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IBM growing in state with atypical solutions: Arkansas operation revenues estimated in $300 million range.

IBM'S EFFORT TO TAKE J.B. Hunt Transport Services Inc. of Lowell into a new age of communications demonstrates the changes the computer company is undergoing internationally and in Arkansas.

The IBM of the 1970s, seen as a monolithic organization that provided computer hardware and little else, now focuses on determining a customer's problems and finding solutions for them, says Dave Kella, IBM's business unit executive in Little Rock.

For years, J.B. Hunt had visions of an on-board computer that allowed drivers to communicate with headquarters.

The Lowell-based truck-load carrier wanted the computer to be programmable, to store data and to execute functions while in the cab of an 18-wheeler. Hunt also wanted to avoid paying the provider of the computer ongoing satellite charges to relay information to Lowell.

Only one company had anything resembling such a computer in the late '80s, but Hunt and its senior vice president for information services, Larry Davenport, didn't believe the system met their requirements.

So J.B. Hunt presented the problem to representatives of IBM's Northwest Arkansas division.

In December 1990, after months of studying the situation, IBM presented Hunt with a 386 PC that was ruggedized for use in a truck instead of an office. It also allowed Hunt to use different communications providers.

IBM and Hunt customized the system, totally touch-screen sensitive, to use codes to compress information so it could be transmitted quicker and reduce communication costs.

In January 1991, IBM began working with Hunt to develop specific functions and to test the system. In April, Hunt bought the computer system and began installing it in its 7,000-plus trucks.

"We are finding that the |computer~ system is allowing our drivers to drive more miles in a day than those without the system," says Davenport, who spent 25 years with IBM before joining J.B. Hunt in 1989. "And we can't verify it yet, but we believe it's going to reduce driver turnover."

IBM's work with J.B. Hunt is a perfect example of how differently the computer company is doing business to compete in today's marketplace.

"There was a time in the late 1970s where people were willing to wait 18 months for a new product," says Kella, who oversees IBM's operations in 45 counties of Arkansas. "We prided ourselves at making customers self-sufficient.

"But the market changed. It got to where customers were asking not for a box to solve a problem, they were asking for a solution to their problems. I've got to admit we weren't the fastest to recognize that. We were still trying to market products."

Growth Rate of 180 Percent

IBM, and specifically its Arkansas and Northwest Arkansas operations, has begun to listen to customers, Kella says.

From 1991 to 1992, Kella's division had a modest 7 percent growth in sales of hardware. But software was up 27 percent, he says, and the services business was up 180 percent.

"We aren't going to keep to a 180 percent pace," Kella says. "We'll barely keep to 100 percent growth. But |services are~ the future of IBM."

IBM apparently does about $300 million in revenues annually in Arkansas although neither Kella nor Bill Almon, IBM's senior location manager for Northwest Arkansas, is willing to reveal specific information.

They do acknowledge, however, that each division's revenues would fit easily within Arkansas Business' list of the state's top 50 private companies, all of which have revenues exceeding $74 million.

Almon concedes that the combined revenues of Kella's division and his business in Northwest Arkansas would approach the state's top 10 private companies, which have at least $350 million in annual revenues.

Kella adds that IBM's Arkansas revenues are growing at double-digit rates annually. Almon says his division in Northwest Arkansas has had double-digit growth for the last several years in every business category.

Both divisions are producing at these levels with fewer employees. IBM, which prided itself for years in never laying off employees, reduced manpower internationally by 40,000 in 1992. It ended the year with just over 300,000 employees.

Kella's division saw employment drop from 130 to 100. In the Northwest Arkansas division, employment fell from 140 to 120. In most instances, workers were offered early retirement incentives or assistance in finding other employment while retaining some IBM benefits.

Changes in the industry have forced IBM to look at solutions that occasionally don't include IBM products, Kella says.

"Instead of having a sales bag or kit bag with certain products, our emphasis is on what skills we have from a people standpoint that can add value to our customers," Kella says.

Help From a Competitor

IBM has just submitted a bid to the state of Arkansas for a new communications network, Kella says. The state had some rigid technical requirements, he says, and IBM's hardware division did not have the capabilities to build a suitable system.

But instead of giving up on the proposal, IBM's Little Rock representatives searched for a system to meet the requirements. They found it with a competitor.

"So we included that company's equipment in our bid to the state," Kella says. "Now the bid hasn't been won, but it looks as though it's going to be a competitive response. That's the kind of autonomy that a business unit like Little Rock has within IBM."

In Northwest Arkansas, IBM is riding the crest of the biggest business boom in the state. Almon's division of IBM ranges from Fort Smith to Harrison. The main office is in Fayetteville, where Almon is based, and other offices are in Rogers and Fort Smith.

In addition to Hunt, Almon says IBM customers include Wal-Mart Stores Inc., American Freightways Corp. and the University of Arkansas.

"There are quite a few smaller companies that are also growing rather well," says Almon, 37. "One of the ones we've done work with is Family Vision Center |in Fayetteville~. In Fort Smith, we've worked with Data Tronics, a subsidiary of Arkansas Best Corp., and Westark Community College. So we cover a very broad range of industries as well as a broad range of size of companies."

IBM has helped develop a computer system for American Freightways that utilizes scanners to input information, Almon says.

Many of the point-of-sale systems in Wal-Mart stores, such as the cash registers, implement IBM equipment, Almon says. He acknowledged that Wal-Mart also does business with many other computer companies.

"Arkansas, in particular, is presenting us with all kinds of opportunities across all our different lines of business," says Almon, who is also in charge of IBM's new services in Arkansas, Oklahoma and Louisiana. "It is a fortunate thing for any IBMer in Arkansas that we've got that."

New-Found Flexibility

Kella cites one other example of IBM's new-found flexibility.

In late 1991, Harvest Foods came to IBM with a critical need -- to advance technologically to the leading edge of the grocery industry. Harvest Foods already had a data processing department but was unable to retain the employees who were tempted to leave because of low salaries.

Robert Rough, Harvest Foods' chief financial officer, asked IBM to run the data processing department with Harvest Foods' employees and roll out point-of-sale technology for its 54 stores.

Amazingly, at first an IBM representative told Rough it couldn't be done because IBM didn't do outsourcing, which is the business of taking over a company's data processing operations.

"I was talking to Dave Kella socially and he asked what had happened," Rough recalls. "I told him point blank it hadn't worked out and we were going to pursue some other things. He said, 'Let me get somebody in there who can answer the questions for you.'

"Very much to his credit, he got involved, brought some people in who he thought would make more sense for us to talk to and he saved the day."

Kella says the problem was that the initial IBM representative responded like the old IBM. A different representative was then sent to Harvest Foods, and he listened to the problems and provided an atypical IBM solution.

IBM took over Harvest Foods data processing, and within six months had the needed point-of-sale equipment in place. A year later, all but one of the 23 former Harvest Foods employees are still on the job although they officially work for IBM.
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Article Details
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Author:Smith, David (American novelist)
Publication:Arkansas Business
Date:Sep 13, 1993
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