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IBM to organise summit at invitation of Prince of Wales

IBM to organise summit at invitation of Prince of Wales

IBM, the US computing and consulting giant, has been invited by the Prince of Wales to organise a nine-day global summit in London in September, aimed at making business more sustainable.

The royal endorsement is a coup for IBM, which sees future growth coming from its "smarter planet" business services. The aim is to use software to analyse and predict trends in consumption, allowing organisations to save money and natural resources by adjusting supply to meet demand in real time.

IBM is already developing services to monitor highways, water systems, electric grids and other infrastructures. In Singapore it monitors and analyses traffic flow as part of a system of congestion charging, predicting where congestion is about to occur and directing cars away from that area by raising road tolls on the busiest streets.

Other smarter planet projects include Deep Thunder, a weather-modelling system in use in New York, which can predict rainfall a day in advance in an area as small as four blocks. With such information, city authorities can better control sewage flow during a storm, for example.

"You have millions of information points and your ability to make adjustments to services in real time is where value is going to be generated," Sam Palmisano, the company's chairman and chief executive, told reporters at a briefing.

IBM's computing muscle means it is well placed to capitalise on growing global demand for business analytics. "You can't do this thing on an iPhone or an iPad," Mr Palmisano added.

The company now plans to push ahead with growth in its business analytics operations through acquisitions that allow it to leverage the intellectual property of the target company at minimal cost. Last week it purchased Sterling Commerce, a business-to-business software and services company, for $1.4 billion (£1 billion).

The company has earmarked a further $20 billion for similar acquisitions over the next five years.

By plugging in the acquired company to IBM's team of 200 mathematicians — it is about to hire 100 extra maths PhDs to keep up with demand — using its own modelling systems and opening up distribution in 170 countries, IBM could quickly scale up the services of acquired companies.

"We don't have to add a lot of capacity because the capacity already exists," Mr Palmisano said. "With our sales force you just train them — [acquisitions] pay for themselves very quickly."

He expects a quarter of IBM's revenues to come from emerging markets by 2015, an increase of six percentage points on today's revenues.

The company has drawn up a list of 20 emerging countries, including Egypt, Indonesia and Vietnam, as well as Brazil, Russia, India and China, where it believes the growth of a strong middle class would boost spending on public infrastructure projects and private industry.

"Once those societies concluded they were going to engage in the global economy, because that's what they needed to create opportunity for their people … what's going to emerge is a middle class," Mr Palmisano said.

This new cadre of comfortably-off citizens would drive economic growth in these regions. It was a fundamental belief in the unstoppability of the middle classes that made IBM so confident that it could double its earnings to at least $20 a share by 2015 and increase its earnings by about 12 per cent a year, Mr Palmisano said.

"These folks [the new middle classes] are going to keep going. They are not going to stop," he said.

IBM is also expanding its cloud computing services, which allow customers to store and access information on shared servers.


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