IBM‟s Transformation Journey

Enabling growth, productivity, and culture change

George Mattathil 4/28/2011

© 2009 IBM Corporation

IBM‟s Ongoing Transformation Journey
Business Model, Operating Model and Workforce Transformation
Remixed our portfolio toward services, software, and integrated solutions…  Exited commoditized businesses:
– PCs – Hard disk drives – Printing Systems

Shift in geographic mix…  2008 revenue:
– 21% Asia Pacific – 37% Europe, Middle East, Africa – 42% Americas

 Strengthened position in:
– – – – – Business Consulting Service-Oriented Architecture Information on demand Virtualization Open, modular systems

 71% of employees outside US
– 84K in India, 60K increase in 5 years – 16K in China, 10K increase in 5 years

 Record Performance in 2008…
– $103.6B revenue, up 5% – $16.7B pre-tax earnings, up 15%

 Acquired over 60 companies in last 5 years
– to complement and scale our portfolio of products and offerings

Pre Tax Income & Free Cash Flow ($B)


Revenue ($B) EPS
Pre-tax income Free Cash Flow EPS $10


16% 2003 49% Segment Revenue Mix 35%


2008 Segment Revenue 21% Mix

Software Services Hardware & Financing

$4 2000 2001 2002 2003 2004 2005 2006 2007 2008


– $8.93 Earnings Per Share, up 24% – Strong performance in services, software and growth markets
© 2009 IBM Corporation

IBM Strategy and Values

IBM Strategy

… Building a Smarter Planet
Focus on open technologies and high- value solutions
Our world is becoming INSTRUMENTED.

Smart traffic systems

Smart food systems

Deliver integration and innovation to clients

Our world is becoming INTERCONNECTED.

Smart supply chains

Smart energy grids

Become the premier Globally Integrated Enterprise

All things are becoming INTELLIGENT.

Smart retail

Smart healthcare

© 2009 IBM Corporation

The Evolution of the Enterprise

IBM Strategy


The international era -- exporting

The multinational era -- replicating

A globally integrated enterprise-- business in a connected world

AGlobally Integrated Enterprise (GIE) is an open, modular organization that is integrated into the fabric of the networked economy and operates under a business model that makes economic sense in the new global landscape.
Global Supply Management Global Production Optimization Global Demand Capture

© 2009 IBM Corporation

IBM‟s Approach to Transformation
IBM Strategy

IBM Values
Transformation Framework

Guided by the IBM Strategy and grounded in our Values

Business Process Excellence

Values-based Culture

Information Technology Enablement

Enable transformation at the intersection of business process, technology and culture

Transformation Focus Areas
Enabling Growth
    Growth markets leadership Mergers & acquisitions Client value focus State-of-the-art sales enablement

Enabling Productivity
 Global shared services  Business process excellence  IT enablement

Enabling Culture Change
 Transformational Leadership  Values-based culture  Collaborative innovation

Sustain our strength in the global marketplace by focusing on areas that enable growth, productivity, and culture change

© 2009 IBM Corporation

Enabling Growth Enabling Growth  Growth Markets Leadership  Mergers & Acquisitions  Client Value Focus  State-of-the-art Sales Enablement © 2009 IBM Corporation .

” Sam Palmisano. high-value. and you have to invest. 2007 IBM Annual Report © 2009 IBM Corporation .You’ve got to be committed for the long term. on multiple levels.Growth Markets Leadership Why?  Emerging markets growing at more than twice the rate of major economies  Growth markets source of global innovation. and competitively-priced skills Central & Eastern Europe Middle East & Africa Enabling Growth What we’ve done  Mobilized resources and leadership to accelerate growth  Leveraged established business relationships for competitive advantage  Taken disciplined approach to categorization of markets  Enabling clients with fast scaling and flexible environments Asia Pacific Latin America  Capturing opportunities to build out public & private infrastructures “You can’t “leapfrog” into being a global company.

India and China (BRIC) up 15% in 2008  Growth countries contributed 18% of IBM’s 2008 revenue  Constant currency revenue grew 8 points higher in growth markets than major markets  Leveraged efficiencies from global support functions to free up investments  Focused management system on future and current period  Continued emphasis on integrity & business practice standards © 2009 IBM Corporation . Africa. Eastern Europe & Latin America Enabling Growth Impact  IBM‟s business in growth markets grew by 10% in 2008  Revenue in Brazil.Growth Markets Leadership (continued) How we did it  Created Growth Markets unit in Shanghai – Covers nearly 150 countries across Asia. Russia.

one must look atall sources of innovation to sustain one’s value proposition to the customer. IBM Chief Financial Officer © 2009 IBM Corporation .” . IBM has become more and more acquisitive.Mergers & Acquisitions Enabling Growth Why? What we’ve done  IBM growth strategy includes acquiring high-value solutions and exiting commoditizing businesses  IBM‟s revenue growth must come from both organic and non-organic sources to meet investor expectations  Over past 5 years.Mark Loughridge. invested nearly $16B in acquiring more than 70 companies  Continued to divest low growth. low margin. As a consequence. commoditizing product lines  Acquired new technology AND complementary business models and channels to create new revenue “In today’s rapidly changing marketplace.

Mergers & Acquisitions (continued) How we did it  End-to-end M&A process with early focus on integration: – enables fast start – reduces risk – optimizes return  Integration Executives appointed early to lead the integration  Best in class deal management tool – IBM M&A Accelerator – to manage global cross-functional teams Enabling Growth Impact  IBM has outperformed peers on acquisition execution over the past 5 years: – Growth in PTI margin – Average cash realization – Average return on invested capital  Across 39 acquisitions between 2002 and 2005. IBM’s average acquisition doubled its direct revenue within two years  Efficient divestitures from commodity businesses has improved profitability  Post-acquisition performance metrics aligned with our management system © 2009 IBM Corporation .

” – Sam Palmisano.Client Value Focus Why?  To better meet our client’s expectation of value. not IBM – is from the client’s perspective – delivers positive impact  Reinforced Values-based leadership and enhanced employee experience to deliver client value “Client success isn’t just “the customer is always right. clients: – expect IBM to align to what will make them successful – want IBM to consistently deliver on commitments – say we are strongest when we collaborate across IBM Enabling Growth What we’ve done  Deployed Client Value Method to improve end-to-end client experience – Recognized distinct types of client buying behaviors – Integrated process from solution design through delivery  Increased industry orientation to serve the client‟s agenda – Enhanced industry-focused skills and capabilities – Aligned market-facing teams around an industry  Client Value – focuses on the client. December 2004 © 2009 IBM Corporation .” It means maintaining a longterm relationship where what happens after the deal ismore important than what happens before it’s signed. Harvard Business Review.

European furniture retailer. implements “green data centers” to support rapid growth – Energy consumption reduction of up to 40% © 2009 IBM Corporation . leading Chinese retailer.5 hours – 50% revenue increase in supplier information service – ROI achieved in 9 months  Client based Measurements – Client Value Assessment – Client Balanced Scorecard  Client First Organization – Industry Aligned Teams – Serving Clients Globally  City of Stockholmbreaks gridlock with a smart road management system – 25% reduction in traffic – 40K more citizens on public transportation – Less noise & carbon pollution  Client Value Ready Teams – Just In Time Knowledge – Networked Communities – End-to-end Issue Management  Kika-Leiner.Client Value Focus (continued) How we did it Transformation based on an “outside-in” view:  Client Behavior Driven – Client Buying Behaviors – Client / Industry Value Propositions Enabling Growth Impact  Yansha. improves competitiveness by combining supply chain & ERP – Order lead time reduced from 2.5 days to 4.

” IBM Seller © 2009 IBM Corporation .State-of-the-Art Sales Enablement Why?  Needed to capture new accounts and grow organic revenue  Needed to improve sales productivity by better aligning resources with opportunities  Needed to support sellers in developing proposals in competitive timeframe Enabling Growth What we’ve done  Worked with IBM Research to apply advanced analytics to sales issues – OnTARGET – prospecting tool used by sellers to identify clients with highest propensity to buy – Market Alignment Program (MAP) – tool for sales managers to ensure that resources shift to growth areas  Created Deal Hub – one-stop shop to help sales teams coordinate: – Technical Support – Pricing – Contracts – Quality Assurance – Proposal Generation OnTARGET & MAP Ranked in InformationWeek’s Top 20 Great Ideas “OnTARGET is the best resource for getting an overall picture of a territory and identifying high potential accounts.

responsibilities and management systems – Look locally. buy-in and ownership  Analytic toolsnow used by business units in fall planning process  Conducted hundreds of training workshops with local sales teams worldwide  Established global Deal Hub team with >2K people – Common roles...State-of-the-Art Sales Enablement (continued) How we’ve addressed it  Worked with business units – frontline to top management – to ensure relevance.operate globally Enabling Growth Impact  Analytic tools identified nearly $8B in incremental revenue opportunity worldwide in 2008  OnTARGET tool identified nearly 100K new sales leads in 2008  Sellers who use Deal Hub spend over 3 hours more per week selling – Have the capacity to handle 2 – 5 additional opportunities per rep © 2009 IBM Corporation .

Non-Core  Global COEs  Globally Integrated Support Processes  Radical Simplification © 2009 IBM Corporation .Enabling Productivity Enabling Productivity  Global Shared Services  Business Process Excellence  IT Enablement Enterprise Integration Shared Services Consolidation/Standards  Common Processes  Automation  Web Enablement  Core vs.

globally – Elevate: Move resources to higher value-add work to drive further efficiency and effectiveness Mktg & Comms Legal Real Gov’t & Estate Contract Relation Integrating Globally © 2009 IBM Corporation . regionally.Global Shared Services Why?  Vertically-aligned support functionsinefficient and incompatible with global integration  Ongoing productivity improvements essential to meet financial goals  Rigorous management of back-office needed to enable shift of resources to front-line roles that deliver client value Finance HR IT Sales Ops Enabling Productivity What we’ve done  Created globally integrated support functions  Established disciplined approach: – Integrate: Place all resources under one global leader – Automate: Use tools and technology to streamline the workflow – Optimize: Decide where each process is best performed – locally.

measures. with the right skills. systems and governance for global shared services  Global function owners accountable for meeting productivity goals based on benchmarked targets  Shared Services Council provides a common approach for identifying opportunities to improve efficiency and effectiveness Enabling Productivity Impact  Shared Services reduced spending by $3B over the last three years  Supply chain averaging $3-5B in savings every year for the last five years  Each Shared Service driving ongoing efficiency & effectiveness: – Finance E/R reduced from 3% to 1% – Real Estate improved E/R by 50% – HR HC Ratio to Employee: improved from 1:122 to 1:169 “We no longer have to replicate IBM from floor to ceiling in every country.”– Sam Palmisano. in the right places. May 20.…This is aboutdoing the right tasks.We are optimizing key operations in the right places in the world– eliminating redundancies and excess overhead – andintegrating those operations horizontally and globally. 2005 Analyst Meeting © 2009 IBM Corporation .Global Shared Services (continued) How we did it  Established consistent set of processes.

based on SAP – Key opportunity-to-cash processes – Financial management processes Geos Brands Sectors/ SMB Support Functions Horizontal Integration Integration Horizontal © 2009 IBM Corporation .Business Process Excellence Why?  Complexity of processes major source of frustration for employees. geo-specific approaches contributed to complexity and inefficiency  Siloed processes inconsistent with vision of globally integrated enterprise Enabling Productivity What we’ve done  Took an outside-in approach to address critical client and employee pain points  Focused first on client-facing teams  Established IBM Enterprise Process Framework with owners for 12 processes  Launched enterprise-wide program to provide common global processes. partners and clients  Unit-specific.

end-toend process improvements and put senior leaders in charge of key processes  Developed hundreds of professionals with business process skills.S. • 2-signature contracts from 2 days to 15 mins • 3-signature contracts from 1 wk to 2 hrs Current Baseline Horizontal Integration © 2009 IBM Corporation . doubling benefit from previous year  Improved client-facing processes: – Reduced cycle time on automated special bid by 75% • from 2 days to 4 hours – Reduced time to execute signatures on contracts for all brands in U.Business Process Excellence (continued) How we did it  Focused on driving horizontal. including Lean Sigma black belts  Simplified and standardized processes across business units and geographies  Identified principles for radical simplification Radical Change Simplification Enabling Productivity Impact  Process improvements contributing to growth & productivity: – Lean Sigma projects drive $100M cost benefit in 2008.

responsive and open global infrastructure  Embraced open standards & Web 2. globally-minded CIOs must help shape and drive their companies business transformation initiatives.” ". – Forrester Research © 2009 IBM Corporation . Rather than remain on the sidelines.0 technologies “ The IT organization plays a strategic rolein driving a firm’s global competitiveness. created common platforms and standards worldwide  Centralized CIO role  Established enterprise-wide governance model  Built a flexible.IT Enablement Enabling Productivity Why?  IT representsbiggest spend aside from workforce  Unlocking new IT efficienciesfrees up resources to fund investments for growth  Common IT platformsrequired for global integration & growth  Need for faster collaboration across global. mobile employee population What we’ve done  Consolidated disparate systems.

000 employees participate in Technology Adoption Program – 50K BlogCentral users – 150K in InnovationJam 2008  Capitalized on open standards & virtualization – 1500+ servers running Linux  Leveraged SOA to enable integration & faster development  Developed intranet into robust social networking platform IBM Strategic Delivery Model Global Resources TAP: Driving Early Adoption Strategic IGA Location Application Portfolio Mgmt SOA for Enterprise Flexibility Global Data Centers Strategic Web Location for IGA Ethernet & Power9 Networks Security for Global Business Project Big Green © 2009 IBM Corporation .000 applications to 4500 Enabling Productivity Impact  $1.0 fueling collaboration: – 110.IT Enablement (continued) How we did it  Began with a massive consolidation: – 128 CIOs to one – 155 data centers to 5 – 16. IT E/R reduced by 1.5B in IT savings over past four years.7 pts  Project Green initiative to deliver 80% energy cost savings & 85% floor space reduction  SOA delivering $125M in business value based on $35M investment  Web 2.

Enabling Culture Change Enabling Culture Change  Transformational Leadership  Values-based Culture  Collaborative Innovation © 2009 IBM Corporation .

are culturally adaptable .leverage IBM‟s enterprise-wide capabilities Enabling Culture Change What we’ve done  Established and periodically refreshed a core set of leadership competencies for all IBMers  Pervasive use of competencies for development.enable IBMers to execute IBM‟s strategy in the face of uncertainty Employee Experience Leader Behavior Organizational Climate Employee Engagement Business Results  Defined a clear methodologyto link strategy to execution IBM Values Corporate Social Responsibility Environmental Influences IBM’s Leadership Framework © 2009 IBM Corporation .unleash IBMers‟ energy . succession planning and selection  Defined a new Leadership Framework emphasizing business results and employees‟ experience  Created a collective leadership force of senior leaders accountable to integrate IBM and lead by Values .Transformational Leadership Why?  Need to develop global leaders for the 21st Century who: .

mentors and coaches Enabling Culture Change Impact  IBM‟s leaders’ competencies have steadily improved each year  IBM‟s leaders. demonstrate a broader set of effective leadership behaviors  I&VTleaders driving integration and enabling key transformation efforts  IBM‟s performance continues to improve year to year  Launched I&VT Initiatives sponsored by SVPs and Chairman to solve strategic enterprise challenges  Deployed Business Leadership Model to identify and resolve performance/opportunity gaps Leadership Competencies Client Partnering Embracing Challenge Passion for IBM’s Future Strategic Risk Taking Earning Trust Enabling Performance and Growth Developing IBM People and Communities Informed Judgment Thinking Horizontally Collaborative Influence © 2009 IBM Corporation . at all levels.Transformational Leadership (continued) How we did it  Identified leader behaviors that impact employees’ experience and performance (with 360 feedback for development)  Embedded Leadership Competencies in all leadership development programs  Senior IBM leaders participate in all leadership programs as role models.

Values-based Culture Enabling Culture Change Why?  Needed to re-establish a set of Values as the core of IBM’s culture and brand What we’ve done  Engaged employees globally in Values Jam to refresh our Values  Conducted World Jam with employees to collaborate on solutions for growth. innovation and bringing the Values to life – Implemented 32 top-rated ideas  Expanding the IBM brand experience beyond products to integrated solutions and people  Evolving the IBM management system to leverage global and cross unit integration  Employee Values Survey conducted annually to measure progress in operating and behaving consistently with our Values  Engaged leaders at all levels on enabling our Values-based culture locally and globally © 2009 IBM Corporation .

Harvard Business Review. recognition and talent management systems  IBM employees actively participate in advancing our Values-based culturevia collaborative technologies – 1500 communities of practice with 250.. you've got to createa management system that empowers peopleand provides a basis of decision making consistent with who we are at IBM” – Sam Palmisano.. December 2004 © 2009 IBM Corporation .000+ IBMers build organizational capability  Majority of IBMers worldwide believe: – IBM management is committed to making the changes necessary to enable us to operate consistently with the Values – The Values influence how IBMers interact with clients  Building leader accountability for role modeling and enabling Values-based culture  Engaging all employees in the transformation “So if there's no way to optimize IBM through organization or management dictate.Values-based Culture (continued) How we did it  Named a global leader to work with leaders and teams worldwide to drive our culture transformation  Identified actions focused on organizational enablers of culture change. including: – Leadership Behaviors – People Practices – Management Systems Enabling Culture Change Impact  IBM‟s Values are integral in our performance.

The Jam -and programs like it – are greatly accelerating our ability to innovate in meaningful ways for business and society.” . have at them‟.Collaborative Innovation Why?  Become our clients‟ “innovation partner” – Address client priorities – Build deeper client relationships Enabling Culture Change What we’ve done  Established an innovation agenda that spans multiple dimensions: – – – – – – Product Services Business process Business model Management and culture Policy and society  Respondto changing nature of innovation  Organizations need each other to be successful – Pace of innovation outstrips an organization‟s ability to “go it alone”  Changing workforce dynamics – Globalization – “Millennials” Venture Capitalists  Enabled global collaboration – Culture of collaboration – Innovation ecosystem ITAnalysts Investors Regulatory Bodies Clients Employees ISVs Business Partners Alumni Universities  Technical  Business Innovation Ecosystem Standards Bodies Policymakers Community Leaders Competitors “We opened up our labs. „Here are our crown jewels.Sam Palmisano. IBM CEO © 2009 IBM Corporation . said to the world.

idea creation: Jams – Content creation: BluePedia – Dynamic interaction: Sametime Enabling Culture Change Impact  IBM Research – #1 on the US patent list for 16 years – Collaboration with clients on real-world challenges and solutions  On Demand Workplace – One of the world’s top 10 intranets  JAMs – $100M investment to bring 10 ideas to reality – 35 Innovative solutions in 4 areas  Collaborate with everyone – Collaboration with client – Societal Innovation – Social network participation  Global Innovation Outlook – Entire ecosystem to create new and unforeseen opportunities © 2009 IBM Corporation .CollaborativeInnovation (continued) How we did it  Provide platforms to foster open dialog – Single Portal: On Demand Workplace – Innovation incubator: Technology Adoption Process – Information sharing: Cattail – Brainstorming.

Letter to Investors © 2009 IBM Corporation . and IBM today is very different from what it was when we entered the decade.” – Sam Palmisano.Dear IBM Investor: “Put it all together. 2007 Annual Report.

Appendix  Lessons Learned  How to get started?  Global Business Services – Portfolio Snapshot  Other topics: – IBM at a Glance – IBM‟s History of Transformation – IBM‟s Leadership Governance – Business Transformation / Information Technology Governance – Enterprise Risk Management – Corporate Social Responsibility  Other Shared Services Examples: – Integrated Supply Chain – Human Resources – Finance Transformation © 2009 IBM Corporation .

IBM Transformation Journey: Key Lessons Learned Lessons learned Strategy  CEO sponsorship is critical  Create a “sense of urgency” that the organization can rally around  Think. outside-in view of processes  Build process skills and methodologies  Need cross-unit leadership and clear accountability Enabling Growth  Focus on high growth customer segments and new markets  Leverage business analytics to better align resources with opportunities and inform fact-based decisions  Consider both organic and non-organic sources for revenue growth  Enhance end-to-end client experience Enabling Culture Change      Engage leaders at all levels Address the underlying drivers of behavior Engage employees broadly Make culture tangible Recognize that changing culture is a journey © 2009 IBM Corporation . performance goals and reporting discipline Enabling Productivity  Business transformation and IT should be closely aligned  Don‟t automate a mess – fix processes first. then apply IT  Sunset legacy systems and tools as new ones are deployed  Take an end-to-end. act and optimize globally  Implement governance.

.g. markets that generate growth/productivity?  How effective and efficient are our support functions (e. global talent and resources across our organization?  Do we have the capabilities to quickly cut lowvalue spending and redeploy to activities. products.How to get started? GBS Services – Portfolio Snapshot Key questions for consideration… Clarity of Strategy  Who are our target client /customer segments?  What is our value proposition to our client/customer segments?  How do we differentiate ourselves?  Are we clear on what we do versus where to partner externally? Enabling Productivity  Are we leveraging scale. supply chain)?  Do we have the tools and support to make our people as effective as possible? Enabling Growth  What percent of our business is coming from outside our home market? Are we well positioned?  Do we have the right data and analytical tools to understand our changing clients/customers and market?  Do we understand our clients‟/customers‟ needs? How well are we positioned to meet them?  Do we have a clear M&A strategy and process? Are we well positioned to effectively capture share and build future capabilities? Enabling Culture Change  Do we have senior executives engaged and accountable to be change leaders?  Are our people aligned with and committed to our strategy/direction?  Does our culture support the strategy and its execution?  Are we effectively collaborating and innovating? © 2009 IBM Corporation .

IBM‟s GBS portfolio supports Transformation Practice Areas Strategy & Change (S&C) Customer Relationship Management (CRM) Supply Chain Management (SCM)                 GBS Services – Portfolio Snapshot Snapshot of our Services Business Strategy Operations Strategy Technology Strategy Organization Change Strategy Business Intelligent Services CRM Strategy CRM Outsourcing Contact Center Optimization SCM strategy and planning Complex Supply Chain Optimization IT services for SCM Supply Chain Enterprise Applications Finance Transformation Business Performance Management Business Risk Management Finance Enterprise Applications Financial Management (FM) Human Capital Management (HCM)     HR Strategy & Transformation Learning Solutions Knowledge & Collaboration Workforce Transformation © 2009 IBM Corporation .

What we offer  IT Strategy & Planning  Service Oriented & Enterprise Architecture  IT Performance Management GBS Services – Portfolio Snapshot Technology Strategy Interact between business and technology Business Strategy Create and realize business value  Merger & Acquisition support  Growth & Innovation  Business Model Innovation and GIE  Green & CSR Strategy  Better Change  Organization Design  Collaboration & Partnering (including Jam & Mini-Jam)  ERP Transformation Organization Change Strategy Make change work Operations Strategy Improve efficiency and productivity  Strategic Profit Improvement  Target Operating Model  Lean Six Sigma  Green Sigma™  Business Process Management  Catalyst for Transformation – We create strategies and design operating models that drive innovation from strategy through execution Key benefits  Focal point for Innovation – We bring strategy together with the range of IBM services and solutions to deliver end-to-end client value  Intersection of Business & Technology – We enhance client competitiveness through innovative business models that leverage IBM‟s unique research and technology capabilities © 2009 IBM Corporation .IBM Strategy and Change .

governance mechanisms. and other organizational elements to drive new behaviors  Realign key performance measures (e.Six Major Elements to Successfully Manage Change Program Strategy and Management  Create strategy for managing and measuring the change to ensure the alignment of the organization towards transformation objectives and contributing initiatives  Help to manage all dependencies.. rewards and incentives) to meet the requirements of the future state operating model Skills and Knowledge  Clearly define and agree to skills and knowledge targets  Assess and implement required skills and knowledge  Provide education that delivers the right tools and solutions to support individuals through the change © 2009 IBM Corporation . job measures.g. organizational risks and conflicting interests across initiatives  Understand the readiness and ability of the organization to absorb / adopt the change from the top down and bottom up GBS Services – Portfolio Snapshot Organization Design  Clarify work responsibilities and redefine jobs as well as their relationships to one another (structure).

and create buy-in. behaviors) components © 2009 IBM Corporation . etc) and soft-wired (mindsets. engage. and effectively communicate to impacted and / or influential stakeholders to prepare them for the organizational changes  Obtain buy-in and ownership of the changes to be implemented from leaders as well as employees  Establish awareness. measurements. or commitment.Six Major Elements to Successfully Manage Change (continued) Program Leadership and Governance  Create approach and tools to build and sustain support among executive leaders and stakeholders  Provide guidance and establish governance mechanisms  Create a compelling and comprehensive vision for the change with collective accountability  Help prepare and align leaders for the change and inform them of their role in the transformation‟s success GBS Services – Portfolio Snapshot Stakeholder Engagement and Communications  Identify. align. processes. business practices. set expectations. structures. to the change Culture Transformation  Create a shared vision of the desired culture and assess alignment of the existing culture  Design/deploy interventions that align both the hard-wired (operating guidelines. classify.

Software. and providing long-term value to shareholders © 2009 IBM Corporation .7B Global Presence Employees Business Segments 170 Countries 398. efficient and competitive through the use of business insight and information technology (IT) solutions.IBM at a Glance: Y/E 2008 IBM at a Glance Revenue Pre-Tax Profit $103.455 Services. Research and Financing Business Model Helping clients succeed in delivering business value by becoming more innovative.6B $16. Hardware.

” -. I can’t promise this journey will be easy or fast… the steps we will take will not be pussyfooting but bold strides.Lou Gerstner. structure and culture to a world of constant change. 1993 1993 1995 1997 1999 2001 2003 2005 2007 2009 Phase One Gerstner era (’93 thru 2002) © 2009 IBM Corporation . 128 CIOs to 1.IBM‟s Transformation: An Ongoing Journey  Keeping company together & stabilizing business Focus Areas IBM’s History of Transformation  Bringing massive decentralization under control (e.g.. 70 ad agencies to 1)  From country to global brand P&L statements  Move to integrated solutions  Dramatic growth in services “I think the greatest challenge facing the company is … to adapt our strategy.

the first decade ofthe 21st century has been a series of wake-up callswith a single subject:the reality of global integration. 6.”. Nov. 2008 Focus Areas IBM’s History of Transformation  Shift to high-value solutions  Move to Values-based culture  Lowering center of gravity for decision-making  Becoming premier globally integrated enterprise  Maintain focus and execute in a radically shifting market  A Smarter Planet 1993 1995 1997 1999 2001 2003 2005 2007 2009 Phase Two Palmisano era (‘03 thru present) © 2009 IBM Corporation . But in truth.IBM‟s Transformation: An Ongoing Journey (continued) “Thecrisis in our financial marketshas jolted us awake to therealities and dangers of highly complex global systems.Sam Palmisano.

IBM Leadership Governance Model IBM Organization At a Glance Geographies North America IBM’s Leadership Governance IBM Leadership Governance Operating Team Day-to-day marketplace execution Business Units Sales & Distribution (S&D) Sectors Public Global Technology Services (GTS) Northeast Europe Software Group (SWG) Southwest Europe Systems & Technology Group (STG) Global Business Services (GBS) Communications Strategy Team IBM’s strategic direction and emerging business opportunities Financial Services Distribution Technology Team Near. technical developments and issues Japan Industrial Growth Markets Integrated Supply Chain (ISC) Performance Team General Business Accountable for business performance & results. Develop cross-unit strategies.and long-term emerging technologies. and align and communicate strategies and values © 2009 IBM Corporation . Globally Integrated Support Functions HR Comms IT Finance Legal Sales Marketing/ Strategy Operations Integration and Values Team (I&VT) Integrate IBM’s enterprise-wide capabilities.

BT/IT Governance Model Globally Integrated Enterprise SVP Forum Strategy Value realization Strategy Funding approval Value realization Enterprise Process OwnerTeam Process transformation priorities Globally Integrated Support Processes Enterprise Process Owner (EPO) CIO Operating Team Transformation Transformation Executive IPMT Transformation Transformation Executive IPMT Executive Executive IPMT IPMT Run Management Team Interlock on business unit and Geo requirements and priorities Unique Business Unit & Geo requirements Funding allocation Program governance Enterprise architecture STG SWG GBS NA GTS NE SW BT/IT Transformation Programs GMU Japan © 2009 IBM Corporation .

Mike Daniels. country by country. SVP GTS © 2009 IBM Corporation .Enterprise Risk Management ERM Why?  Contribute to consistent growth and economic return by improving the company‟s ability to take calculated & fully-informed risks What we’ve done  Inform strategic decisions with explicit consideration of risk  Anticipate issues and problems in executing growth plans and prepare for them  Analyze variations in ongoing operations and take action to improve performance and increase consistency  Key indicator of good corporate governance and as important components of controls and compliance programs  Take advantage of experience in other parts of the enterprise “Managing risk within silos. for example.”. or contract by contract isn't adequate.

7% compliance © 2009 IBM Corporation .Enterprise Risk Management (continued) ERM How we did it  Benchmarked best practices  Established Governance Model & Enterprise Steering Committee Impact  Prioritized enterprise level risk map – 25 Risk Action plans in place  Engaged senior executive team in identification of enterprise risks  Developed a structured risk assessment methodology  Integrated risk into the strategic & operational planning process  Risk owners performed assessments. Russia. China. 128 approved vendors through revised process – Resource Optimization across 43K service employees – Health & Safety: 51 sites upgraded  Enterprise IT Risk assessment with focus on company-wide actions in: – Data Security & Privacy 99. implemented actions. and defined metrics for ongoing monitoring  Risk assessments in Brazil. India. and Argentina established common frameworks and improved risk outcomes: – Integrity in the Hiring Process: 13K new hires.

it is notable for leveraging the core strengths of IBM – its technology and the vast skills of its employees – to make a global difference.” .000 registrants and over 6 million total hours of volunteer time.Corporate Social Responsibility What we’ve done CSR Why?  Need for CSR strategy to align with global business goals  75% of executives needed to better understand their stakeholders‟ CSR expectations  Despite growth in developing economies.8 billion people live on less than $2 a day  Moved from scattered grants with limited ROI to strategic focus on education – Gerstner era  Defined corporate citizenship as the intersection between business and society  Identified critical issues that intersect with IBM capabilities  Pursued global approach to corporate citizenship  Empowered IBMers to be global citizens “With more than 100. Corporation for National and Community Service © 2009 IBM Corporation  Desire to create real solutions (not just make donations) – and deliver innovation that matters the world . Even more than the massive numbers.David Eisner. CEO. 2.the On Demand Community is an extraordinary example of corporate philanthropy.

transition to new careers and make a difference in the world  Created the Global Citizen’s Portfolio: – Corporate Service Corps – Personal Learning Accounts – Transition2 CSR Impact  Corporate Services Corps – sending 1. cancer. muscular dystrophy & hunger  Applied own technology & talent to tackle societal problems – – – – On Demand Community World Community Grid AccessibilityWorks KidSmart  Meedan – using social computing & IBM translation tools to advance dialogue between Western and Arab worlds © 2009 IBM Corporation .Corporate Social Responsibility (continued) How we’ve done it  Empowering IBMers to acquire new skills.500 employees over next three years to work on economic development projects in emerging markets  Transition 2 Teaching – bringing seasoned IBMers into second careers in classroom – 100+ new math & science teachers  World Community Grid – harnessing power from 1M+ devices to aid research on AIDS. dengue fever.

For IBM it sayswe are shifting. to a solutions business. Spain and Brazil Procurement Fulfillment Logistics Manufacturing Supply Chain Optimize Automate Integrate Integrated Globally Global Capabilities Process Technology “IBM has been on the forefront of globalizing the supply chain. formed the Integrated Supply Chain as a single business unit  Manage entire ISC – from procurement and logistics to strategy and planning -.” . of IBM’s total cost and expense  ISC was a fragmented cost center and not mission critical  Distributed and hard-wired to business units  Pockets of integration in functional silos but no enterprise-wide common processes ISC What we’ve done  Established online links to suppliers.from being a traditional manufacturing business. yet again.Kevin O‟Marah..on a global basis (moved procurement HQ from Westchester to Shenzhen.I think the interesting thing is the strategic implications. cutting processing time for average PO from a month to less than a day  95% of business partner orders now “touchless”  In 2002. or roughly 50 percent. Bratislava.Integrated Supply Chain Why?  The ISC is accountable for $40 billion. AMR Research © 2009 IBM Corporation .. China)  Consolidated transaction processing in global delivery centers in Malaysia. partners and clients.

speak 80 languages. introduced world‟s first supplychain business transformation outsourcing capability  Applied supply chain principles to services business ISC Impact  Driving EPS growth for 23 straight quarters  Averaging $3-5B in savings every year for the last five years  A 5-point improvement in margins since 2003  Improving sales force productivity. 31K suppliers connected online  In 2005.Integrated Supply Chain (continued) How we’ve done it  Tied ISC together with shared measurements to support end-to-end operation  Focused on client satisfaction along with operational results  Leveraged global scale – nearly 20K employees at 100 locations in 62 countries. now spending 38% more time with clients  Turning orders 32% faster and improving client satisfaction © 2009 IBM Corporation .

andwork-force deployment….000 new employees a year globally “The globally integrated enterprise will require fundamentallydifferent approachesto production. 2006 © 2009 IBM Corporation .New kinds of managerial skillsare also needed.Human Resources Shared Services Why?  Need to deliver more HR support for less and evolve the function from administrative to strategic role  Better support the requirements of a diverse and mobile workforce What we’ve done  Centralized the HR function and manage globally as a shared service  Outsourced benefits enrollment and pension administration  Rolled out self-service online tools for HR applications and learning  Aligned HR resources to focus on growth markets  Empower employees to continuously upgrade their skills  Recruit and on-board 30.Sam Palmisano. Foreign Affairs. distribution.” .

Partners Support Support Delivery © 2009 IBM Corporation . Learning and Diversity as one integrated function  Established HR Integrated Services Team with specialized skills and practices  Transformation to a new HR partner model.000 new employees in growth markets in past five years Manufacturing Manufacturing Development Development Suppliers Suppliers Relationship Relationship Clients End-to-end focus on the talent value chain to innovate for clients Delivery Clients Bus. partners aligned to businesses in areas or regions – Including growth markets focus Shared Services Impact  Reduced ratio of HR to employees from 1:122 to 1:169 from 2001 to 2007  Increased focus on strategic work from 15% to 30% – Increased focus on HR programs and policies from 25% to 60% – Reduced HR administrative work from 60% to 10%  Established global standards for HR technologies and performance management across business units  Delivered 50% more learning hours while reducing education budget by almost $300M from 2001 to 2007 – almost 70% of learning is currently online  Hired more than 100.Human Resources (continued) How we’ve done it  Aligned Talent. Partners Bus.

Finance Transformation Why?  IBM Finance was highly decentralized – a maze of systems  14K finance employees was 2 times competition  High percent of time spent on administrative tasks  Lack of integration and unique measurement systems led to inconsistent data  Finance function viewed as low value add What does it mean to be an Integrated Finance Organization (IFO)? IFOs achieve increased effectiveness through greater integration of information Finance What we’ve done  Drove 3-prong approach to finance transformation: process. IT  Standardized processes & controls  Created common ledger. common data definitions. data. common worldwide planning system  Created global centers of excellence  Focused on supplying headlights to the business Revenue and Stock Price Growth of IFOs out perform peers in growth markets Revenue Growth 5 Yr CAGR 24% 14% Globally mandated standards Standard CoA Standard Processes Standard Data Definitions Stock Price 5 Yr CAGR Industry 10% 6% Non-Integrated Finance Organizations Integrated Finance Organizations © 2009 IBM Corporation .

4B 1.0 pts © 2009 IBM Corporation .1B 3.2B 1.3% 1996 15 95 8 $1.3% -91% -70% -62% -43% -2.8% Change 2005 vs.Finance Transformation (continued) How we did it Evolution of our Finance processes …  Focused on the basics (‟94 – ‟98) – – – – – – – – – – – – Standard / Common Process Automation Functional Best Practices Financial Reporting Shared Services Web Enablement Core Competency Decision Support Process Outsourcing /Global COEs Technology Exploitation Rationalized ERP Information On Demand Finance Impact  Optimized global capability – Increased use of global support from 12% in‟05 to 40% in ‟08  Shift to higher value work – Increased decision support work from 30% in ‟94 to 70% in ‟07  Integrated the Enterprise (‟98 – ‟02)  Lowered expenses – Lowered expense to revenue share from 3% in ‟94 to 1% in „ 07  Moved to globalization (‟02 – present) 1994 Financial data centers Key applications Days for accounting close Estimated Finance operations expense* Estimated Finance ops exp / revenue* 67 145 18 $2. 1994 6 44 7 $1.

the Intel Inside Intel SpeedStep. Celeron. and other are registered trademarks. and UNIX are trademarks or service marks of others as described under “Special attributions” at: http://www. Cell Broadband Engine. the Intel Centrino logo. Microsoft. Itanium. the IBM logo and ibm. Intel Inside. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www. Intel.shtml#section-special  Other company.Trademarks and notes IBM Corporation 2011  IBM. Intel Centrino. © 2009 IBM Corporation . IT Infrastructure Library.  References in this publication to IBM products or services do not imply that IBM intends to make them available in all countries in which IBM operates. other countries. product and service names may be trademarks or service marks of others. the Windows logo. the PostScript logo. Java and all Java-based trademarks. Intel Xeon. product or service names may be trademarks or service marks of International Business Machines Corporation in the United States. or  Adobe. the Adobe logo. the Intel logo. Windows NT. Windows. PostScript.

Support for your vision IBM Global Financing delivers the IT financial expertise and capabilities you need today to support your vision for tomorrow We are well positioned to assist you with not only financing but also IT lifecycle management challenges We can help accelerate the implementation of innovative solutions or projects such as cloud computing or business analytics 53 © 2009 IBM Corporation .

Sign up to vote on this title
UsefulNot useful