Big Blue Puts $40 Million PR Budget in Play

ARMONK, May 10—IBM, which uses more than 50 public relations agencies around the world, has put about $40 million of PR business in play and expects to consolidate with no more than three firms, each of which will handle a specific group—research and technology; product; and customer contact—and a related theme: innovation, products, and applications respectively.

IBM’s most significant agency relationships include Omnicom unit Brodeur Worldwide, which handles personal computer and global services business; Manning Selvage & Lee, which handles the company’s software business; and the TSI unit of Golin/Harris International (formerly Technology Solutions) which handles the server business and several other projects. Those three firms as well as many others are expected to tender for one or more of the three assignments.

The restructuring follows an analysis of IBM’s communications operations by New York-based consulting firm Osgood O’Donnell & Walsh, led by the firm’s founder Peter Osgood. In addition to dramatic changes in its agency relationships, IBM has made changes in its in-house PR department, creating a product communications board, a customer communications board, and a technology communications board, each of which is being chaired by a senior communications professional on a rotating basis.

The rationale for the new model is also derived in part from chairman Lou Gerstner’s Letter to Investors in IBM’s 2000 Annual Report, in which he writes, “We can now see clearly that competitive advantage in the future will rest essentially on three things: technological innovation, the ability to help customers integrate technology with their business; and the ability to make information technology easy to acquire and manage.”

According to Ed Barbini, the company’s vice president of corporate media relations, “Each of these three groups will look at public relations issues that go across product lines, divisions, and groups.”

The agency search, which is expected to run into the summer, marks an end to the extreme decentralization of PR activities at Big Blue, where each division has traditionally selected its own PR firm. Says vice president of corporate communications Jon Iwata, the move marks “a major strategic shift in the way IBM works with PR agencies. In a nutshell, we’ve decided to consolidate our investments and align them with three core business areas that underpin everything that we do. This will mean moving from our current, decentralized structure and moving to fewer, but much more strategic relationships.”

Iwata is hopeful the changes will increase IBM’s access to the best strategic thinking within global agencies; integrate key strategic messages across programs and companies; create an organization structure that achieves maximum value for its PR spending; and reduces administrative costs—although Barbini was quick to point out that the changes were not designed to cut costs.

Nor is this a reflection on the award-winning work done by IBM’s existing roster of agencies. “This is certainly not a criticism of our existing agencies,” says Barbini. “But we think it’s a move we have to make if we are going to take IBM’s corporate communications to the next level.”          

According to a letter sent to firms earlier this week, “We intend to identify a few elite agencies that have the talent and resources to become valued partners in promoting key initiatives and strategies encompassing our full range of products, services and technical innovations.  It’s a unique opportunity: our campaigns have a scope and ambition matched by few in the world.”

The work will focus on nine key markets—the United States, Australia, Brazil, Canada, France, Germany, Italy, Japan, and the United Kingdom—and according to IBM, “Our long-term goal for compensation is to encourage our global agency partners to assign the best talent to the IBM account, to keep account teams focused on the strategic imperatives, to maintain the involvement of senior agency staff and, finally, to ensure a higher degree of staff continuity.”
At Brodeur Worldwide (which may have most to lose: some sources say it has as much as a quarter of IBM’s business today), senior executives say they support the move. “We think this is the right move for IBM,” says John Brodeur. “It’s going to make their communications more effective.”