The CIO as the Chief Transformation Officer. The Role of Technology in IBM s Transformation Journey

Transcription

1 The CIO as the Chief Transformation Officer The Role of Technology in IBM s Transformation Journey mikecook@ca.ibm.com

2 This will never happen again (Jerry York, IBM CFO, 1992) 20th Century 21st Century International Multinational Globally integrated Smarter 2 instrumented interconnected intelligent Export Replicate Connect Instrument

3 IBM is in the 20 th year of an ongoing Transformation Journey. IBM Historical Earnings per Share Diluted Quarterly & TTM $14 $13.70 $12 $10 $8 $6 $4 IBM EPS Diluted Quarterly IBM EPS Diluted TTM Inflection point in 1Q02 $2 $0 $3.34 -$2 -$4 -$6 -$8 1Q90 1Q91 1Q92 1Q93 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 Beyond improving EPS performance, IBM s GIE transformation has been instrumental in stabilizing and growing earnings since the beginning of the 20 th century This time period coincides with the firm s focus on enterprise transformation through process consolidation and standardization 3 3

4 .where anticipated transformation results are embedded into IBM s Financial Roadmap. Base revenue growth ~2% excluding divestitures Shift to faster growing business mix provides ~1% revenue growth ~$20B of acquisition spend provides ~2% revenue growth Enterprise Productivity yields margin expansion Shift to a higher value portfolio continues to provide leverage ~$50B returned through share repurchase Shares 11% CAGR Base Revenue Growth Revenue Mix Acquisitions Enterprise Productivity Margin Mix ~$2.80 At Least $20 $11.67 Operating Leverage ~$2.50 Revenue Growth ~$ Operating EPS* * Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense Assumes current tax policy and Non-GAAP tax rate of 25% 2015 Operating EPS* Source: 2015 EPS Roadmap as used on May March 8 th Investor Day

5 Leadership Teams Processes & Owners Hardware Software Services Hardware Software Services.where results have been persistently delivered through four phases of transformation. Discrete, Iterative Phases of IBM s Transformation Integrate Standardize Optimize Elevate Draft Version/ 31-Aug-12 v21.0 IBM has consolidated resources by function under a global leader and budget Looking across support, IBM has standardized how work is executed IBM has focused on moving work to where it is best performed IBM is investing in initiatives to enhance client, employee, and business partner experience From Silos to Shared Services Fin HR.. Fin HR.. Fin HR.. IE Shared Services Integrating functions has provided a single view of support costs so IBM can understand where to invest and reduce Consolidated $16B of Shared Service spend across ~150 countries HW SW SVC Geos Geos Geos Operating Processes Enabling Processes Supporting Processes Consolidating ownership and standardizing tasks has helped IBM identify best practices while automating and eliminating work Reduced support cost by ~25% over 5 years while entering new markets Optimize Labor & Cost Differentiate Services Optimize Data Focus on Higher Value Optimizing labor and delivery models has helped IBM reduce costs while focusing resources on high value support areas Scaled to support the ~22% of IBM s 2011 revenue coming from emerging markets Transformation Agenda Customer, Employee, Business Partner and Supplier Experience Web based remote services and Integrated invoicing Move people to focus on higher value work Social engagement Integration across BU s enabling bundled offerings Ensuring clients have a superior experience Current initiatives enable the transformation that drives continuous improvement Targeting enablement of $8B in productivity and $20B in revenue growth by 2015 IBM s management system integrates leaders across geographies and products to help them focus on One-IBM goals Focus Operations Daily Execution Strategy Technology Client Experience Performance Long Term Vision Market Shifts Client Satisfaction Business Performance Integration & ValuesEnterprise Capabilities IBM s Integrated Enterprise Transformation & Key Differentiators As IBM standardized, the firm began significant investment in self-service tools to simplify the delivery model and reduce cost Benefits News Hiring HR Self- Serve HR FAQs Payroll Training Smarter Infrastructure With a global presence, IBM can quickly port work to existing local operations to scale in new markets, mitigate risk or reduce cost North America Europe GMU Japan Global Bid Support Center Global Enablement Center Canada NA LA UKI France SPGI Nordic BeNeLux Germany Alps CEE Italy MEA Budapest Bratislava Bangalore India/SA B GCG ASEAN Korea Japan Okinawa Manila ANZ IBM s delivery of its financial roadmap is leveraging its integrated enterprise to create and capture value for clients Change Management Risk Management Collaboration Tools Process Excellence 5 Program Management Performance Management Culture Transformation Business 2012 IBM Analytics Corporation Enabling Capabilities

6 .and which has been driven by a Governance model and commitment to execution. IBM Organization At a Glance IBM Leadership Governance Geographies Business Units Sectors Operating Team North America Sales & Distribution (S&D) Public Day-to-day marketplace execution Strategy Team Integrated Supply Chain Europe Japan Growth Markets Global Technology Services (GTS) Software Group (SWG) Systems & Technology Group (STG) Global Business Services (GBS) IBM Research Communications Financial Services Distribution Industrial General Business Globally Integrated Shared Services HR Real Estate IT Finance Legal Marketing/ Comm Sales Mgmt Support Sales Transaction Hub IBM s strategic direction and emerging business opportunities Technology Team Near- and long-term emerging technologies, technical developments and issues Client Experience Team Focused on ensuring IBMers deliver exceptional client service Performance Team Accountable for business performance & results. Develop cross-unit strategies. Integration and Values Team (I&VT) Integrate IBM s enterprise-wide capabilities, and align and communicate strategies and values 6

7 .of a constant Transformation Framework that drives the interplay of Business Process Excellence, IT Enablement and Organizational Change IBM Strategy IBM Values Transformation Framework Business Process Excellence Organizational Change Management Information Technology Enablement Transformation Focus Areas Enabling Growth Enabling Productivity Enabling Change Growth markets leadership Mergers & acquisitions State-of-the-art sales enablement Value Services Business process excellence IT enablement Transformational leadership Values-based culture Organizational Change Management 7

8 Enabling Growth Enabling Growth Growth Markets Leadership Mergers & Acquisitions State-of-the-art Sales Enablement 8

9 Growth Markets Leadership Enabling Growth Why? Emerging markets growing at more than twice the rate of major economies Growth markets source of global innovation, high-value, and competitively-priced skills Latin America Middle East & Africa Central & Eastern Europe India S Asia Australia New Zealand S Korea Greater China Group ASEAN What we ve done Executed growth strategies by market and industry Leveraged established business relationships for competitive advantage Enabling clients with fast scaling and flexible environments Created/based Growth Markets unit in Shanghai Leveraged efficiencies from global support functions to free up investments Focused management system on future and current period Impact IBM s business in growth markets grew 10 points faster than major markets in 2011 Growth countries contributed 22% of IBM s 2011 geographic revenue Revenue in Brazil, Russia, India and China up 16% in countries grew double digits at constant currency 9

10 Mergers & Acquisitions Enabling Growth Why? IBM growth strategy includes acquiring high-value solutions, entering new markets and exiting non-core businesses IBM s revenue growth must come from both organic and non-organic sources to meet investor expectations What we ve done Over the past 5 years, invested $18B in acquiring nearly 60 companies Continued to divest non-core businesses Acquired technologies AND business models to create new revenue and deliver additional value End-to-end M&A process with Integration Executives appointed Best in class deal management tool to manage global cross-functional teams Post-acquisition performance metrics aligned with our management system 10 Impact IBM s acquisitions played a key role in revenue growth and profitability over the past 5 years Efficient divestitures program around non-core assets continues to help profitability M&A continues to enhance IBM s position as a global IT leader in strategic areas, e.g. business analytics

11 State-of-the-Art Sales Enablement Enabling Growth Why? Needed to capture new accounts and grow organic revenue Needed to improve sales productivity by better aligning resources & opportunities Needed to support sellers in integrating IBM on cross-brand deals What we ve done Worked with IBM Research to apply advanced analytics to sales issues Created Sales Transaction Hub one-stop shop for pre-sales support Worked with business unit leaders to ensure relevance, buy-in and ownership Analytic tools now used by business units as part of planning process Capture our best client proposals and collateral for reuse Impact Optimization of sales assignments based on analytics resulted in $1B in revenue opportunity over 4 years Territory Optimization Program deployed -well-deployed reps outperforming others by 10% on average Sellers report reusable proposal collateral saves hours of preparation time Sales Transaction Hub increased win rates and reduced the cycle time to close deals 11

12 Enabling Productivity Enabling Productivity Value Services Business Process Excellence IT Enablement 12

13 Our Shared Services model allows IBM to provide support to all IBM business units efficiently and effectively Enabling Productivity IBM GIE Shared Services Information Technology Marketing and Communications Legal Real Estate Operations Finance Sales Management Support Integrated Supply Chain Human Resources / Admin Sales Transaction Hub INTEGRATE AUTOMATE OPTIMIZE ELEVATE Capitalize on talent and skills around the world Global support for the local front office INTEGRATE AUTOMATE OPTIMIZE ELEVATE We no longer have to replicate IBM from floor to ceiling in every country. We are optimizing key operations in the right places in the world eliminating redundancies and excess overhead and integrating those operations horizontally and globally. This is about doing the right tasks, with the right skills, in the right places. - Sam Palmisano, IBM Chairman, President and Chief Executive Officer 13

14 Enterprise Transformation contributes improved business performance and has achieved over $8B through 2011 Enabling Productivity Value Services Progress To-Date Shared Services Spend ($B) Year-to-Year Enterprise Productivity Savings ($B) $5.3B spending reduction in Shared Services from 2005 through 2011 $2.8B productivity improvement from Enterprise Transformation Initiatives In 2011 IBM delivered $1.9B against $8B 2015 productivity objective Shared Services Enterprise Transformation Initiatives 14

15 Business Process Excellence Enabling Productivity How we did it Focused on driving horizontal, end-to-end process improvements and put senior leaders in charge of key processes Developed hundreds of professionals with business process skills, including Lean Sigma black belts Simplified and standardized processes across business units and geographies Package-enabled business transformation, based on SAP software, provides global template for consistent deployment Identified principles for radical simplification Radical Change Simplification Impact Process improvements contributing to growth & productivity: $1.4B in productivity gain in process transformation & integrated operations in two years Hardware Product Management: reducing product portfolio and design complexity Reduced feature and options by 35% and systems portfolio by 40% Use of labor analytics to manage technical delivery resources Unassigned resources bench has improved from 8 percent to 3 percent Utilization improved 18 percent over four years First release of Blue Harmony in China in 2011 integrates data from multiple legacy systems into a single instance, managed within SAP Current Baseline Horizontal Integration 15

16 Supporting (Foundational Processes) Enabling (Enables Client Facing) Operating (Client Facing) Our Enterprise Process Framework (EPF) provides a common taxonomy and reference for all IBM business processes Enabling Productivity The EPF includes 3 categories of Level 1 processes cutting across business units and geographies Hardware Software Services Americas NE/SW IOT GMU Japan Americas NE/SW IOT GMU Japan Americas NE/SW IOT GMU Japan 1.0 Idea to Market EPF Overview Process taxonomy designed to help categorize information on business processes to support transformation, operational and deployment activities Common processes are logically grouped and displayed once with a single process owner, but can be used by many business areas Enable organization to understand inner workings from a horizontal process viewpoint, rather than a vertical functional organization point of view. 2.0 Market to Opportunity 3.0 Opportunity to Order 4.0 Order to Cash 5.0 Support 15.0 Deliver Services 6.0 Develop Strategy to Execute 7.0 Plan and Manage Client Relationships 8.0 Manage Sales and Channels 9.0 Procure to Pay 10.0 Manage Human Resources 11.0 Manage Finances 12.0 Manage Business Transformation & Information Technology 13.0 Manage Web & Business Support 14.0 Manage Financing Services 16

17 IT Enablement Enabling Productivity How we did it Impact Began with a massive consolidation: 128 CIOs to one 155 data centers to 5 16,000 applications to 4500 Capitalized on open standards & virtualization servers consolidated since 2008 Created GenO - global, virtual community uses collaborative practices to develop software Leveraged Cloud to share resources, rapid scaling & self-service Transformed intranet into robust social networking platform Developed branch office in a box IT $1.75B in IT savings since 2005 Project Green to deliver 80% energy cost savings & 85% floor space reduction Develop/Test Cloud server supports 5000 images, 500 projects and 1000 developers Social Computing fuels collaboration 155K employees in Technology Adoption Program (up 48% from 2010); 600K+ users in Lotus Connections. Growth market branch offices increased significantly to 222 branches through 2011 TAP: Driving Early Adoption Application Portfolio Mgmt SOA for Enterprise Flexibility BlueInsight Analytics Cloud Security for Global Business Project Big Green 17

18 IT E/R Support IBM s 2015 Financial Roadmap Enabling Productivity FROM 2003 to TRANSFORM % +17 pts IT Spend Trend and 2015 Roadmap UPDATE GRAPH R u n T ra n s fo rm IB M E /R 24% 27% 30% Total IT Spend 32% 32% 33% 37% 39% 39% 39% 40% 41% 41% 16% 35% Note: E/R is the ratio of IBM total IT spend to IBM total revenue 18

19 Enabling Change Enabling Change Transformational Leadership Values-based Culture Organizational Change Management 19

20 Transformational Leadership Enabling Change Why? Need to develop global leaders for the 21st Century who: have a global orientation foster employee engagement inspire IBMers to think and work together enable IBMers to execute IBM s strategy in the face of uncertainty IBMers at our Best: Our Competencies Embrace challenge Partner for clients success Collaborate globally Act with a systemic perspective Build mutual trust Influence through expertise Continuously transform Communicate for impact Help IBMers succeed What we ve done Created a collective leadership force of senior leaders accountable to integrate IBM and lead by Values (Integration & Values Team or I&VT) Deployed Business Leadership Model which links strategy to execution Identified critical roles and built multi-year talent pipelines Refreshed a core set of leadership competencies for all IBMers Defined a new Leadership Framework focused on business results and employees experience Impact IBM ranked #1 in 2011 Global Top Companies for Leaders I&VT leaders model integration and enable key transformation efforts IBMers are focused on a set of competencies that are empirically linked to performance IBM continues to deliver performance while transforming 20

21 Values-based Culture Enabling Change Why? Needed to re-establish a set of Values as the core of IBM s culture and brand Expanding the IBM brand experience beyond products to integrated solutions and people Evolving the IBM management system to leverage global / cross unit integration What we ve done Engaged employees globally in Values Jam to refresh our Values (2003) Conducted World Jam with employees to collaborate on solutions for growth, innovation and bringing the Values to life (2004) Resulted in a set of new core values defined by IBM s workforce Created Values that are integral to our performance, recognition and talent management systems Engaged leaders at all levels on enabling our Values-based culture locally and globally ValuesJam

22 Organizational Change Management Enabling Change Why? IBM is in a constant state of transformation, engaged in a stream of concurrent initiatives Some IBM initiatives have experienced uneven adoption and impact Need for a disciplined change management capability on key transformational initiatives What we ve done Launched a Center of Excellence to provide leaders with Organizational Change Mgmt. advisory services Deployed a common method and tools: Better Change for IBM Strengthening change management capability of our leaders and teams, globally Embedding change management discipline into key transformation projects Created a worldwide on-line community of change management practitioners Using social business technologies to engage IBMers in transformation Impact Change management is recognized by leaders as improving adoption and business impact: The change mgmt. plan allowed local leaders to deploy aggressive coverage model changes while minimizing business disruption and driving adoption instrumental in early success. - VP, Sales Coverage 22 Our project required Brands and Geographies to agree on common priorities for the good of the enterprise. Stakeholder alignment as a part of change management was ongoing and critical for success. - VP, BT/IT Enterprise Transformation