IBM is years ahead of rival Hewlett-Packard in building the integrated software and services business needed in a modern IT company, according to one of the top lieutenants to Sam Palmisano, IBM chief executive.

Mike Daniels, head of IBM’s services division and a leading contender to succeed Mr Palmisano, threw down the challenge ahead of a key HP strategy session on Monday in which Léo Apotheker, HP’s new chief, is due to lay out his plans for the company. While Mr Apotheker has made it clear that he plans to boost HP’s presence in software, the IBM executive suggested that focusing on building individual divisions would not be enough to put HP level.

By tying its software and services businesses more closely together, IBM has been able to boost its profit margins ahead of HP and is on track to maintain its lead with further expansion over the next five years, he added.