accelerating transformation of their client’s businesses and processes through:

  • Hybrid cloud that develops ability and speed.
  • Tailored and trustworthy data governance respecting privacy and generating data-driven business insights.
  • AI-driven decision-making that automates enterprise processes.
  • Consistency, security, and compliance.

The company is rapidly growing its ecosystem, enhancing client experience while driving value and innovation with its open-source technologies.

Key Takeaway #3: To succeed long term, focus on developing business capabilities instead of financial returns

Ambitious goals and financial promises are not strategies. They might provide some returns in the short term but ultimately set the company up for future failure. Cutting costs is not an infinite-returns-yielding tactic.

When the industry changes, new trends and technologies emerge, and your competitive advantage won’t be serving you for much longer:

  • Make a thorough analysis of the environment . Spot the most promising emerging trends in technology, customer expectations, and markets.
  • Perform an  internal analysis  to define your strengths, weaknesses, and current capabilities that power your competitive advantage.
  • Develop a strategy  that takes advantage of your current capabilities, develops adjacent ones, and mitigates weaknesses to seize the opportunities you spot.
  • Until your new strategy is performing and your competitiveness relies on it,  ensure cash flow and sustainability  through your current healthy lines of products.

Why is IBM so successful?

IBM’s success over its long history can’t be attributed to a single cause.

In each distinctive phase, IBM demonstrated the qualities that enabled it to thrive and pioneer in technological advancements. One consistent quality that allowed IBM to stand the test of time has been its decisive adaptability, the ability to spot new trends and transform its business in time to lead change.

Its corporate culture of respect and hard work has been the cornerstone of every single one of its achievements.

Growth by numbers

 {{cta('eed3a6a3-0c12-4c96-9964-ac5329a94a27')}}

 FourWeekMBA

The Leading Source of Insights On Business Model Strategy & Tech Business Models

IBM-business-model

How Does IBM Make Money? IBM Business Model In A Nutshell

IBM started in 1911 as the Computing-Tabulating-Recording Company (CTR), called the International Business Machines by 1924. IBM primarily makes money from three segments: Software, Consulting, and Infrastructure.

Table of Contents

IBM history in a nutshell

While in the early 1920s, the company acquired the name that would stick up to these days, IBM operated already by the late 1800s as tabulating equipment for the US census, as reported by computerhistory.org .

Its founder, Herman Hollerith, was an inventor who came up with the tabulating punched-card that enabled automated computations ever since IBM became a major player, they created computers for scientific research and business during the 1960s.

While IBM would play catch up during the PC era, it kept its position as a solid business . In the 1990s, IBM risked being spun off in several units and shut its doors until it got turned around.

As reported by NYTimes in 1995 :

The International Business Machines Corporation reported its first profitable year since 1990 yesterday, with fourth-quarter earnings more than tripling to a level well above Wall Street analysts’ estimates.

It is important to highlight those were very competitive years, as the same article from the NY Times reported:

After being roughly tied with Apple Computer Inc. in 1993 for the title of No. 1 seller of personal computers in the United States, I.B.M. slipped in 1994, falling behind the Compaq Computer Corporation, Apple and Packard Bell Inc. to fourth place.

According to the article, the company’s fall was due to a lack of focus, too many unsuccessful models, and a lousy inventory management system. We might argue indeed that it’s not possible for a company to stay on top of its game for so long.

Yet IBM turned around, and it’s still a strong company as of today.

IBM business model in a nutshell

IBM is one of those companies which is interesting to look at, as it managed to survive wave after wave of IT innovation , and yet, as of today, while playing a role in the enterprise space, IBM is still an important tech player (although not many realize that).

How does IBM make money?

ibm-revenue-breakdown

Software revenue increased from $23.42 billion in 2021 to $25 billion in 2022, resulting in a 6.73% growth year over year.

Consulting revenue grew from $17.84 billion in 2021 to $19.1 billion in 2022, reflecting a 7.08% growth year over year.

Infrastructure revenue rose from $14.2 billion in 2021 to $15.3 billion in 2022, indicating a 7.75% growth year over year.

Financing revenue declined from $0.774 billion in 2021 to $0.645 billion in 2022, showing a -16.67% decrease year over year.

Other revenue experienced a significant drop from $1.12 billion in 2021 to $0.453 billion in 2022, resulting in a -59.55% decrease year over year.

Cognitive solutions

Cognitive Solutions’ revenue of $18,481 in 2018 provides Solutions Software, led by the company’s analytics and security platforms. Within analytics, the company offers a set of products from the Db2 portfolio, including analytics appliances and IBM Cloud Private for Data.

Other services part of that are integrated security and services solutions, like Watson Health and Watson Media & Weather.

Global business services

Global Business Services revenue of $16,817 in 2018, which comprises consulting, led by key offerings in a digital and cloud application. New consulting offerings comprise the company’s digital strategy , like Digital Commerce and CRM offerings, and accelerated growth in next-generation enterprise applications, led by strong demand for consulting and implementation services.

Technology services & cloud platforms

Technology Services & Cloud Platforms revenue of $34,462 in 2018.

IBM innovations

IBM claims to be the enterprise AI leader. This claim is supported by solutions like IBM Watson, which is a key AI tool used by decision-makers in the business world, which comprises several key use cases:

  • AI for customer service.
  • Natural language processing.
  • Build a chatbot.
  • Explainable AI.
  • AI for enterprise search.
  • And AI for contract governance.

As explained on the I BM Watson website , with the AI assistant, you can do things like:

Build a full-service virtual assistant that responds to customers directly on the front end and provides employees and agents with information and resources they need on the back end. Seamlessly automate tasks – from addressing customer requests to guiding employees through internal processes – to allow your teams to focus on higher value work. This is AI customer service with Watson Assistant.

Or use Natural language processing capabilities to:

Natural language processing (NLP) is the parsing and semantic interpretation of text, which allows systems to learn, analyze , and understand human language. With Watson’s suite of NLP offerings, including Watson Natural Language Understanding (NLU), you can surface concepts, categories, sentiment, and emotion, and apply knowledge of unique entities in your industry to your data, no matter where it lives.

Or how the IBM Blockchain helps enterprise customers to build supply chains.

Key takeaways

  • Born around the 1920s, IBM was previously called Computing-Tabulating-Recording Company and it came to life thanks to the inventions of its founder, Herman Hollerith, who came up with tabulating machines for the US Census.
  • Later IBM would be able to revolutionize and dominate the IT space with its family of computers that helped foster scientific research and business .
  • At the same time, IBM lost traction during the 1990s when the PC industry was getting dominated by other key players.
  • The company turned around during the late 1990s and it managed to renew its business model .
  • While IBM still mostly operates in the enterprise space, it managed to innovate in several areas by offering enterprise tools (like IBM Watson and IBM Blockchain) that power up many businesses.

Key Highlights from IBM’s History and Business Model:

  • Early Beginnings: IBM, initially named Computing-Tabulating-Recording Company (CTR), was founded by Herman Hollerith in the late 1800s. It became known as IBM by the 1920s. It started by creating tabulating equipment for the US Census.
  • Innovations in Computing: IBM played a significant role in the development of computers for scientific research and business during the 1960s. It went on to become a major player in the computing industry.
  • PC Era Challenges: While IBM faced challenges during the PC era and lost its top position in the personal computer market, it remained a solid business with a focus on innovation and reinvention.
  • Turnaround and Recovery: IBM turned around its fortunes in the 1990s after facing issues like lack of focus, unsuccessful models, and poor inventory management . The company’s successful recovery was marked by profitable years and renewed business strategies.
  • Diverse Revenue Streams: IBM’s business model is centered around three main segments: Software, Consulting, and Infrastructure. The company generates revenue by offering software solutions, consulting services, and infrastructure-related products.
  • Software and Services Growth: IBM’s software revenue has shown consistent growth , including offerings in analytics, security platforms, digital strategy , cloud applications, and AI solutions like IBM Watson.
  • AI Leadership: IBM positions itself as an enterprise AI leader with its Watson platform. Watson offers various AI capabilities, including natural language processing, chatbots, explainable AI, and AI for customer service.
  • Blockchain Innovation: IBM has ventured into blockchain technology, providing solutions for enterprises to build efficient supply chains and enhance business processes.
  • Enterprise Focus: While many associate IBM with the enterprise space, it continues to innovate and provide essential tools and solutions to power businesses across various industries.
  • Adaptability and Resilience: IBM’s ability to adapt to changing technology landscapes and reinvent itself has been a key factor in its sustained success over the years.

Business Model Explorers

Related visual stories.

Who Owns IBM

who-owns-ibm

IBM Organizational Structure

ibm-organizational-structure

IBM Competitors

ibm-competitors

IBM Revenue

ibm-revenue

IBM Profits

ibm-profits

IBM Revenue Breakdown

ibm-revenue-breakdown

IBM Cost Structure

ibm-cost-structure

More Resources

ibm-cost-structure

About The Author

' src=

Gennaro Cuofano

Leave a reply cancel reply, discover more from fourweekmba.

Subscribe now to keep reading and get access to the full archive.

Type your email…

Continue reading

  • 70+ Business Models
  • Airbnb Business Model
  • Amazon Business Model
  • Apple Business Model
  • Google Business Model
  • Facebook [Meta] Business Model
  • Microsoft Business Model
  • Netflix Business Model
  • Uber Business Model

The Strategy Story

Hybrid Business Strategy of IBM

Founded in 1911, International Business Machines Corporation (IBM) has invented many essential products like the automated teller machines (ATM), floppy disk, and the hard disk drive that have transformed the world. Over a century, IBM has transformed its business, but one aspect remains common: IBM’s business strategy of innovation. 

We live in a digital era of AI and the cloud. Hence it makes perfect sense for IBM to have a business strategy to lead in the hybrid cloud and AI era. In 2021, IBM took dramatic steps to execute that business strategy, strengthening its portfolio and expanding the partner ecosystem. 

IBM now focuses on integrating technology and expertise—from IBM, its partners, and even its competitors— to meet the urgent needs of our clients, who see hybrid cloud and AI as crucial sources of competitive advantage. 

A deeper look at IBM’s business strategy

IBM’s business strategy is focused on helping clients leverage the power of the hybrid cloud and Artificial Intelligence (AI) to resonate with clients who must continually innovate and redefine their businesses with technology. 

Today, IBM has designed a business strategy for accelerated growth while preparing the company for future opportunities. Let’s look at the key elements of IBM’s business strategy.

1. Accelerating Digital Transformation 

A new era of rapid change and disruption is underway. The need for digital transformation has dramatically accelerated due to the pandemic and extends through the core mission-critical business processes of almost all large enterprises. Successful digital transformations face significant obstacles: 

  • Managing increased complexity, as large enterprises use multiple heterogeneous IT environments and clouds
  • deriving value from an explosion of available data, projected by analysts to grow up to three-fold in the next three years, 
  • guaranteeing competitive operations in the context of disruptive changes and worker shortages,
  • addressing the increase of malicious security breaches and the rising cost of cybercrime, and
  • successfully meeting those challenges together with a cohesive end-to-end sustainable execution. 

To address these obstacles, enterprises want technology that provides flexibility with open-source across heterogeneous environments – an approach known as hybrid cloud. 

IBM believes such an approach creates 2.5 times more value for enterprises than a public cloud-only one. Open-source technologies, such as Linux, containers, and Kubernetes, are essential to the hybrid cloud, as they harness millions of developers’ power to accelerate innovation. 

85% of organizations expect to use Linux containers by 2025. Additionally, AI continues to expand as a critical technology to unlock value, with more than 80 percent of enterprises agreeing that intelligent automation can improve business results. 

As AI for production scales, enterprises and governments focus on ensuring AI models are unbiased and trustworthy. 

2. A Differentiated Architecture for Business Innovation 

IBM claims its differentiation derives from a flexible, secure, open hybrid cloud platform, the comprehensive set of assets it impacts, and its ability to combine them to scale up solutions for enterprise digital transformation and mission-critical systems. 

IBM’s value proposition builds on five core capabilities to address clients’ hybrid cloud, and AI needs: 

  • Build and modernize for the hybrid cloud, to develop and operate with speed, consistency, and agility,
  • Create data-driven business insights regardless of where data lives and while maintaining enterprise-grade data governance, privacy and trust, 
  • Automate the end-to-end enterprise processes for effectiveness and efficiency with AI-driven decision-making, 
  • Secure everywhere, with consistent governance and compliance across environments, and 
  • Bring it together by transforming our clients’ businesses and processes into sustainable best-in-class industry practices. 

IBM’s business segment to realize this business strategy

IBM operates in more than 175 countries around the world. IBM’s platform-centric hybrid cloud and AI business strategy are realized through four business segments: Software, Consulting, Infrastructure, and Financing. 

Software: Software brings together IBM’s hybrid cloud platform and our software solutions, optimized for that platform, to help clients become more data-driven and to automate, secure, and modernize their environments.

Consulting: Consulting provides deep industry expertise and market-leading business transformation and technology implementation capabilities. Consulting designs and builds open, hybrid cloud architectures and optimizes key workflows and business processes with IBM and ecosystem partner technologies. Consulting uses its IBM Garage method to convene experts to co-create business products and solutions with clients to accelerate their digital transformations. 

Infrastructure: Infrastructure provides trusted, agile, and secure solutions for hybrid cloud and is the foundation of the hybrid cloud stack. Infrastructure is optimized for infusing AI into mission-critical transactions for accelerated hybrid cloud benefits. Infrastructure also includes remanufacturing and remarketing used equipment with a focus on sustainable recovery services. 

Financing : Financing facilitates IBM clients’ acquisition of information technology systems, software, and services through its financing solutions. The financing arrangements are predominantly for products or services critical to the end users’ business operations and support IBM’s hybrid cloud platform and AI strategy.

How Acquisitions Drive the Business Strategy of New York Times

Strategy and execution .

IBM has set ambitious goals: to strengthen its portfolio, simplify its operations, and broaden its ecosystem. IBM has aligned its offerings with the two most transformational technologies of our time: hybrid cloud and AI. 

IBM’s platform-centric approach starts with Red Hat, which allows clients to develop and deploy their applications on private and public clouds, achieve consistent security across their computing infrastructure, and consume innovation from anywhere. 

IBM’s business strategy is positioned to capture the $1 trillion hybrid-cloud opportunity by enabling clients to access and deploy AI capabilities on IBM’s cloud or those of other major providers.

IBM has expanded its partner ecosystem dramatically, including systems integrators, independent software vendors, service providers, channel partners, and developers to deliver value to IBM’s clients and partners. For instance, 

  • IBM has created new consulting services in collaboration with SAP and co-created an AI-enabled analytics solution with Deloitte. 
  • IBM announced strategic partnerships with Cisco , Palo Alto Networks, and Telus. All focused on 5G, Edge, and network automation.

Using this business strategy, IBM generated $57.4 billion in revenue and $12.8 billion in cash from operations in 2021.

ibm business plan

A passionate writer and a business enthusiast having 6 years of industry experience in a variety of industries and functions. I just love telling stories and share my learning. Connect with me on LinkedIn. Let's chat...

Related Posts

ibm business plan

Revolutionizing Supply Chain Planning with AI: The Future Unleashed

ibm business plan

Is AI the death knell for traditional supply chain management?

ibm business plan

Merchant-focused Business & Growth Strategy of Shopify

ibm business plan

Business, Growth & Acquisition Strategy of Salesforce

ibm business plan

Strategy Ingredients that make Natural Ice Cream a King

ibm business plan

Investing in Consumer Staples: Profiting from Caution

ibm business plan

Storytelling: The best strategy for brands

new york times

Rely on Annual Planning at Your Peril

ibm business plan

Sprinklr Business Model: Managing Unified Customer Experience

ibm business plan

Innovation focused business strategy of Godrej

ibm business plan

Business Strategy behind Pixar Animation Films

ibm business plan

LinkedIn: Redefining its content strategy

ibm business plan

Stitch Fix: Data-Driven Innovation Strategy & Business Model

moderna business strategy model

How Moderna’s Unique Business Strategy Led to Its Spectacular Success

ibm business plan

Amazon: Mastering the art of decoupling & recoupling

Write a comment cancel reply.

Save my name, email, and website in this browser for the next time I comment.

  • Advanced Strategies
  • Brand Marketing
  • Digital Marketing
  • Luxury Business
  • Startup Strategies
  • 1 Minute Strategy Stories
  • Business Or Revenue Model
  • Forward Thinking Strategies
  • Infographics
  • Publish & Promote Your Article
  • Write Article
  • Testimonials
  • TSS Programs
  • Fight Against Covid
  • Privacy Policy
  • Terms and condition
  • Refund/Cancellation Policy
  • Master Sessions
  • Live Courses
  • Playbook & Guides

Type above and press Enter to search. Press Esc to cancel.

Panmore Institute

  • About / Contact
  • Privacy Policy
  • Alphabetical List of Companies
  • Business Analysis Topics

IBM’s Generic Strategy, SWOT Analysis & Strategic Choices

IBM generic competitive strategies, SWOT analysis, strengths, weaknesses, opportunities, threats, cloud computing business analysis case study

IBM (International Business Machines Corporation) is among the world’s biggest technology companies. The company, nicknamed Big Blue, has one of the strongest brands in the computing technology industry, and is one of the biggest employers in the industry. At IBM, strategic choices of top executives favor global expansion and increased outsourcing, while focusing on business operations that have the highest profitability. In global expansion, the company aims to penetrate developing markets. Also, the company outsources its material processing and manufacturing to specialized companies to take advantage of cost-efficiencies. The company also outsources some of its software development to its India group. Thus, IBM’s strategy involves a combination of global expansion and increased outsourcing. This strategy is competitive. The lower production costs help optimize profit margins. Global expansion enables the company to have higher stability. These strategic choices contribute to the firm’s competitive advantages.

The strategic direction of IBM for business competitiveness relates to Porter’s generic strategies and the SWOT analysis model. The company’s strategies are built on organizational strengths directed toward the goals of IBM’s mission and vision . These strengths and corresponding competitive advantages address the company’s weaknesses and the threats to its business. At the same time, these strategies exploit opportunities in the information technology business environment. IBM’s generic competitive strategies have shifted over the years, reflecting the company’s changing emphasis on profitability and the reduction of less profitable business operations.

IBM’s Generic Strategies (Porter’s Model)

  • Main article: IBM’s Generic Competitive Strategy and Intensive Growth Strategies

IBM’s primary generic strategy is cost leadership . In Michael Porter’s model, the generic strategies are what companies use to ensure competitive advantages. In this case, through operational cost-effectiveness, the generic competitive strategy of cost leadership supports IBM’s competitive advantages over other firms, including Intel , Microsoft , Google , and Amazon . Some of the company’s strategic objectives are focused on reducing the costs of production. Cost differences enable IBM to make its prices more competitive and, consequently, make its products more attractive to target customers. Also, the lower costs allow the company to keep a higher profit margin if product prices are maintained. Nonetheless, despite this prioritization for cost leadership, the generic strategy of differentiation continues to play a strategic role in supporting the company’s competitive advantages.

IBM has shifted its generic strategy through the years. Initially, the company used differentiation focus as its generic competitive strategy. Differentiation focus involves differentiation of products through uniqueness or value to customers, while focusing on a specific segment or segments of the market. In this case, IBM’s initial strategy focused on businesses as its target customers, and hence the name International Business Machines. However, as the business grew, the company started emphasizing cost reduction to ensure competitiveness in its current markets. This condition shifted IBM toward using the cost focus generic strategy. Cost focus involves focusing on a segment or number of segments of the market but relying more on cost minimization to ensure competitive advantages. Today, IBM has shifted toward using the cost leadership generic competitive strategy. The company no longer limits its product offerings to businesses as its target customers. For example, in acquiring The Weather Company, PwC Consulting, and SPSS, IBM has broadened its target markets beyond business organizations as clients.

IBM SWOT Analysis

  • Main article: SWOT Analysis of IBM Corporation

Strengths . In the SWOT analysis model, IBM’s strategy successfully capitalizes on business strengths, such as the company’s strong brand and global supply chain. The company has one of the strongest brands in the global information technology industry. In addition, financial capacity is a strength that supports IBM in terms of acquisitions and global expansion. These strengths enable the business to maintain its direction toward further outsourcing of manufacturing, and expansion of services worldwide.

Weaknesses . IBM’s weaknesses reduce business potential for expansion and growth. In recent years, the company has experienced challenges to its financial performance, which analysts associate with competitive rivalry (see Porter’s Five Forces Analysis of IBM ) and the pitfalls of the company’s corporate culture (see IBM’s Organizational Culture or Work Culture ). For example, the company’s cultural approach is criticized for inadequate support for workforce flexibility, which is necessary in keeping the business competitive.

Opportunities . IBM has the opportunity to improve its financial performance through further and aggressive expansion in developing markets. Another opportunity is to use acquisitions to enter new industries and establish new operations that can complement the company’s existing operations. The strategic objective of such further acquisitions should be to enhance existing products and associated operations, and not necessarily to widen the company’s level of business diversification.

Threats . In this SWOT analysis, competition is the main threat to IBM’s business. For example, the company suffers from the aggressive approaches of other technology firms, such as Intel , Google , Microsoft , and Amazon , which have investments in artificial intelligence and offer cloud computing services that compete with IBM’s products. The company continues to experience the forces of even more competitors as more companies are entering the computing technology market. Many of these firms compete with IBM by providing their products online.

  • About IBM .
  • IBM Annual Report .
  • International Business Machines Corporation (IBM) – Form 10-K .
  • Jukka, T. (2023). Does business strategy and management control system fit determine performance? International Journal of Productivity and Performance Management, 72 (3), 659-678.
  • Palomares, I., Martínez-Cámara, E., Montes, R., García-Moral, P., Chiachio, M., Chiachio, J., … & Herrera, F. (2021). A panoramic view and SWOT analysis of artificial intelligence for achieving the sustainable development goals by 2030: Progress and prospects. Applied Intelligence, 51 , 6497-6527.
  • U.S. Department of Commerce – International Trade Administration – Software and Information Technology Industry .
  • Varshney, M., & Jain, A. (2023). Understanding “reverse” knowledge flows following inventor exit in the semiconductor industry. Technovation, 121 , 102638.
  • Copyright by Panmore Institute - All rights reserved.
  • This article may not be reproduced, distributed, or mirrored without written permission from Panmore Institute and its author/s.
  • Educators, Researchers, and Students: You are permitted to quote or paraphrase parts of this article (not the entire article) for educational or research purposes, as long as the article is properly cited and referenced together with its URL/link.

IBM plans to spin off infrastructure services as a separate $19B business

ibm business plan

IBM , a company that originally made its name out of its leadership in building myriad enterprise hardware (quite literally: its name is an abbreviation for International Business Machines), is taking one more step away from that legacy and deeper into the world of cloud services. The company today announced that it plans to spin off its managed infrastructure services unit as a separate public company, a $19 billion business in annual revenues, to help it focus more squarely on newer opportunities in hybrid cloud applications and artificial intelligence.

Infrastructure services include a range of managed services based around legacy infrastructure and digital transformation related to it. It includes things like testing and assembly, but also product engineering and lab services, among other things. A spokesperson confirmed to me that the deal will not include the company’s servers business, only infrastructure services.

IBM said it expects to complete the process — a tax-free spin-off for shareholders — by the end of 2021. It has not yet given a name to “NewCo” but it said that out of the gate the spun-off company will have 90,000 employees, 4,600 big enterprise clients in 115 countries, a backlog of $60 billion in business “and more than twice the scale of its nearest competitor” in the area of infrastructure services.

Others that compete against it include the likes of BMC and Microsoft. The remaining IBM business is about three times as big: it currently generates some $59 billion in annual revenues.

At the same time that IBM announced the news, it also gave some updated guidance for Q3, which it plans to report officially later this month. It said it expects revenues of  $17.6 billion , with GAAP diluted earnings per share from continuing operations of $1.89 , and operating (non-GAAP) earnings per share of  $2.58 . As a point of comparison, in Q3 2019 it reported revenues of $18 billion. And last quarter IBM reported revenues of $18.1 billion. Tellingly, the division that contains infrastructure services saw declines last quarter.

The market seems to like the news: IBM shares are trading up some 10% ahead of the market opening.

The move is a significant shift for the company and underscores a bigger sea change in how enterprise IT has evolved and looks to continue changing in the future.

IBM is betting that legacy infrastructure and the servicing of it, while continuing to net revenues, will not grow as it has in the past, and as companies continue with their modernization (or “digital transformation,” as consultants like to refer to it today), they will turn increasingly to outsourced infrastructure and using cloud services, both to run their businesses and to build the services that interface with consumers. IBM, meanwhile, is in a race competing against the likes of Microsoft and Google in cloud services, and so doubling down on that part of the business is another way to focus on it for growth.

Why is cloud revenue growth so slow if the digital transformation is accelerating?

But IBM, often referred to as “Big Blue”, is also using the announcement as the start of an effort to streamline its business to spur growth (maybe we’ll have to rename it “Medium Blue”).

“IBM is laser-focused on the $1 trillion hybrid cloud opportunity,” said Arvind Krishna, IBM CEO, in a statement. “Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating. Now is the right time to create two market-leading companies focused on what they do best. IBM will focus on its open hybrid cloud platform and AI capabilities. NewCo will have greater agility to design, run and modernize the infrastructure of the world’s most important organizations. Both companies will be on an improved growth trajectory with greater ability to partner and capture new opportunities – creating value for clients and shareholders.”

Its $34 billion  purchase of Red Hat in 2019 is perhaps its most notable investment in recent times in IBM’s own transformation.

With the acquisition closed, IBM goes all in on Red Hat

“We have positioned IBM for the new era of hybrid cloud,” said Ginni Rometty, IBM Executive Chairman in a statement. “Our multi-year transformation created the foundation for the open hybrid cloud platform, which we then accelerated with the acquisition of Red Hat. At the same time, our managed infrastructure services business has established itself as the industry leader, with unrivaled expertise in complex and mission-critical infrastructure work. As two independent companies, IBM and NewCo will capitalize on their respective strengths. IBM will accelerate clients’ digital transformation journeys, and NewCo will accelerate clients’ infrastructure modernization efforts. This focus will result in greater value, increased innovation, and faster execution for our clients.”

More to come.

  • Investment Planning
  • Asset Classes
  • Assets Performance
  • Personal Finance
  • Tax Planning
  • Business Models
  • Inspiring Stories

ibm business plan

Business Model of IBM ~ Business Plan, Revenue Model, SWOT Analysis

' src=

Introduction

International Business Machines Corporation (IBM) is an american multinational company producing and selling computer hardware, middleware and  software , and providing hosting and consulting services in areas ranging from mainframe computers to nanotechnology. The business Model of IBM includes its business plan, revenue model, its competitors, SWOT Analysis and many more.

IBM Russia (IBM Eastern Europe and Asia)

IBM offers a wide range of technology and consulting services; a broad portfolio of middleware for collaboration, predictive analytics, software development, and systems management; and the world’s most advanced servers and supercomputers. Inventions by IBM include the automated tellermachine (ATM), the floppy disk, the hard disk drive, the magnetic stripe card, the relational database, the SQL programming language, the UPC barcode, and dynamic random-access memory (DRAM).

Business Plan

The IBM Company has been providing a lot of services of the clients which make it reliable and dependable at the same time. Ever since its existence, the company has been widely adopted in different countries and has about 175 different branches all over the world.

IBM’s value proposition are-

  • Software to Connect Applications
  • Hardware to deliver specialized business solutions
  • Services to assist companies to deliver IT more efficiently
  • Artificial Intelligence

Some of the other key software of IBM are-

  • Information Management
  • Social Workforce

Revenue Model

Business segments of IBM are actually the main players behind the company’s revenue generation. The key sources of through which business model of IBM makes money are-

  • Hardware Sales
  • Hardware installation and Maintenance
  • SaaS or Software as a Service
  • Annual Outsourcing and Maintenance Contracts

Competitors

There are several brands in the market which are competing for the same set of customers. Below are the top 12 competitors of IBM:

1. Accenture

2. HP Hewlett-Packard

5. Microsoft

6. Salesforce

7. Cognizant

10. Tata Consultancy Services (TCS)

11. Infosys

12. Wipro Technologies

SWOT Analysis

  • Superb Performance in New Markets – IBM has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
  • Strong Free Cash Flow – IBM has strong free cash flows that provide resources in the hand of the company to expand into new projects.
  • Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
  • Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
  • Strong distribution network – Over the years IBM has built a reliable distribution network that can reach majority of its potential market.
  • There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
  • Financial planning is not done properly and efficiently –  The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
  • Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
  • Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of IBM
  • Limited success outside core business – Even though IBM is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
  • Not highly successful at integrating firms with different work culture – As mentioned earlier even though IBM is successful at integrating small companies it has its share of failure to merge firms that have different work culture.

Opportunities

  • Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of IBM.
  • New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for IBM to drive home its advantage in new technology and gain market share in the new product category.
  • Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for IBM to capture new customers and increase its market share.
  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as IBM to increase its profitability.
  • New trends in the consumer behavior can open up new market for the IBM . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
  • Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
  • No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
  • Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
  • Imitation of the counterfeit and low quality product is also a threat to IBM’s product especially in the emerging markets and low income markets.
  • Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
  • Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.

Being one of the oldest tech companies in the world, IBM for sure comprises a business model that can be quite inspiring for those who want to make their own moves in this field. While IBM still mostly operates in the enterprise space, it managed to innovate in several areas by offering enterprise tools (like IBM Watson and IBM Blockchain) that power up many businesses.

Recent Articles

Personal loan options for low cibil score, exploring opportunities in fundamentally strong stocks to invest, unveiling the benefits of free airport lounge access credit cards, explore the 10 best credit cards for shopping online today, safeguarding your transactions with rupay credit cards on upi, related stories, business model of brex ~ business plan, revenue model, competitors, swot analysis, business model of tinder ~ business plan, revenue model, swot analysis, business model of goibibo ~ business plan, revenue model, swot analysis, business model of oyo ~ business plan, revenue model, swot analysis, business model of reddit: reddit’s profit playbook, business model of spotify ~ business plan, revenue model, swot analysis.

© Copyright - Developed by CultNerds IT

  • Share full article

Advertisement

Supported by

IBM Reopens Its Frozen Pension Plan, Saving the Company Millions

The company has stopped making contributions to 401(k) accounts, and instead gives workers cash credits in a new version of its old pension plan.

An illustration of an old computer that's melting, with IBM on the screen.

By Jeff Sommer

Jeff Sommer writes Strategies , a weekly column on markets, finance and the economy.

Traditional pension plans haven’t come back. But the news from IBM might lead you to think so.

Last month, IBM thawed out a defined benefit pension plan that it had frozen more than 15 years ago. The company has also stopped making contributions into employee 401(k) accounts.

These moves are startling, because, on the surface, at least, IBM seems to be reversing a decades-long trend of corporations moving away from traditional pension plans. With the old plans, companies promised to pay employees retirement income that rewarded them for long years of service. But these plans were expensive, and IBM and hundreds of other firms instead began to emphasize 401(k)s that moved the primary responsibility for saving and investing to workers.

IBM’s new approach is significant because the company has been a leader in employee benefit policymaking. What it is doing now is no simple return to the classic cradle-to-grave benefits system. In fact, IBM’s new pension plan isn’t nearly as generous to long-tenured employees compared with its predecessor.

The move has real advantages for some people who work at IBM, particularly those who put little or no money of their own into 401(k)s and who stay at the company for a relatively short while.

Crucially, IBM’s maneuver is likely to be wonderful for its shareholders. The company is saving hundreds of millions of dollars a year by stopping contributions to employee 401(k) accounts. And it doesn’t need to put any money into the pension plan this year — and, probably, for the next few years — because it has plenty of money already in it. On a purely financial standpoint, IBM is improving its cash flow and bottom line.

For a small but important subset of companies — those with fully funded, closed or frozen pension plans — IBM’s move could be a harbinger of things to come, pension consultants say. IBM is using a surplus in its pension fund to simultaneously change its employee benefits package and help the company’s finances.

“You’ll be seeing more of this,” said Matt Maloney, a senior partner at Aon. “But I don’t think it’s really a watershed event because not that many companies are in a position to do what IBM is doing.”

Retirement Basics

IBM calls its new pension plan a “retirement benefit account.” It is nestled, legally and bureaucratically, within the old version. Because it’s part of the defined benefit pension plan, the new plan is backed by the government’s Pension Benefit Guaranty Corporation , which will pay benefits , up to certain limits, if the plan runs out of money or the employer goes out of business.

Unlike 401(k)s, in pension plans the employer makes “the contribution, owns the assets, selects the investments and bears the investment risk,” said Alicia Munnell, the director of the Center for Retirement Research at Boston College.

Employees are immediately vested in the new IBM plan, and can take their money with them when they leave, IBM says. So far, so good.

But for many employees, the change comes at a cost.

IBM will no longer make contributions to employee 401(k) plans. Until now, it made 5 percent matching contributions and 1 percent automatic contributions, according to internal documents that were posted publicly and whose authenticity Jessica Chen, an IBM spokeswoman, confirmed. That money and those accounts are owned by employees. It took a year for employees to be vested in those accounts.

The new retirement benefit accounts are part of a so-called cash balance plan, a pension plan in which the employer controls how the money is invested.

In the new IBM accounts, employees receive credits equal to 5 percent of their salary — 1 percentage point less than the company’s maximum contribution to the 401(k) used to be. For the first year only, employees are getting a 1 percent salary bump to make up for the discrepancy in contributions between the old 401(k) and the new retirement accounts.

Risk and Return

IBM documents show that in the new accounts, employees are guaranteed a return of 6 percent interest for the first three years — an excellent rate under current market conditions.

From 2027 through 2033, the return is likely to fall. Employees will receive the yield on 10-year Treasuries, with a floor of 3 percent. From 2034 on, there is no floor. So if Treasury yields fall below 3 percent — as they were most of the time from late 2008 through early 2022 — a paltry return is all that employees will get.

Remember, in a 401(k), employees are free to invest as they like. People with a long investing horizon can favor the stock market, which tends to produce higher returns than government bonds over long periods.

Although IBM workers can keep their 401(k)s and continue to add money to them, they won’t have the inducement of a company match. How many will continue to contribute remains to be seen. In the new accounts, employees are receiving only fixed-income investments.

That may be fine for people in retirement, but it’s questionable for those with years to come in the work force. Employees may need to increase the equity allocations in their 401(k)s or other accounts.

The Background

At the peak for defined benefit plans, in the 1970s, as many as 62 percent of workers in the private sector were covered solely by these retirement plans, according to the Employee Benefit Research Institute, an independent organization that researches retirement issues.

By 2022, the institute found , only 1 percent of private-sector wage and salaried workers had just a defined benefit plan, while 41 percent participated in only a defined contribution — or 401(k) — plan, and 8 percent participated in both.

Underfunding of corporate pension plans led to the great shift away from defined benefit plans. At first, 401(k)s were supplementary savings vehicles for employees. Now, along with Social Security, 401(k)s have become core elements of retirement.

By closing the old defined benefit plans to new workers and by freezing benefits for people already enrolled in them, companies reduced their potential pension liabilities. They poured money into the old retirement plans to bring them into compliance with government rules, which were relaxed to give companies relief .

But canny management and cooperative financial markets have helped increase plan funding, too. Because pensions are a form of annuities, the increase in interest rates over the past couple of years has made it cheaper to finance existing pensions. On top of that, strong stock returns over the past decade have bolstered fund assets.

These factors have led to a sea change in the funding of the old corporate pension plans. (Public pension plans, on the other hand, face an estimated $1.45 trillion funding gap, according to the Pew Charitable Trusts .) For big companies, the average defined benefit private plan now has more than enough money to pay off its pension obligations. For defined benefit pension plans at S&P 500 companies, Aon says , funding levels rose to 102.7 percent on Feb. 6 from 78.4 percent in 2011.

The Bottom Line

IBM’s defined benefit pension plan is now extremely well funded. Its annual report shows that it had a $3.5 billion surplus in the plan last year, while it paid $550 million annually in 401(k) contributions. It doesn’t need to put fresh money into the pension plan and now, with the shift to the new retirement benefit accounts, it isn’t making 401(k) contributions either.

Professor Munnell estimated that IBM would be able to credit employees with benefits in the new accounts for at least the next six or seven years. Several pension consultants said that if market conditions were favorable, and IBM invested the $3.5 billion surplus at a higher rate of return than the fixed-income rates it was offering employees, it might be able to avoid deploying any cash on these benefits for many years.

The company said its retirement innovation was improving its finances. In an earnings call on Jan. 24, James J. Kavanaugh, IBM’s chief financial officer, said the company’s cash flow was better this year, in part because of “lower cash requirements driven by changes in our retirement plans.” That could be true for years to come.

Other companies with frozen plans that are fully funded could follow IBM’s lead.

This isn’t a return to the richer benefits for long-tenured employees provided by traditional defined benefit plans.

But perhaps cash balance plans combined with 401(k)s are the best that most big companies are likely to be offering. If so, Zorast Wadia , a principal and consulting actuary at Milliman, the pension consultant, suggested, there are a variety of ways of designing retirement packages that make use of pension plan surpluses. Unlike IBM, for example, some companies could continue their 401(k) contributions while starting cash balance plans.

Finding ways to use well-funded pension plans generously but responsibly is a challenge for big companies. IBM has moved cautiously. But it’s in nobody’s interest for companies to make pension promises that they can’t keep.

Jeff Sommer writes Strategies , a weekly column on markets, finance and the economy. More about Jeff Sommer

A Guide to Making Better Financial Moves

Making sense of your finances can be complicated. the tips below can help..

The federal financial aid formula used to give a break to families with two or more children in college at a time. That’s gone now, and some schools may not fill the gap .

Student loan borrowers who have access to a 401(k)-type plan, may soon generate retirement savings contributions from their employer by paying off their loans. Here’s how it works .

Are you trying to improve your credit profile? You can now choose to have your on-time rent payments reported to the credit bureaus  to enhance your score.

Americans’ credit card debt and late payments are rising, and card interest rates remain high, but many people lack a plan to pay down their debt. Here’s what you can do .

When banks close checking and credit-card accounts because of “suspicious activity,” chaos and anxiety ensue. It doesn’t have to be this way .

There are few challenges facing students more daunting than paying for college. This guide can help you make sense of it all .

403: Access Denied

Reference number: 18.85054917.1708272912.2cdd1e1.

CRR logo

Why Did IBM Reopen Its Defined Benefit Plan? Will Others Follow?

Issue Brief by Alicia H. Munnell , Yimeng Yin , and Jean-Pierre Aubry

The  brief’s  key findings are:

  • IBM has reopened its defined benefit plan to use the plan’s surplus – rather than corporate cash – to fund retirement contributions.
  • This shift has been fueled by a more favorable regulatory environment and the improved funded status of defined benefit plans.
  • While using “trapped surpluses” helps the firm, workers may well come out behind unless the gains are shared.
  • Interestingly, the analysis finds that only a handful of other large companies are likely candidates to follow IBM’s lead.
  • Thus, the move should be viewed as a financial maneuver, not a meaningful change in the provision of retirement income.

Introduction 

Enthusiasm seems to be growing to reopen – or at least to stop closing and freezing – defined benefit retirement plans.  The impetus comes from a more benign regulatory environment and the improved funded status of these plans, even before the recent rise in interest rates.  Reopening plans allows employers to use surplus assets, which if reverted to the sponsor would be subject to a 50-percent excise tax in addition to the employer income tax.  The most dramatic manifestation of this enthusiasm for reopening plans has been IBM’s announcement to shift its 401(k) match to an automatic contribution to the cash balance component of its previously frozen defined benefit plan.  

This brief lays out the implications of IBM’s shift for the company and its employees, and speculates about which companies might follow IBM’s lead.  Specifically, the discussion proceeds as follows.  The first section describes the changing regulatory environment and financial status of single-employer defined benefit plans.  The second section provides the details of IBM’s startling move and its implications for both employers and employees.  The third section identifies large overfunded plans that could follow IBM’s lead.  

The final section concludes with two points.  First, plan sponsors clearly gain by putting the “trapped” surpluses to use, but, without some sharing of the gains, employees may well come out behind.  Second, among major companies, only a handful are likely candidates to reopen their defined benefit plans.  The nation’s largest banks lead the list: Bank of America and JPMorgan Chase are particularly well positioned, but Citigroup is also a possibility.  Two non-financial firms – Honeywell International and Deere & Co. – are also potential candidates.  

Regulatory and Financial Developments  

The shift from defined benefit pensions to 401(k) plans has been underway since 1981, but during the 1980s and 1990s this trend reflected a surge in 401(k)s – not the closing of defined benefit plans.  In fact, the 1990s were a great time to sponsor a defined benefit plan.  Growing asset values allowed sponsors to make little or no cash contributions to their pension funds.  By the turn of the century, pension assets amounted to 123 percent of liabilities (see Figure 1). 

Bar graph showing the Top 100 U.S. Corporate Pensions by GAAP Funded Status, 2000-2022

The scene changed dramatically in 2000 when the tech bubble burst and interest rates tumbled, highlighting the mismatch between assets and liabilities.  In response, Congress tightened funding rules in the 2006 Pension Protection Act.  For single-employer pension plans, it first set the period for amortizing all unfunded liabilities at 7 years.  Second, it specified three interest rates to be used for discounting promised benefits.  The rates, called segment rates, depend on when the benefits are expected to be paid – in less than 5 years, 5-20 years, and more than 20 years.  The segment rates are corporate bond yields averaged over the preceding 24 months.

At the same time that Congress tightened funding standards, the Financial Accounting Standards Board changed the reporting requirements, forcing corporations to treat net pension liabilities as debt on their balance sheet.

Shortly after the tightening of funding requirements and the adoption of stricter accounting rules, the stock market and the economy collapsed in the Global Financial Crisis (2007-2009).  With the new provisions, the drop in funded status imposed real costs on sponsoring corporations – their income and balance sheets took a hit, and they faced a sharp increase in required pension contributions.     

In response, corporate sponsors did two things.  First, they changed their plans’ asset mix, which included moving away from equities (see Figure 2) and purchasing bonds that matured as benefit liabilities were projected to fall due (liability-driven investment). 1 See Munnell et al. (2007).   At the same time, they began closing and freezing their defined benefit plans in favor of 401(k)s.  Many defined benefit plan sponsors put themselves on a path to eventually get out of the business altogether.

Line graph showing the Share of Defined Benefit Plan Assets in Corporate Equities, 1980-2023

In the wake of the Global Financial Crisis, two developments made single-employer defined benefit plans more attractive.  First, their finances improved.  The change in asset allocation made them much less vulnerable to market swings, and a rising stock market led to higher asset values.  At the same time, the closing and/or freezing of plans slowed the growth in liabilities.  As a result, the ratio of assets to liabilities increased from a low of 77 percent in 2012 to 96 percent in 2021.  Of course, the spike in interest rates in 2022 – despite poor market returns – boosted funding levels even further.  

Second, Congress provided funding relief.  The first crucial piece of legislation was the 2012 Moving Ahead for Progress in the 21st Century Act, which permitted the market rate established by the 2006 Pension Protection Act to be averaged over the prior 25 years – a period when rates had been significantly higher.  It also established a corridor that set the minimum and maximum rates at 90 percent and 110 percent of the average, respectively.  

The 2012 legislation envisioned the corridor widening over time, which – with market rates significantly below the corridor –  would have decreased the discount rate and increased liabilities and minimum required contributions.  But additional iterations of funding relief prevented this widening from occurring. 2 The Highway and Transportation Funding Act of 2014 delayed the widening until 2018; the Bipartisan Budget Act of 2015 delayed it until 2021; the American Rescue Plan Act of 2021 delayed it until 2026; and the Infrastructure Investment and Jobs Act of 2022 delayed any widening until 2031.   As a result, the rate used to calculate liabilities for funding purposes has been about 200 basis points higher than the “market rate” specified in the Pension Protection Act (see Figure 3). 3 In terms of permissible rates, for 2012-2019 the minimum was 90 percent of the 25-year average of the Pension Protection Act rates, and the maximum was 110 percent.  For 2020 and later, the percentages were narrowed to 95 percent and 105 percent, respectively, and the minimum rate for the 24-month average was set permanently to 5 percent.

Line graph showing the Market Rate and Minimum Permissible Rate for Calculating Required Contributions, 2012-2023

For single-employer defined benefit plans, the second and most dramatic pieces of funding relief were included in the American Rescue Plan Act of 2021.  First, it set a floor of 5 percent on the 25-year average and narrowed the corridor around the average to the range of 95 percent to 105 percent.  This change comes just as the 25-year average was moving away from historically high rates, which would have eliminated the gap between the minimum permissible rate and the “market rate.”  The legislation also permanently increased the amortization period from 7 years to 15 years, which increases the time for underfunded plans to reach full funding.   

A series of three influential articles from JPMorgan  Asset Management argue that the improved financial condition of defined benefit plans – better funded and less risky – and the funding relief have “severed the link” between movements in market interest rates and required pension contributions. 4 See Gross and Buchenholz (2021, 2022, 2023).   Since the fear of large required contributions was a major factor that drove employers away from defined benefit plans, the elimination of contribution risk should lead sponsors to rethink possible ways to use the “trapped assets” in their defined benefit plans.  It seems like IBM was listening to this advice.

What IBM Did and Why

Starting in January 2024, IBM ended its 5-percent matching contribution and 1-percent automatic contribution to employees’ 401(k) accounts in favor of an automatic 5-percent contribution to a “Retirement Benefit Account” for each employee.  The Retirement Benefit Account is the employee’s “notional” account in the cash balance component of the company’s defined benefit plan.  IBM had closed its defined benefit plan to new participants in 2005 and “frozen” benefits – that is, ended new accruals – for existing participants in 2008.  

Cash balance plans are defined benefit plans that retain notional individual accounts until the account is paid out to the individual.  Like traditional defined benefit plans, the employer makes the contributions and bears the investment risk, while the plan fiduciaries manage the investments.  In addition, the plan credits the employee’s account with notional earnings, usually as interest based on the current yield on pre-selected Treasury securities.  Employees receive regular statements and typically can withdraw the balance as a lump sum when they retire or terminate employment.  Unlike 401(k) plans, however, cash balance plans are required to offer employees the ability to receive their benefits in the form of an annuity for the employee’s life or for the lifetimes of the employee and the employee’s surviving spouse.

Historically, IBM had automatically enrolled new employees in its 401(k) plan at 5 percent of salary after 30 days, unless the employee opted out.  After one year, employees then became eligible for IBM’s 5-percent matching contribution and 1-percent automatic employer contribution.  Under the new arrangement, employees receive a monthly credit of 5 percent of pay into their Retirement Benefit Account, with the option to save additional amounts through the company’s traditional or Roth 401(k) plans.  To compensate for the loss of the company’s previous 1-percent automatic employer contribution, IBM increased salaries by 1 percent effective January 1, 2024.

The guaranteed rate of notional earnings for IBM’s new Retirement Benefit Accounts are as follows:

  • first 3 years: 6 percent interest; 
  • 2027-2033: yield on 10-year Treasury, with a floor of 3 percent; and
  • 2034 and beyond: yield on 10-year Treasury. 5 IBM (2023).

What Does This Shift Mean for the Company?  

The most significant benefit of the shift is that it allows IBM to fund retirement contributions with the surplus in its overfunded defined benefit plan rather than with corporate cash contributed to its 401(k) plan.  According to its annual report, IBM held a surplus of $5 billion in its defined benefit plan, while it paid out $530 million annually in matching and automatic 1-percent contributions to the 401(k). 6 The surplus pertains only to IBM’s main defined benefit plan covering its domestic employees – the plan affected by the new arrangement.  IBM’s non-U.S. plans and supplementary plans are excluded from the calculation.  Similarly, 401(k) contributions pertain only to the main domestic plan.   Faced with no funding requirements for its over-funded defined benefit plan, IBM can use the $5 billion surplus in the plan to pay for the 5-percent monthly credits provided to employees’ notional individual accounts for at least the next 10 years – improving its cash flow statement by about $500 million each year. 7 The cost of the monthly pay credits to employees’ notional individual accounts will be affected by two offsetting factors.  On the one hand, eliminating the 1-percent automatic contribution will reduce the required contribution; on the other hand, contributions will be made on behalf of workers who did not participate in the 401(k) plan or take full advantage of the matching contribution.   Eventually, IBM will have to make contributions to the plan out of company money, but good investment performance could help reduce the annual burden. 8 In terms of IBM’s income statement, the impact of the new arrangement should be modest, because the reopened cash balance arrangement creates new pension expenses that replace the 401(k) expenses.   

The drawbacks are modest compared to the gain.  First, regular actuarial analyses and annual premiums to the Pension Benefit Guaranty Corporation make defined benefit plans more expensive to operate than 401(k)s.  Second, the IBM plan will have to provide the interest credits to participants’ notional accounts, which, as noted, will amount to 6 percent in the short run.  These payments are not necessarily linked to the investment performance of the assets, which will require some hedging effort on the part of IBM.  Third, the reduction in the plan’s surplus to fund the monthly pay credits will show up as a negative adjustment in the company’s financial statements.  Eventually, IBM will have to make some funding contributions, but the payment schedule will be much more flexible than the annual contributions to the 401(k) plan.  Alternatively, at that point, the company could just re-freeze the DB plan and revert to the earlier pattern of making cash contributions to the 401(k) plan.  In either case, the company clearly comes out ahead. 

What Does This Shift Mean for Employees?  

While IBM clearly gains from this maneuver, its employees may well lose.  On the positive side, employees not participating in the current 401(k) or not maxing out the employer match will definitely gain, but the gains here would be very small since 97 percent of workers at IBM participate in the 401(k).  Similarly, the ability to receive lifetime benefits – provided at very low cost – could alleviate some of the challenges associated with withdrawing 401(k) balances and purchasing an annuity.  But the gains here depend on how many participants opt for the lifetime benefit as opposed to the lump sum, and also – as in the case of an annuity purchased with 401(k) dollars – the value of lifetime income depends crucially on what happens on the inflation front.  In short, the potential gains for employees are modest.

In contrast, the potential losses for employees are meaningful.  First, if employees do not adjust the asset composition of their 401(k) contributions, they will have too much of their assets in fixed-income investments.  After the higher initial guarantee, IBM will provide credits equal to the yield on Treasuries.  If the company’s 5-percent contribution had gone into the 401(k) instead, it would earn the return on a mix of stocks and bonds – presumably higher.  In addition, without a match, employees may well cut back on their 401(k) saving and end up putting less aside for retirement.  On balance, employees are likely to come out behind.  

A simple simulation can provide some sense of how the employee’s behavioral response can affect the outcome.  The analysis focuses on a new employee who is age 30 in 2024 and retires at 65. 9 The model runs 10,000 times with normally distributed equity returns; the results are reported for the 50th percentile in terms of outcomes.  Annual equity returns are assumed to have an arithmetic mean of 8.2 percent and a standard deviation of 16.2 percent, based on the U.S. large-cap stock assumptions from the Long-Term Capital Market Assumptions Matrices (JPMorgan Asset Management 2024).  The projected yield on the 10-year Treasury is 3.8 percent, based on assumptions from the Congressional Budget Office (2023).  This assumption is also used for bond returns, which is conservative and therefore understates the potential loss from IBM’s shift.  The calculations assume the total balance of the employee’s 401(k) and cash balance accounts is used to purchase a life annuity upon retirement.  For simplicity, the 1-percent automatic contribution and the 1-percent salary increase, which largely offset the impact of each other, are not modeled.  Without IBM’s switch, this employee contributing 5 percent to the 401(k) plan and receiving the 5-percent matching contribution – assuming a portfolio of 60-percent equities and 40-percent bonds – would have a replacement rate of 31 percent from the IBM plan at retirement.  If the employee now saves 5 percent in the 401(k) invested 60/40 in equities and bonds and 5 percent in a cash balance plan with IBM’s design (the 10-year Treasury except for guaranteed returns in the early years), the replacement rate drops to 25 percent.  If the employee rebalances and puts all his 401(k) assets in equities, the replacement rate recovers, but not all the way back because the ratio across both plans is 50/50 not 60/40.  Finally, the employee can decide to save less in the absence of an employer match.  If the employee cuts the 401(k) contribution to 3 percent, and does not rebalance, the replacement rate drops to 19 percent.  The important point is that all the potential outcomes for the employee are lower than under IBM’s previous arrangement (see Figure 4). 10 The simulation results also suggest that the new arrangement only provides modest protection against the possibility of long-term market underperformance.  Even with rebalancing, the model shows only a one-in-seven chance that the employee would have a higher replacement rate at 65 under the new arrangement, and the differences are typically small.

Bar graph showing the Replacement Rates for IBM Employees under Alternative Scenarios 

Will Others Follow?

Will other corporate sponsors follow suit and reopen their defined benefit plan?  As discussed, IBM’s gain comes from using the surplus in its overfunded defined benefit plan to improve its cash flow by reducing its ongoing retirement contribution costs.  Accordingly, a potential follower should have: 1) a large defined benefit surplus that can be put to use; and 2) large 401(k) contributions that, once saved or reduced, can significantly improve the company’s cash flow.  In addition, an existing cash balance component in the current closed/frozen plan may make the transition easier, and a plan that covers non-unionized employees would avoid the need for negotiations.   

The analysis started by looking at the 45 U.S. companies with defined benefit obligations of more than $10 billion. 11 These 45 companies collectively accounted for 56 percent of total corporate defined benefit obligations in 2022.  The analysis only considers qualified defined benefit plans for U.S. employees, excluding non-qualified plans (not subject to ERISA/Pension Protection Act funding rules and typically offered only to highly compensated employees) and foreign plans.  The Projected Benefit Obligation reported in 10-K financial statements is used to determine plan size.   Narrowing the focus to closed/frozen plans with a funded ratio over 100 percent resulted in eight companies.  These companies, ordered by their funded ratios, are shown in Table 1.  The table also includes the surplus in the company’s defined benefit plan, contributions to the company’s 401(k) plan, and two measures that might provide an incentive to consider IBM’s approach – the defined benefit surplus relative to shareholders’ equity and 401(k) contributions’ relative to annual cash flow.  Not surprisingly, IBM ranks high on both incentive measures.  All companies except Ford have a major cash balance component in their plans. 12 Ford’s cash balance plan only covers about 1 percent of its total defined benefit plan participants.

Table showing the corporate sponsors of large overfunded closed/frozen defined benefit plans, 2022

On the top of the list are the nation’s two largest banks – Bank of America and JPMorgan Chase.  The sheer dollar amount of their pension surpluses may trigger serious consideration of potential alternative uses.  Also, these companies made large 401(k) contributions both in dollar amount ($1.2 billion and $1 billion, respectively) and as a share of their annual cash flow (4.2 percent and 3.6 percent, respectively).  These numbers imply that the potential gains from reopening their defined benefit plans could be even greater than IBM’s.  Citigroup, the fourth largest U.S. bank, is also on the list with a funded ratio of 110 percent, although its defined benefit surplus and 401(k) contributions are much lower than the top two.  As few financial sector employees are unionized, these banks would have great discretion in setting plan provisions if they decided to reopen the cash balance component of their defined benefit plans.

Honeywell International and Deere & Co., which are third and fourth on the list, face a situation similar to IBM’s in terms of the relative sizes of their surpluses and 401(k) costs.  Deere & Co. may not take further actions anytime soon as it just closed its defined benefit plan for salaried employees to new hires in January 2023 and greatly enhanced its 401(k) matching rate. 13 According to the Form 5500 filings – effective January 1, 2023 – Deere & Co.’s 401(k) matching contribution became 300 percent for the first 2 percent and 100 percent of the next 4 percent contributed by the employee.  The implied maximum employer match of 10 percent is much higher than the maximum match of 6 percent before 2023.   However, down the road, a rapid increase in 401(k) costs could trigger a reconsideration of the defined benefit option.  

General Motors and Ford seem unlikely to follow IBM in reopening their barely fully funded defined benefit plans.  Restoring their defined benefit plans was actually on the list of demands of the United Auto Workers during the strike in 2023, and the automakers rejected it.  Instead, the auto companies agreed to increase their 401(k) contributions from 6.4 percent to 10 percent of pay with no required employee contributions.  Although General Motors and Ford are likely to see increased 401(k) contributions in coming years, they just do not have the defined benefit surplus needed to adopt IBM’s approach.

Overall, the big banks – Bank of America, JPMorgan Chase, and maybe Citigroup – and two nonfinancial companies – Honeywell International and Deere & Co – are the most likely candidates to reopen their defined benefit plans.   

Conclusion 

IBM’s shift to reopen its defined benefit plan for retirement benefits is a significant development in the world of pensions.  It is a financial maneuver, however, that allows IBM to fund retirement contributions with the surplus in its overfunded defined benefit plan rather than corporate cash; it is not a meaningful change in how the private sector provides retirement income.  The move has been fueled by a more favorable regulatory environment and the improved funded status of these plans.  While tapping “trapped “surpluses” benefits the company, employees face less flexibility in their investment options and likely lower replacement rates.  Only a handful of other large companies are positioned to follow IBM’s lead.  The nation’s largest banks head the list: Bank of America and JPMorgan Chase are particularly well positioned, but Citigroup is also a possibility.  Two non-financial firms – Honeywell International and Deere & Co. – are also potential candidates.

Congressional Budget Office. 2023. The 2023 Long-Term Budget Outlook . Washington, DC.

Gross, Jared and Mike Buchenholz. 2023. “Pension Defrost: Is It Time to Reopen DB Pension Plans—or at Least Stop Closing and Freezing Them?” Report. New York, NY: JPMorgan Asset Management. 

Gross, Jared and Michael Buchenholz. 2022. “The Roadmap to Pension Stability.” Report. New York, NY: JPMorgan Asset Management. 

Gross, Jared and Michael Buchenholz. 2021. “Rethinking the Pension Plan Endgame: Hibernation, Termination or Stabilization?” Report. New York, NY: JPMorgan Asset Management. 

IBM. 2023. “IBM Benefits 2024 IBM U.S. Benefits Guide.” Armonk, NY. 

Internal Revenue Service. 2024. “Pension Plan Funding Segments.” Washington, DC.

JPMorgan Asset Management. 2024. “2024 Long-Term Capital Market Assumptions.” 28th Annual Edition. New York, NY.

Munnell, Alicia H., Mauricio Soto, J.P. Aubry and Christopher J. Baum. 2007. “Why Are Companies Freezing Their Pensions?” Working Paper 2007-22. Chestnut Hill, MA: Center for Retirement Research at Boston College. 

Securities and Exchange Commission. 2023. Financial Statements filed by various companies . Washington, DC.

U.S. Board of Governors of the Federal Reserve System. Financial Accounts of the United States , 1980-2023. Washington, DC.

  • 1 See Munnell et al. (2007).
  • 2 The Highway and Transportation Funding Act of 2014 delayed the widening until 2018; the Bipartisan Budget Act of 2015 delayed it until 2021; the American Rescue Plan Act of 2021 delayed it until 2026; and the Infrastructure Investment and Jobs Act of 2022 delayed any widening until 2031.
  • 3 In terms of permissible rates, for 2012-2019 the minimum was 90 percent of the 25-year average of the Pension Protection Act rates, and the maximum was 110 percent.  For 2020 and later, the percentages were narrowed to 95 percent and 105 percent, respectively, and the minimum rate for the 24-month average was set permanently to 5 percent.
  • 4 See Gross and Buchenholz (2021, 2022, 2023).
  • 5 IBM (2023).
  • 6 The surplus pertains only to IBM’s main defined benefit plan covering its domestic employees – the plan affected by the new arrangement.  IBM’s non-U.S. plans and supplementary plans are excluded from the calculation.  Similarly, 401(k) contributions pertain only to the main domestic plan.
  • 7 The cost of the monthly pay credits to employees’ notional individual accounts will be affected by two offsetting factors.  On the one hand, eliminating the 1-percent automatic contribution will reduce the required contribution; on the other hand, contributions will be made on behalf of workers who did not participate in the 401(k) plan or take full advantage of the matching contribution.
  • 8 In terms of IBM’s income statement, the impact of the new arrangement should be modest, because the reopened cash balance arrangement creates new pension expenses that replace the 401(k) expenses. 
  • 9 The model runs 10,000 times with normally distributed equity returns; the results are reported for the 50th percentile in terms of outcomes.  Annual equity returns are assumed to have an arithmetic mean of 8.2 percent and a standard deviation of 16.2 percent, based on the U.S. large-cap stock assumptions from the Long-Term Capital Market Assumptions Matrices (JPMorgan Asset Management 2024).  The projected yield on the 10-year Treasury is 3.8 percent, based on assumptions from the Congressional Budget Office (2023).  This assumption is also used for bond returns, which is conservative and therefore understates the potential loss from IBM’s shift.  The calculations assume the total balance of the employee’s 401(k) and cash balance accounts is used to purchase a life annuity upon retirement.  For simplicity, the 1-percent automatic contribution and the 1-percent salary increase, which largely offset the impact of each other, are not modeled. 
  • 10 The simulation results also suggest that the new arrangement only provides modest protection against the possibility of long-term market underperformance.  Even with rebalancing, the model shows only a one-in-seven chance that the employee would have a higher replacement rate at 65 under the new arrangement, and the differences are typically small.
  • 11 These 45 companies collectively accounted for 56 percent of total corporate defined benefit obligations in 2022.  The analysis only considers qualified defined benefit plans for U.S. employees, excluding non-qualified plans (not subject to ERISA/Pension Protection Act funding rules and typically offered only to highly compensated employees) and foreign plans.  The Projected Benefit Obligation reported in 10-K financial statements is used to determine plan size.
  • 12 Ford’s cash balance plan only covers about 1 percent of its total defined benefit plan participants.
  • 13 According to the Form 5500 filings – effective January 1, 2023 – Deere & Co.’s 401(k) matching contribution became 300 percent for the first 2 percent and 100 percent of the next 4 percent contributed by the employee.  The implied maximum employer match of 10 percent is much higher than the maximum match of 6 percent before 2023.

Laptop computer displaying logo of IBM

Munnell, Alicia H., Yimeng Yin, and Jean-Pierre Aubry. 2024. "Why Did IBM Reopen Its Defined Benefit Plan? Will Others Follow?" Issue in Brief 24-4. Chestnut Hill, MA: Center for Retirement Research at Boston College.

Exterior view of the French headquarters of IBM

What Is IBM Doing with Its Retirement Plans? And Why?

MarketWatch Blog by Alicia H. Munnell

Piggy bank, gavel and calculator on a table

Has “Funding Relief” for Private Sector Defined Benefit Plans Gone Too Far?

businessman shouting in megaphone, showing personal opinion

Suddenly Everyone’s Talking about Defined Benefit Plans

Privacy overview.

ibm business plan

9 Top Predictive Analytics Tools (2024)

ibm business plan

A good predictive analytics tool can transform the way you plan for events and opportunities in business.

Whether you're interested in using machine learning to manipulate data or you're in need of a no-code tool, the nine options on this list are some of the best predictive analytics software programs on the market today.

1. IBM SPSS

IBM SPSS is a predictive analytics and data mining tool.

undefined

It includes several different tools for analyzing data, including the SPSS modeler. The modeler is a drag-and-drop interface that lets anyone predict future outcomes related to:

  • Supply chains
  • Business operations
  • Crime prevention

SPSS will automatically transform your data into the best-fit formats for predictive analysis and modeling—including charts and other visualizations, so your findings are easy to share with others.

And because no coding languages are required to use the SPSS modeler, it's a good option for many corporate users.

How Much Does IBM SPSS Cost?

SPSS pricing is customized based on your needs, so you'll have to contact IBM for a quote.

IBM SPSS: Pros and Cons

  • SPSS offers some drag-and-drop functionality that makes it functional for a wider range of users
  • It's suitable for use in a wide range of industries and applications
  • While you can connect a number of data sources to the tool, it isn't truly open source—so it won't have quite the level of flexibility as some other services in our guide
  • SPSS pricing isn’t based on usage, so it may not be a good choice for users that need to tap into the tool on occasion versus every day

2. SAP Analytics Cloud

SAP Analytics Cloud is a self-service, cloud-based modeling tool that integrates with the SAP Business Technology Platform.

undefined

If your company is already storing data in other SAP tools, you can use Analytics Cloud to consolidate that information and:

  • Simulate different business scenarios
  • Convert simulations into actions within the SAP suite of tools
  • Use machine learning capabilities to automate processes
  • Create data visualizations and reports from large or small data sets

The Analytics Cloud comes complete with prebuilt business dashboards. Simply connect your business data sets and begin predicting, visualizing, and modeling information.

It's a nice touch that makes the tool more accessible to users who are just beginning to explore predictive analytics.

If you aren't using SAP products to power other areas of your business, though, you'll be better suited by another tool on this list.

How Much Does SAP Analytics Cloud Cost?

SAP Analytics Cloud costs $432 per user, per year. The company requires that its subscribers purchase a minimum of five user seats.

SAP Analytics: Pros and Cons

  • The platform integrates seamlessly with other SAP products
  • Prebuilt business dashboards make it easy to get started, even with minimal experience in predictive analytics
  • To get the most out of this tool, you'll need to be using other SAP products across your operations
  • Users must purchase a minimum of five licenses, so it's not a great choice for independent consultants or very small teams

3. Microsoft Power BI

Power BI is a suite of business intelligence tools and connectors that let you manipulate and model data from Microsoft applications.

undefined

You can use Power BI to access, analyze, and create predictions from data stored in a corporate data warehouse, an on-premises server, and even an Excel spreadsheet.

There are many different ways you can use Power BI, including creating visualizations, shareable dashboards, and reports. And if you're comfortable working with machine learning models, you can use Power BI to generate predictions.

Power BI will walk you through the process of setting up and training a predictive model—but you'll still need to be comfortable working with machine learning applications and code repositories like GitHub. This makes it a good choice for experienced data analysts, but not casual business users.

How Much Does Microsoft Power BI Cost?

To unlock Power BI's advanced predictive modeling features, you'll need a premium subscription that costs $20 per user, per month.

Microsoft Power BI: Pros and Cons

  • You can use PowerBI for predictive analytics even if you're working with small data sets in Excel; access to large data lakes isn't required
  • The platform is very customizable, so you can use it in a wide variety of ways—and change the way your data predictions are compiled and visualized
  • Because PowerBI is so customizable, you will need to be familiar with machine learning algorithms and related code
  • If your organization doesn't use Microsoft to manage most of its data and documents, you may not find PowerBI to be as useful as some other tools in our guide

4. Spotfire

Spotfire (formerly TIBCO Spotfire) is a self-service data analytics platform.

undefined

It supports predictive analytics, data visualization, and dashboard creation for business use.

Companies using Spotfire rely on the tool to help them predict things like:

  • When production equipment may break down or require repairs
  • If consumer retail demand will spike at certain times during the year
  • How ongoing business operations may be impacted by an anomaly
  • Which transit routes are least likely to experience bottlenecks

Spotfire stands apart from many other predictive analytics tools in that it's suitable for both new and experienced users alike. The platform offers point-and-click, no-code configuration—you don't have to be a developer to analyze data and create predictive insights.

How Much Does Spotfire Cost?

Spotfire pricing is customized based on the number and type of user licenses you require. The company offers a 30-day free trial so you can test out the product; after that, you'll need to request a custom price quote.

Spotfire: Pros and Cons

  • No-code configuration options make it possible for anyone to begin leveraging predictive analytics in their business
  • You can pull in data from a wide range of sources, great for both modeling predictions and visualizing data
  • Spotfire doesn't offer the same level of complete AI and ML configuration as some other predictive analytics tools on the market
  • There isn't any free access to the platform—you'll have to pay a subscription fee after your trial ends

Tableau is a visual analytics and data analysis platform.

undefined

You can use the tool to create various "what-if" scenarios and potential outcomes. This is useful for things like:

  • Predicting product sales by quarter
  • Preparing for potential increases in transit demand
  • Analyzing customer insights by season
  • Modeling business expansion opportunities by region

Like Spotfire, Tableau includes drag-and-drop tools that make it easy to adjust your predictive models and visualize data.

You can use Tableau to analyze data from a variety of sources, including cloud and on-premises data storage. The tool also integrates directly with the Salesforce CRM—so if you're already in the Salesforce ecosystem, Tableau could be a good choice.

How Much Does Tableau Cost?

Tableau pricing starts at $42 per user, per month when billed annually. You can add additional view-only licenses for $15 per user, per month when billed annually.

Tableau: Pros and Cons

  • Tableau includes drag-and-drop tools for no-code dashboard creation and data visualization
  • View-only licenses make it a cost-effective option for consultants and large teams
  • The platform isn't quite as open and customizable as Power BI and some other predictive analytics tools
  • Customers of non-Salesforce CRMs may not find Tableau as useful for sales predictions

6. Oracle Analytics

Oracle Analytics is a data platform that uses machine learning algorithms to create predictive models.

undefined

The software includes algorithms for:

  • Classification and regression trees
  • Logistic regression
  • Binary clustering

Once you choose your model of choice, you can use Oracle Analytics to train it on a dataset. The final, trained model can then be applied to other datasets that you want to use for predictions.

Using the Oracle platform requires more data and machine learning experience than when using Spotfire's no-code interface. Some users may find Oracle easier to use than IBM Watson Studio and Power BI, though, both of which require more hands-on work with algorithms and code.

How Much Does Oracle Analytics Cost?

You can use a limited number of Oracle Analytics features and computing hours each month for free.

To utilize all of the platform's features, though, you'll need to contact Oracle and discuss custom pricing based on your needs.

Oracle Analytics: Pros and Cons

  • Users can access a portion of the platform for free every month
  • Oracle provides a selection of trainable machine learning algorithms to get users started right out of the box
  • While there are starter algorithms, Oracle Analytics is not a completely drag-and-drop no-code tool
  • Oracle's pricing for heavy users isn't transparent and publicly available

7. Alteryx Designer

Alteryx Designer is an AI-powered enterprise analytics platform.

undefined

You can use Alteryx Designer to develop predictions based on all kinds of data—from sports team performance to email open rates or sales revenue.

Alteryx lets you pull in data from a long list of sources, including:

  • Adobe analytics
  • Amazon Redshift
  • Google Analytics
  • Microsoft Azure Data Lake Store

You can even pull in data from CSV spreadsheets, text documents, and XML files.

Alteryx designer includes drag-and-drop tools that let users create predictions and workflows without writing any code. If you're comfortable working within the R software environment , though, you can take your data analysis even further.

How Much Does Alteryx Cost?

Access to Alteryx Designer starts at $4,950 per user, per year for cloud software and requires a minimum of three user licenses. A desktop version is also available for $5,195 per user, per year.

Alteryx: Pros and Cons

  • Alteryx Designer lets you leverage machine learning to automate data analysis and predictions
  • Drag-and-drop tools let anyone create predictions from data without code
  • one more con here
  • Minimum user licensing requirements can make Alteryx an expensive choice for smaller teams

8. IBM Watson Studio

IBM Watson Studio is an AI tool that uses deep learning and neural networks to find patterns.

undefined

You can leverage this pattern analysis to create predictions with data from a wide range of sources. To do this, though, you'll need to be familiar with at least one of the following:

  • Jupyter notebooks

This makes Watson Studio a better fit than SPSS for data scientists interested in the IBM ecosystem.

And if you're comfortable with the way Watson Studio works, you can use it to analyze and visualize data from an array of sources.

You can either train a machine learning model yourself or use one of the pre-trained text analysis models provided by IBM as part of a Watson Studio account.

How Much Does IBM Watson Studio Cost?

Watson Studio pricing is based on usage. Using the tool's resources for less than 10 hours a month may be free for some users; heavier resource consumption costs $1.02 per hour.

IBM Watson Studio: Pros and Cons

  • Watson Studio lets you leverage neural networks to dig deep into data and uncover patterns and insights you may not get from other tools
  • You can get started quickly with AI automation tools and a selection of pre-trained models that use natural language processing (NLP)
  • You'll need to be comfortable working with machine learning algorithms in order to use Watson to its full extent
  • There's no drag-and-drop tool option in Watson Studio—for that, you'll need to stick with an alternative like IBM SPSS or Spotfire

KNIME is a no-code, open source analytics platform.

undefined

The platform connects to over 300 data sources, including:

  • MySQL databases
  • Google applications via REST API

Once you bring your data into KNIME, you can then use drag-and-drop nodes and connectors to create workflows. Each node is a single step—and when you combine these steps, the program can:

  • Read and sort data
  • Create decision trees
  • Predict future trends
  • Analyze large data sets

You don't need any prior data, statistics, or predictive analytics experience in order to use KNIME.

How Much Does KNIME Cost?

KNIME is free to use—you can build workflows and collaborate with others at now cost. In order to gain more control over the ways in which you collaborate with others in KNIME, you'll want to subscribe to a Teams plan for $285 per month.

KNIME also offers a Business Hub plan that allows users to turn workflows into apps and services. Business Hub access starts at $39,900 per year.

KNIME: Pros and Cons

  • KNIME is a free, open-source download
  • No coding knowledge is necessary—drag-and-drop modules make it easy to build workflows
  • You will need to build all of your workflows—there aren't any starter dashboards right out of the box
  • It's only a drag-and-drop tool, so advanced analytics users interested in coding will want to look for another platform

When it comes to working with big data, finding a predictive analytics solution is just one part of the process. Check out our continually updated guide to the key big data trends you need to know this year—and see how tapping into automations, trends, and more can help you scale your data usage.

Find Thousands of Trending Topics With Our Platform

newsletter banner

  • Back to stores
  • Find a Verizon Store
  • Request a Store Appointment
  • Australia (eng)
  • Deutschland (de)
  • France (fr)
  • Great Britain (eng)
  • Netherlands (eng)
  • Singapore (eng)
  • Business Unlimited

Business Unlimited plans

Switch and get truly unlimited data, plus double the premium hotspot data with select plans.

  Select the number of lines to see how your Business Unlimited plan monthly price would change.

Plans available with a month-to-month or device payment agreement. Prices include $5 savings per month per line when you sign up for Auto Pay and paper-free billing. 

Enjoy your business essentials.

$70 without Auto Pay and paper-free billing discount

$60 without Auto Pay and paper-free billing discount

$45 without Auto Pay and paper-free billing discount

$40 without Auto Pay and paper-free billing discount

$35 without Auto Pay and paper-free billing discount

  • 5G/4G LTE Unlimited 5G and 4G LTE data; in times of congestion, your smartphone and mobile hotspot data may be temporarily slower than other traffic (network management). 5G access requires a 5G-capable device. 5G Ultra Wideband access is not available. Domestic data roaming at 2G speeds.
  • Unlimited talk, text & data Unlimited 5G and 4G LTE data; in times of congestion, your smartphone and mobile hotspot data may be temporarily slower than other traffic (network management). 5G access requires a 5G-capable device. 5G Ultra Wideband access is not available. Domestic data roaming at 2G speeds. In times of congestion, your mobile hotspot data may be temporarily slower than other traffic (network management). After 5 GB/line/month, mobile hotspot reduced to speeds up to 600 Kbps for the rest of the month.
  • Mobile hotspot data In times of congestion, your mobile hotspot data may be temporarily slower than other traffic (network management). After 5 GB/line/month, mobile hotspot reduced to speeds up to 600 Kbps for the rest of the month.
  • Call Filter Reduce spam calls with call screening, auto-blocking and easy reporting of unwanted numbers. Activation required. Terms apply.
  • 480p video streaming Video streaming at 480p.

Boost your productivity.

$80 without Auto Pay and paper-free billing discount

$55 without Auto Pay and paper-free billing discount

$50 without Auto Pay and paper-free billing discount

  • 5G Ultra Wideband Our fastest 5G network experience. 5G access requires a 5G-capable device.
  • 100 GB Premium Network Access Get 100 GB of premium smartphone data per line per month. In times of congestion, your 5G and 4G LTE smartphone data may be temporarily slower than other traffic after 100 GB premium network access/line/mo. There is no network management for 5G Ultra Wideband (UW) data. Domestic data roaming at 2G speeds.
  • 100 GB premium mobile hotspot data After 100 GB line/mo premium hotspot data, mobile hotspot reduced to speeds up to 600 Kbps (4G LTE and 5G) and 3 Mbps (5G UW) for the rest of the month.
  • Call Filter or Call Filter Plus Call Filter: Reduce spam calls with call screening, auto-blocking and easy reporting of unwanted numbers. Call Filter Plus: Adds caller ID, spam look up and risk meter, a personal block list and the ability to block by category. Activation required. Terms apply.
  • Business Mobile Secure Help protect and manage your company devices with this bundle of security features curated specifically for small businesses. Lookout for small business: Helps keep your data safe with anti-phishing and Wi-Fi network protections. Mobile Device Management: Lets you manage and apply controls across company smartphones and tablets. Dedicated chat support: Expert help via Chat for onboarding, setup and troubleshooting of your security features. Activation required. $5/device monthly charge offset by $5 credit while on qualifying price plan. Terms apply.
  • Up to 4K video streaming Video streaming at 4K when inside a 5G Ultra Wideband coverage area. High-definition 1080p video streaming on 5G / 4G LTE when you activate it in your plan settings. Otherwise video streaming at 480p.
  • TravelPass (2 days per month) Get 2 TravelPass days each month. Each TravelPass day gives you 24 hours of unlimited talk and text, 2GB of high speed international data then unlimited data at 3G speeds thereafter. TravelPass days do not carry over and expire at the end of each month. TravelPass is available in 210+ countries and destinations. 5G or 4G world device required.

Get more of what you need.

$85 without Auto Pay and paper-free billing discount

$75 without Auto Pay and paper-free billing discount

  • Unlimited Premium Network Access Get unlimited premium smartphone data that isn’t slowed based on how much data you use. Domestic data roaming at 2G speeds.
  • 200 GB premium mobile hotspot data After 200 GB line per month premium hotspot data, mobile hotspot reduced to speeds up to 600 Kbps (4G LTE and 5G) and 3 Mbps (5G UW) for the rest of the month.
  • TravelPass (4 days per month) 4 TravelPass days are included each month. Each TravelPass day gives you 24 hours of unlimited talk and text, 2GB of high speed international data then unlimited data at 3G speeds thereafter. TravelPass days do not carry over and expire at the end of each month. TravelPass is available in 210+ countries and destinations. 5G or 4G world device required.
  • 50% off on Unlimited Pro Tablet plan

Caret

 Choose the Business Unlimited tablet plan that works best for you.

Tablet Start

Save $10/mo when you add a line.

Unlimited data so you can work as flexibly as you need

  • 5G/4G LTE Unlimited 5G and 4G LTE data; in times of congestion, your smartphone and mobile hotspot data may be temporarily slower than other traffic (network management). 5G access requires a 5G-capable device. 5G Ultra Wideband access, machine to machine services and mobile hotspot are not available. Domestic data roaming at 2G speeds.

Save 50% with Business Unlimited Pro smartphone plan.

Unlimited mobile hotspot data so you can meet on the go

  • 5G/4G LTE 5G access requires a 5G-capable device. Not available for machine to machine services. Domestic data roaming at 2G speeds.
  • 35 GB Premium Network Access Unlimited 4G LTE, 5G and 5G Ultra Wideband (UW) data; in times of congestion, your tablet data may be temporarily slower than other traffic after 35 GB/line/mo premium network access (network management).
  • 15 GB Premium mobile hotspot data, then unlimited lower speed data After 15 GB/line/mo premium hotspot data, mobile hotspot reduced to speeds up to 600 Kbps (4G LTE & 5G Nationwide) and 3 Mbps (5G UW).
  • Up to 4K video streaming Video streaming at 4K when inside a 5G Ultra Wideband coverage area.

 Choose the Business Unlimited laptop plan that works best for you.

Start Laptop

Unlimted data to help you take on the day

  • 5G/4G LTE Unlimited 5G and 4G LTE data; in times of congestion, your data may be temporarily slower than other traffic. 5G access requires a 5G-capable device. 5G Ultra Wideband access and machine-to machine services are not available. Domestic data roaming at 2G speeds.

Up to 4K video streaming to help you meet in HD

  • 50 GB Premium Network Access Unlimited 4G LTE, 5G and 5G Ultra Wideband (UW) laptop and mobile hotspot data. After 50 GB/line/mo premium network access, data reduced to speeds up to 600 Kbps (4G LTE and 5G) and 3 Mbps (5G UW) for the rest of the month.
  • Up to 4K video streaming Video streaming at 4K when inside a 5G Ultra Wideband coverage area. High-definition 1080p video streaming on 5G/4G LTE when you activate it in your plan settings. Otherwise video streaming at 480p.

 Choose the Business Unlimited mobile hotspot plan that works best for you.

Plus Data Device

Enough data for easy hotspot streaming and to meet on the go

  • 60 GB Premium Network Access Unlimited 4G LTE, and 5G and 5G Ultra Wideband (UW) data. After 60 GB/line/mo premium network access, data reduced to speeds up to 600 Kbps (4G LTE and 5G) and 3 Mbps (5G UW) for the rest of the month.
  • Up to 4K video streaming Video streaming at 4K when inside a 5G Ultra Wideband coverage area. 720p video streaming on 5G/4G LTE.

Pro Data Device

Plenty of data to stay productive during those longer workdays

  • 100 GB Premium Network Access Unlimited 4G LTE, 5G and 5G Ultra Wideband (UW) data. After 100 GB/line/mo premium network access, data reduced to speeds up to 600 Kbps (4G LTE and 5G ) and 3 Mbps (5G UW) for the rest of the month.

Choose the Business Unlimited smartwatch plan that works best for you.

Standalone Smartwatch

Premium data so you don’t miss a beat at work

  • 15 GB of premium 5G/4G LTE data Unlimited 5G & 4G LTE data. After 15 GB premium data/line/month, data reduced to speeds up to 200 Kbps for the rest of the month. 5G access requires a 5G capable device. Not available for 5G Ultra Wideband access, mobile hotspot or machine to machine services. Domestic data roaming at 2G speeds. Additional terms apply.

Numbershare Smartwatch

Your connected smartwatch can use your mobile number

  • 22 GB of premium 5G/4G LTE data Unlimited 5G & 4G LTE data. After 22 GB premium data/line/month, data reduced to speeds up to 200 Kbps for the rest of the month. 5G access requires a 5G capable device. Not available for 5G Ultra Wideband access, mobile hotspot or machine to machine services. Domestic data roaming at 2G speeds. Customer must also subscribe to select smartphone data plan. Both smartphone & smartwatch plans must be part of same sub-account. Additional terms apply.

New plan + new device

Find the plan that fits your budget and business needs, then check out our devices page for the 
latest smartphones.

New plan + your own device

See if your device is compatible with our network, then get started.

What are the benefits of Verizon Business Unlimited 5G smartphone plans?

Verizon Business Unlimited 5G smartphone plans provide unlimited data, talk and text on Verizon’s 4G LTE and 5G networks. Plans also include access to Verizon’s business-class features, such as mobile hotspot data, call filtering, video streaming and mobile device management (available with select plans). Customers can choose from a variety of plans with different features to meet their business needs.

Can I add multiple lines to a Business Unlimited 5G smartphone plan?

Yes, Verizon’s Business Unlimited 5G smartphone plans allow you to add multiple lines. There are multiple options for businesses, ranging from single-line plans to multiple-line plans. The amount of lines you select is based on your company’s requirements.

Do Verizon Business Unlimited 5G smartphone plans offer any international benefits?

Yes, unlimited talk and text is available in Canada and Mexico along with 2 GB of high speed data per day with unlimited data at 3G speeds thereafter. If more than 50% of your total talk, text or data usage in a 60-day period is in Canada or Mexico, use of those services in those countries may be removed or limited. Additionally, Verizon Business Unlimited Plus 5G and Unlimited Pro 5G plans offer TravelPass that include international talk and text in over 210 countries and destinations.

Can I bring my own device or do I need to purchase a new device with the Business Unlimited 5G smartphone plan?

Verizon’s Business Unlimited 5G smartphone plans offer the flexibility to bring your own device (BYOD) or purchase new devices . If you already have compatible devices, you can simply activate them on a Business Unlimited plan. Alternatively, Verizon offers a wide range of devices for purchase if you prefer new devices for your business.

Are there unlimited data plans for other devices?

Yes, Verizon offers a variety of plans with unlimited data for tablets, laptops, smartwatches and hotspots. This provides the right solution for businesses requiring reliable connectivity while on the go.

Offer and Pricing Details

All Offers:  Offers available to new business customers only, subject to credit review. Not available in all areas/locations. Depending on speed tier purchased, promotional pricing for Internet and voice guaranteed for 12 consecutive months ($10 increase starting month 13 with 2 year contract), or 24 consecutive months ($10 increase starting month 25 with 2 year contract), or 36 consecutive months ($10 increase starting month 37 with 2 year contract) or 60 consecutive months ($10 increase starting month 61 with 2 year contract) (60 month guarantee not available in all areas where Fios is sold) subject to continuation of qualifying products; price guarantee applies to base monthly rate only; excludes optional services and equipment charges; prices subject to increase thereafter. With no annual contract, price increases to then current market rate subject to the applicable guarantee period. Select installation charges may be waived. Additional charges apply for inside wiring and/or other installation services. $49 activation fee may apply. Offers may be fulfilled via bill credit(s); other taxes, fees & terms apply.  Early termination fees  for a 2 year contract: 35% of base monthly charges for unexpired term. 2 year term automatically renews at then-current term rates unless canceled within 30 days prior to or 60 days after the term is renewed.  Money Back Guarantee  (MBG) is available with 2 year contract only and requires cancellation within 30 days of installation; excludes subscriptions, per minute usage, labor/material charges in excess of standard installation and month-to-month service plans, including Fios TV service. Wireless Verizon Router is available for $399.99 purchase and $18/mo rental (except in Maryland, where the wireless Fios Router is available for $299.99 purchase and $15/mo rental).  Wireless router models and prices are subject to change. Phone equipment purchase required with VoIP, starting at $85. Equipment must be returned within 30 days of cancellation. Equipment restocking fee may apply if order is canceled or service is terminated within 30 days. MBG and/or promotional offers do not apply to service ordered for temporary, short term or special events.  Firm Price Quote  is valid for 5 business days and is an estimate based on current pricing, promotions and taxes that are subject to change. Quote does not include additional charges for nonstandard installations. Verizon Wi-Fi available in select areas with qualifying packages. Software limitations and other terms apply. Visit business.verizon.net/wifi for details.  Offers are available for a limited time only and are subject to change without notice.  Wired speeds advertised. Wired & wireless speeds vary due to device limits, multiple users, network & other factors. See  www.verizon.com/yourspeed  for more info. Service availability varies.

Fios Internet & Phone Bundle (VSB):  Usage charges apply on basic line. Activation fee of $49 may apply based on speed tier purchased. Wireless Verizon Router is available for$399.99 purchase and $18/mo rental (except in Maryland, where the wireless Fios Router is available for $299.99 purchase and $15/mo rental).  Wireless router models and prices are subject to change. Backup battery available for Fios voice services & E911. VSB not available with 2048/2048 Mbps Internet (2 Gigabit Connection).

Fios Internet & Business Digital Voice (BDV) Bundle:  Pricing for BDV line(s) with the Fios bundle: For speeds 200/200 Mbps and higher: the first BDV line is available for $20/mo. and $25/mo. for each addl. line. Pricing reflected in the cart. No annual contract required. $49 activation fee may apply. Wireless Verizon Router is available for $399.99 purchase and $18/mo rental (except in Maryland, where the wireless Fios Router is available for $299.99 purchase and $15/mo rental). Wireless router models and prices are subject to change. Business Digital Voice requires phone equipment purchase starting at $85.00.

Basic Internet & Phone Bundle : $49.00 activation fee applies with 2 year contract; $99.00 activation fee applies with no annual contract. Wireless router available for $49.00, subject to change. Basic Internet will be provisioned at our fastest speed available at your location of up to 1Mbps, 3Mbps, 5Mbps, 7Mbps or 10-15Mbps based on VZ line qualifications requirements.

$5/month Auto Pay & Paper-Free Billing discount:  For new and existing Fios Internet or Basic Internet customers on select plans. May not be combined with all offers. $5/mo. discount begins when you sign up for Auto Pay (ACH or debit card only) & paper-free billing (registration on  verizon.com/mybusiness  required). $5 discount will be applied each month as long as auto pay and paper-free billing stay active.

$85 Business Digital Voice Phone Discount:  Offer available on select IP Phones with purchase of a new Fios Internet and Business Digital Voice bundle with a two year agreement. Fulfilled via bill credit. Taxes apply. Limit one discount per phone model. Restocking fee may apply if canceled within 30 days. Available to select customers in select areas only. Offer ends 3.31.24.

Included Router Rental Fee:  Available only to Fios Internet customers on the Gigabit Connection plan (up to 940/880 Mbps) or 2 Gigabit Connection plan (up to 2048/2048 Mbps) where available. Qualifying customers will receive a monthly bill credit for the applicable monthly router rental fee for as long service with qualifying plan is on the account.  Promo credits end when eligibility requirements are no longer met.  If your Fios service is cancelled, you must return the Fios router subject to Verizon’s standard return policy. 

Fios Switching Allowance Offer:  Offer for new business customers in select areas only who sign up for qualifying Fios internet service with a two year agreement (subject to credit review) and who terminated their prior internet service and incurred an early termination fee (ETF). To redeem offer, you must email documentation of the ETF from your prior service provider w/in 30 days after receipt of final bill. Offer fulfilled via a bill credit to your Verizon account in the amount of the billed ETF, up to $1,500. Credit will be issued starting after 30 days of service, and will appear on your Verizon bill within 2-3 billing cycles. You remain solely responsible for paying the ETF to your prior service provider. Offer is non-transferable, has no cash or refund value, and may not be combined with all offers. Other terms apply. Offer ends 3.31.24.

Visa Prepaid Card Offers : Businesses who sign up for qualifying Fios Internet with our mid-tier or high-tier speeds with a two-year agreement will receive a Visa Prepaid Card, with the Visa Prepaid Card amount based on speed tier purchased, as follows: (i) $100 Visa Prepaid Card for Fios 500/500 Mbps Internet; or (ii) $500 Visa Prepaid Card for Fios 940/880 Mbps Internet (Gigabit Connection) or 2048/2048 Mbps Internet (2 Gigabit Connection). May only be combined with select offers. Only available in select locations, including the Philadelphia metro area, parts of New York state and parts of central Massachusetts. Call or visit the website to confirm availability.  Visa Prepaid Card is issued by Pathward®, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. No cash access or recurring payments. Can be used everywhere Visa debit cards are accepted. Card valid for up to 12 months, funds do not expire and may be available after card expiration date, fees may apply. Terms and conditions apply.  Must register for card online and keep qualifying Verizon service for 60 days from install, with no past-due balance 65 days from install. Card mailed within 90 days of install date. Limit one card per account. Other card terms and conditions apply. Offers end 3.31.24.

Visa Prepaid Card Fast Start Offers : Businesses who sign up for qualifying Fios Internet with our mid-tier or high-tier speeds with a two-year agreement will receive a Visa Prepaid Card, with the Visa Prepaid Card amount based on speed tier purchased, as follows: (i) $400 Visa Prepaid Card for Fios 500/500 Mbps Internet; or (ii) $800 Visa Prepaid Card for Fios 1 Gig Internet (940/880 Mbps) or Fios 2 Gig Internet (2048/2048 Mbps). May not be combined with all offers. Not available in all locations, including the Philadelphia metro area, parts of New York state and parts of central Massachusetts. Call or visit the website to confirm availability.  Visa Prepaid Card is issued by Pathward®, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. No cash access or recurring payments. Can be used everywhere Visa debit cards are accepted. Card valid for up to 12 months, funds do not expire and may be available after card expiration date, fees may apply. Terms and conditions apply.  Must register for card online and keep qualifying Verizon service for 60 days from install, with no past-due balance 65 days from install. Card mailed within 90 days of install date. Limit one card per account. Other card terms and conditions apply. Offers end 3.31.24.

Fios Business Internet/Business Unlimited Offer:  Offer available to new and existing business customers in select areas only who sign up for both: (i) a qualifying Fios Business Internet plan & (ii) a qualifying Verizon Wireless Business Unlimited plan (eligible smartphone required, device payment purchase or bring your own device). Existing customers are eligible with Fios Business Internet plan upgrade or Business Unlimited plan upgrade or a new line, as applicable. Customers with Fios Gigabit Connection (speeds up to 940/880 Mbps) or Fios 2 Gigabit Connection (speeds up to 2048M/2048M), where available, and Verizon Wireless Business Unlimited Pro plan (at least 1 line) are eligible for a total credit of $80/mo, all other combinations of service plans are eligible for a total credit of $40/mo. Offer fulfilled as a credit of $20/mo. or $40/mo. each to your Fios and Verizon Wireless bills, for a total credit of $40/mo or $80/mo as applicable. Credit is fulfilled at an account level and only one promotional credit per account. Discounts are applied once both services are activated. All discounts apply as long as Verizon provides & business maintains both services at the qualifying levels. Limited time offer.

$100 One-Time Discount:  Offer available only to business customers who are new to Verizon and who sign up for a qualifying Fios Business Internet plan and a qualifying Verizon Wireless Business Unlimited plan. Existing Verizon customers are not eligible. One time $100 discount offer fulfilled as a bill credit to your Verizon Wireless account and will appear within 1-2 billing cycles. May only be combined with select offers. Limited time offer.

Fios Internet Only:  $49 activation fee applies based on speed tier.  Wireless Verizon Router is available for $399.99 purchase and $18/mo rental (except in Maryland, where the wireless Fios Router is available for $299.99 purchase and $15/mo rental).  Wireless router models and prices are subject to change.

Basic Internet Only: $49.00 activation fee applies with 2 year contract; $99.00 activation fee applies with no annual contract. Wireless router available for $49.00, subject to change. Verizon Basic Internet will be provisioned at up to 1Mbps, 3Mbps, 5Mbps, 7Mbps or 10–15Mbps based on VZ line qualifications requirements. Availability subject to final confirmation by Verizon.

Preferred Voice Only:  Offer available to new and existing customers. Requires 2-yr term agreement. Includes unlimited direct-dialed voice calls to anywhere in the US. Selected activation and installation charges are waived. Additional charges may apply for inside wiring and/or other installation services. Additional Universal Service Fee, taxes and other charges apply. Call detail is not provided for unlimited calling.

Business Digital Voice (BDV) Only:  Offer available to new customers with 100 voice lines or fewer in select areas only, subject to credit review. BDV requires an existing Internet connection of 5Mbps or higher. $99.99 activation and $200 installation fees apply. Additional charges apply for inside wiring and/or other installation services. Phone equipment purchase req’d, starting at $85.00. Call detail is not provided for unlimited calling.

Fios TV:  Wireless Verizon Router is available for $399.99 purchase and $18/mo rental (except in Maryland, where the wireless Fios Router is available for $299.99 purchase and $15/mo rental).  Wireless router models and prices are subject to change.. $99.99 activation and $89.99 installation fees (first three existing TV outlets) apply. Additional charges apply for inside wiring and/or other installation services. $11.99/mo. HD set top box, franchise and regulatory fees, up to $8.89 Regional Sports Network (RSN) fee, $11.49 Broadcast Fee, other taxes and fees apply. Equipment shipping charge may apply. Program availability varies by location. Number of channels is approximation. High Definition (HD) TV with HD STB required for HD programming. Certain TV plans, Pay Per View (PPV) and Subscription or fee-based Video On Demand (VOD) are not permitted for viewing in restaurants, bars or other customer service areas. Channel lineup is subject to change and not all channels will be available at all times. Blackout restrictions apply. Month-to-month service without an annual contract required.

Fios TV Mobile app:  Req. compatible device and Fios® TV. Content restrictions may apply. Fios Internet req’d for in-office use. Full channel access and DVR streaming require Fios Multi-Room DVR enhanced or Premium Service. Max. combined 5 simultaneous live TV streams and/or DVR streams per media server. Streaming of TV shows and movies On Demand included in your plan is available to all business customers. Streaming of rented/purchased TV shows and movies On Demand is only available to Private Viewing business customers. Requires acceptance of Terms of Service and Private Viewing conditions at  verizon.com/mybusiness . Early access to Fios TV Mobile app begins with activation & ends upon installation or in 14 days, whichever comes first. Wireless data charges may apply.

Veterans / Active Military offer:  Offer available to eligible and verified members of the U.S. military and U.S. Veterans in select areas with Business Fios Internet with a two year agreement, subject to credit review. Not available in all areas/locations. Upon military service verification through Veterans Advantage, eligible customers will receive a discount in the amount of $5/month for speeds up to 500M/500M; or $10/month for 940/880 Mbps and 2048/2048 Mbps (where available), for as long as that customer maintains qualifying Business Fios Internet service. Not available for month-to-month plans. Eligible customers must complete the military service verification process within 30 days of the order to get the discount.

Business Internet Secure:  Available to businesses with 19 employees or less. Requires current Fios Business Internet service. Business Internet Secure licenses are sold in packs of 5, 10, and 25 with one license covering one device (laptop, desktop, smartphone or tablet). One license pack at a time per customer account. Prices are monthly and exclusive of taxes and fees. Terms and conditions apply. System requirements: Windows 7 and above; Mac OSX 10.9 and above; Android OS 5.0 and above, or Apple iOS 10.0 and above.

Let’s connect.

Call Sales 800-526-3178

Have us contact you Request a call

Already have an account?    Log in Explore support More ways to connect with us

  • Auto Insurance Best Car Insurance Cheapest Car Insurance Compare Car Insurance Quotes Best Car Insurance For Young Drivers Best Auto & Home Bundles Cheapest Cars To Insure
  • Home Insurance Best Home Insurance Best Renters Insurance Cheapest Homeowners Insurance Types Of Homeowners Insurance
  • Life Insurance Best Life Insurance Best Term Life Insurance Best Senior Life Insurance Best Whole Life Insurance Best No Exam Life Insurance
  • Pet Insurance Best Pet Insurance Cheap Pet Insurance Pet Insurance Costs Compare Pet Insurance Quotes
  • Travel Insurance Best Travel Insurance Cancel For Any Reason Travel Insurance Best Cruise Travel Insurance Best Senior Travel Insurance
  • Health Insurance Best Health Insurance Plans Best Affordable Health Insurance Best Dental Insurance Best Vision Insurance Best Disability Insurance
  • Credit Cards Best Credit Cards 2024 Best Balance Transfer Credit Cards Best Rewards Credit Cards Best Cash Back Credit Cards Best Travel Rewards Credit Cards Best 0% APR Credit Cards Best Business Credit Cards Best Credit Cards for Startups Best Credit Cards For Bad Credit Best Cards for Students without Credit
  • Credit Card Reviews Chase Sapphire Preferred Wells Fargo Active Cash® Chase Sapphire Reserve Citi Double Cash Citi Diamond Preferred Chase Ink Business Unlimited American Express Blue Business Plus
  • Credit Card by Issuer Best Chase Credit Cards Best American Express Credit Cards Best Bank of America Credit Cards Best Visa Credit Cards
  • Credit Score Best Credit Monitoring Services Best Identity Theft Protection
  • CDs Best CD Rates Best No Penalty CDs Best Jumbo CD Rates Best 3 Month CD Rates Best 6 Month CD Rates Best 9 Month CD Rates Best 1 Year CD Rates Best 2 Year CD Rates Best 5 Year CD Rates
  • Checking Best High-Yield Checking Accounts Best Checking Accounts Best No Fee Checking Accounts Best Teen Checking Accounts Best Student Checking Accounts Best Joint Checking Accounts Best Business Checking Accounts Best Free Checking Accounts
  • Savings Best High-Yield Savings Accounts Best Free No-Fee Savings Accounts Simple Savings Calculator Monthly Budget Calculator: 50/30/20
  • Mortgages Best Mortgage Lenders Best Online Mortgage Lenders Current Mortgage Rates Best HELOC Rates Best Mortgage Refinance Lenders Best Home Equity Loan Lenders Best VA Mortgage Lenders Mortgage Refinance Rates Mortgage Interest Rate Forecast
  • Personal Loans Best Personal Loans Best Debt Consolidation Loans Best Emergency Loans Best Home Improvement Loans Best Bad Credit Loans Best Installment Loans For Bad Credit Best Personal Loans For Fair Credit Best Low Interest Personal Loans
  • Student Loans Best Student Loans Best Student Loan Refinance Best Student Loans for Bad or No Credit Best Low-Interest Student Loans
  • Business Loans Best Business Loans Best Business Lines of Credit Apply For A Business Loan Business Loan vs. Business Line Of Credit What Is An SBA Loan?
  • Investing Best Online Brokers Top 10 Cryptocurrencies Best Low-Risk Investments Best Cheap Stocks To Buy Now Best S&P 500 Index Funds Best Stocks For Beginners How To Make Money From Investing In Stocks
  • Retirement Best Gold IRAs Best Investments for a Roth IRA Best Bitcoin IRAs Protecting Your 401(k) In a Recession Types of IRAs Roth vs Traditional IRA How To Open A Roth IRA
  • Business Formation Best LLC Services Best Registered Agent Services How To Start An LLC How To Start A Business
  • Web Design & Hosting Best Website Builders Best E-commerce Platforms Best Domain Registrar
  • HR & Payroll Best Payroll Software Best HR Software Best HRIS Systems Best Recruiting Software Best Applicant Tracking Systems
  • Payment Processing Best Credit Card Processing Companies Best POS Systems Best Merchant Services Best Credit Card Readers How To Accept Credit Cards
  • More Business Solutions Best VPNs Best VoIP Services Best Project Management Software Best CRM Software Best Accounting Software
  • Manage Topics
  • Investigations
  • Visual Explainers
  • Newsletters
  • Abortion news
  • Coronavirus
  • Climate Change
  • Vertical Storytelling
  • Corrections Policy
  • College Football
  • High School Sports
  • H.S. Sports Awards
  • Sports Betting
  • College Basketball (M)
  • College Basketball (W)
  • For The Win
  • Sports Pulse
  • Weekly Pulse
  • Buy Tickets
  • Sports Seriously
  • Sports+ States
  • Celebrities
  • Entertainment This!
  • Celebrity Deaths
  • American Influencer Awards
  • Women of the Century
  • Problem Solved
  • Personal Finance
  • Small Business
  • Consumer Recalls
  • Video Games
  • Product Reviews
  • Destinations
  • Airline News
  • Experience America
  • Today's Debate
  • Suzette Hackney
  • Policing the USA
  • Meet the Editorial Board
  • How to Submit Content
  • Hidden Common Ground
  • Race in America

Personal Loans

Best Personal Loans

Auto Insurance

Best Auto Insurance

Best High-Yields Savings Accounts

CREDIT CARDS

Best Credit Cards

Advertiser Disclosure

Blueprint is an independent, advertising-supported comparison service focused on helping readers make smarter decisions. We receive compensation from the companies that advertise on Blueprint which may impact how and where products appear on this site. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Blueprint. Blueprint does not include all companies, products or offers that may be available to you within the market. A list of selected affiliate partners is available here .

Free business plan template (with examples)

Alan Bradley

Sierra Campbell

Sierra Campbell

“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.

Updated 3:37 a.m. UTC Feb. 12, 2024

  • path]:fill-[#49619B]" alt="Facebook" width="18" height="18" viewBox="0 0 18 18" fill="none" xmlns="http://www.w3.org/2000/svg">
  • path]:fill-[#202020]" alt="Email" width="19" height="14" viewBox="0 0 19 14" fill="none" xmlns="http://www.w3.org/2000/svg">

Editorial Note: Blueprint may earn a commission from affiliate partner links featured here on our site. This commission does not influence our editors' opinions or evaluations. Please view our full advertiser disclosure policy .

Featured Image

AzmanL, Getty Images

Starting a business can be a daunting undertaking. As with so many large projects, one of the most difficult challenges is just getting started, and one of the best ways to start is by putting together a plan. A plan is also a powerful tool for communication and can serve as a cornerstone for onboarding new partners and employees or for demonstrating your philosophy and priorities to potential collaborators. 

A solid business plan will not only provide a framework for your business going forward but will also give you an early opportunity to organize and refine your thoughts and define your mission statement, providing a guidepost that can serve as a beacon for your business for years to come. We’ve provided a business plan template below to help guide you in the creation of your new enterprise.

Featured LLC service offers

Zenbusiness.

ibm business plan

Via ZenBusiness’ Website

Free version available

Lowest published package price

ibm business plan

Via LegalZoom’s Website

Northwest Registered Agent

ibm business plan

Via Northwest’s Website

Business plan template

What should a business plan include?

Regardless of the type of business you own or the products and services you provide, every business plan should include some core elements:

  • Mission statement. The definition and executive summary of your business.
  • Market analysis. A breakdown of the market segment and customers you hope to reach, built through primary (gathered by you) and secondary (gathered from outside sources) research.
  • Organization and logistics. The nuts and bolts of how your business is operated
  • Products or services. What your company provides its customers.
  • Advertising and marketing. How you intend to get your products in front of your customers.
  • Forecasting. Revenue forecasting for partners or potential investors.

Why do you need a business plan?

A business plan is a framework for success. It provides a number of key benefits:

  • Structure. The outline around which to design your business.
  • Operational guidance. A signpost for how to run your business from day to day.
  • Expansion. A vision for the future growth of your enterprise.
  • Definition. A platform to consider every element of your business and how best to execute your plans for them.
  • Collaboration. A synopsis of what’s exceptional about your business and a way to attract funding, investment or partnerships.
  • Onboarding. An efficient summary of your business for new or potential employees.

Business plan examples

We’ve created two fictional companies to illustrate how a business might use a business plan to sketch out goals and opportunities as well as forecast revenue.

Bling, Incorporated

Our first hypothetical example is a jewelry and accessory creator called Bling, Incorporated. A hybrid business that manufactures its products for sale both online and through physical retail channels, Bling’s mission statement is focused on transforming simple, inexpensive ingredients into wearable statement pieces of art. 

Market analysis includes gathering data around sourcing sustainable, inexpensive components, aesthetic trends in fashion and on which platforms competitors have had success in advertising jewelry to prospective customers. Logistics include shipping products, negotiating with retailers, establishing an e-commerce presence and material and manufacturing costs. 

Bling, Incorporated advertises initially through social platforms like TikTok and Facebook, as well as with Google AdSense, with plans to eventually expand to television advertising. Revenue forecasting is structured around a low overhead on the basis of inexpensive materials, no dedicated storefront and broad reach through digital platforms.

Phaeton Custom Cars

Phaeton is a custom car builder and classic car restoration business with a regional focus and reach. Its mission statement defines it as a local, family-owned business serving a community of auto enthusiasts and a broader regional niche of collectors. 

Market analysis breaks down the location and facilities of other competitor shops in the region as well as online communities of regional car enthusiasts likely to spend money on custom modifications or restoration projects. It also examines trends in valuations for custom parts and vintage cars. Logistics include pricing out parts and labor, finding skilled or apprentice laborers and mortgaging a garage and equipment. 

Phaeton advertises in regional publications, at local events and regional car shows and online through Facebook and Instagram, with an emphasis on a social presence highlighting their flashiest builds. Revenue forecasting is built around a growing reputation and high-value commissions.

Frequently asked questions (FAQs)

A business plan may not be a prerequisite for every type of business, but there are few businesses that wouldn’t benefit from one. It can serve as an important strategic tool and help crystalize a vision of your business and its future.

Business plans do just that: they help you plan the future of your business, serve as a platform to brainstorm ideas and think through your vision and are a great tool for showcasing why your business works to potential investors or partners.

Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy . The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

Alan Bradley

Alan is an experienced culture and tech writer with a background in newspaper reporting. His work has appeared in Rolling Stone, Paste Magazine, The Escapist, PC Mag, PC Gamer, and a multitude of other outlets. He has over twenty years of experience as a journalist and editor and is the author of the urban fantasy novel The Sixth Borough.

Sierra Campbell is a small business editor for USA Today Blueprint. She specializes in writing, editing and fact-checking content centered around helping businesses. She has worked as a digital content and show producer for several local TV stations, an editor for U.S. News & World Report and a freelance writer and editor for many companies. Sierra prides herself in delivering accurate and up-to-date information to readers. Her expertise includes credit card processing companies, e-commerce platforms, payroll software, accounting software and virtual private networks (VPNs). She also owns Editing by Sierra, where she offers editing services to writers of all backgrounds, including self-published and traditionally published authors.

How to start a small business: A step-by-step guide

How to start a small business: A step-by-step guide

Business Eric Rosenberg

IMAGES

  1. How Does IBM Make Money? IBM Business Model In A Nutshell

    ibm business plan

  2. How Does IBM Make Money? IBM Business Model In A Nutshell

    ibm business plan

  3. What is the IBM Business Model?

    ibm business plan

  4. PPT

    ibm business plan

  5. IBM Corp Business Model 2018

    ibm business plan

  6. PPT

    ibm business plan

VIDEO

  1. What Made Tony Gwynn the SMARTEST Hitter in History?

COMMENTS

  1. PDF IBM Strategic Update 2020

    James Kavanaugh SVP, Finance & Operations, Chief Financial Officer Executive Summary Multi-year transformation, accelerated by strong Red Hat adoption, has positioned IBM for success in the hybrid cloud and AI market

  2. What is Integrated Business Planning (IBP)?

    Integrated business planning framework Integrated Business Planning (IBP) is a holistic approach that integrates strategic planning, operational planning, and financial planning within an organization.

  3. How IBM Became A Multinational Giant Through Multiple Business

    Total assets of $28.999B as of September 30, 2022 Revenue of $57.35B billion in 2021 Total number of employees in 2022: 345,000 Brand value of $ 96,992B in 2021 Market Capitalization of over $130B as of December 2022 Humble beginnings: How did IBM start?

  4. IBM Planning Analytics

    Automate and unify integrated business planning across your organization. Turn AI-driven predictions into actions. Try IBM Planning Analytics free Book a live demo Predict outcomes with flexible and AI-infused forecasting. Analyze large-scale and fine-grain what-if scenarios in real-time so you can pivot quickly.

  5. Accelerating our future and growth strategy

    Accelerating Our Future and Growth Strategy Team: On my first day as CEO, I made a commitment to the growth of IBM. I stated that a maniacal focus on our open hybrid cloud platform and AI capabilities is key to this outcome.

  6. PDF The IBM Strategy

    $24 billion invested to date to build IBM's capabilities in Big Data and analytics, with $7 billion in organic investment $17billion of gross spend for Big Data and analytics acquisitions, including more than 30 acquired companies 15,000 analytics consultants and 400 mathematicians

  7. How Does IBM Make Money? IBM Business Model In A Nutshell

    IBM Business Model In A Nutshell - FourWeekMBA How Does IBM Make Money? IBM Business Model In A Nutshell Business, Business Models / By Gennaro Cuofano / January 22, 2024 IBM started in 1911 as the Computing-Tabulating-Recording Company (CTR), called the International Business Machines by 1924.

  8. Integrated business planning: The key to agile enterprise ...

    What is integrated planning? A must in the culture of "now." In virtually all industries, work has become more interactive and collaborative. More sharing is required, and more data is available than ever before.

  9. Businesses Plan to Invest in Tech in 2023, Despite ...

    The report dives into the investment strategies of 4,000 global business leaders and found that more than three-quarters plan to prioritize or invest in technology in the next 12 months, a steady pace from 2022.

  10. IBM Commits to Skill 30 Million People Globally by 2030

    ARMONK, N.Y.Oct. 13, 2021 PRNewswire / -- IBM (NYSE: ) today unveiled a groundbreaking commitment and global plan to provide 30 million people of all ages with new skills needed for the jobs of tomorrow by 2030. To achieve this goal, IBM is announcing a clear roadmap with more than 170 new academic and industry partnerships.

  11. IBM Makes Resources Available to Small Business Owners At No Cost to

    ARMONK, N.Y., June 22, 2021 / PRNewswire / -- IBM (NYSE: IBM) today announced the availability of Reigniting Small Business from IBM, a program aiming to provide no-cost, education and coaching designed to help small businesses run their companies more effectively as the COVID-19 pandemic eases.

  12. Hybrid Business Strategy of IBM

    Let's look at the key elements of IBM's business strategy. 1. Accelerating Digital Transformation A new era of rapid change and disruption is underway. The need for digital transformation has dramatically accelerated due to the pandemic and extends through the core mission-critical business processes of almost all large enterprises.

  13. What is Business Analytics?

    Business analytics uses data exploration, data visualization, integrated dashboards and more, to allow users access to usable data and insights. As companies increasingly digitize their businesses, business analytics is more important than ever before.

  14. IBM's Generic Strategy, SWOT Analysis & Strategic Choices

    The strategic direction of IBM for business competitiveness relates to Porter's generic strategies and the SWOT analysis model. The company's strategies are built on organizational strengths directed toward the goals of IBM's mission and vision.These strengths and corresponding competitive advantages address the company's weaknesses and the threats to its business.

  15. IBM plans to spin off infrastructure services as a separate $19B business

    The remaining IBM business is about three times as big: it currently generates some $59 billion in annual revenues. At the same time that IBM announced the news, it also gave some updated guidance ...

  16. What You Need to Know About IBM's $19 Billion Spinoff

    The biggest move made by International Business Machines (IBM-1.32%) since CEO Arvind Krishna took the helm last year was the planned spinoff of the managed infrastructure services unit. The new ...

  17. Business Plan, Revenue Model, SWOT Analysis

    Business Plan The IBM Company has been providing a lot of services of the clients which make it reliable and dependable at the same time. Ever since its existence, the company has been widely adopted in different countries and has about 175 different branches all over the world. IBM's value proposition are- Software to Connect Applications

  18. Security and resiliency services

    Book a consultation Strengthen your business continuity management and disaster recovery approach with the right tools, technology and skills to deal with crises. Upgrade your cyber and disaster recovery plan to boost operational resilience, a non-negotiable imperative for every organization.

  19. (Updated in 2024) Detailed Business Model Of IBM

    Let us look into the present scenario of IBM company. Presently the business model of IBM is involved in the research of Cloud computing, Databases and Artificial intelligence. IBM's subsidiaries have reached 177 countries with an estimated 400000 employees worldwide. Around 800 different companies are a part of the IBM business model.

  20. Business systems planning

    Business systems planning (BSP) is a method of analyzing, defining and designing the information architecture of organizations. It was introduced by IBM for internal use only in 1981, although initial work on BSP began during the early 1970s. BSP was later sold to organizations. It is a complex method dealing with interconnected data, processes, strategies, aims and organizational departments.

  21. IBM Reopens Its Frozen Pension Plan, Saving the Company Millions

    Feb. 9, 2024 Traditional pension plans haven't come back. But the news from IBM might lead you to think so. Last month, IBM thawed out a defined benefit pension plan that it had frozen more...

  22. IBM Cloud Docs

    A holistic strategy for business continuity and disaster recovery is critical when you are managing cloud at scale. This recommendation extends the business continuity recommendations from the IBM Cloud framework for Financial Services and provides some additional specifics that extend the IBM Cloud General disaster recovery strategy.. Key points from the IBM Cloud Framework for Financial ...

  23. IBM Shocking New Type Of Pension Is The Old Defined Benefit Plan

    International Business Machines, IBM, will, starting January 1, 2024 reports 401 (k) Specialist and Justin Mitchell at Fund Fire, provide a defined benefit plan that will save for an...

  24. IBM Training

    IBM Training

  25. IBM's AI Revolution: How Small Investors Can Make Money Forever With

    Shares of International Business Machines (IBM 0.41%) are finally trading at multiyear highs after a long and painful period in the doldrums. Big Blue started shifting its business strategy in ...

  26. Why Did IBM Reopen Its Defined Benefit Plan? Will Others Follow?

    The most significant benefit of the shift is that it allows IBM to fund retirement contributions with the surplus in its overfunded defined benefit plan rather than with corporate cash contributed to its 401(k) plan. According to its annual report, IBM held a surplus of $5 billion in its defined benefit plan, while it paid out $530 million ...

  27. 9 Top Predictive Analytics Tools (2024)

    A good predictive analytics tool can transform the way you plan for events and opportunities in business. Whether you're interested in using machine learning to manipulate data or you're in need of a no-code tool, the nine options on this list are some of the best predictive analytics software programs on the market today. 1. IBM SPSS

  28. Business Unlimited Phone Plans

    Existing customers are eligible with Fios Business Internet plan upgrade or Business Unlimited plan upgrade or a new line, as applicable. Customers with Fios Gigabit Connection (speeds up to 940/880 Mbps) or Fios 2 Gigabit Connection (speeds up to 2048M/2048M), where available, and Verizon Wireless Business Unlimited Pro plan (at least 1 line ...

  29. Free Business Plan Template (With Examples)

    Regardless of the type of business you own or the products and services you provide, every business plan should include some core elements: Mission statement. The definition and executive summary ...