The 2009 Outsourcing World Summit

Transcription

1 The 2009 Outsourcing World Summit The Emergence of a Global Integrated Enterprise Bill Payne Vice President Strategy and Development IBM Business Process Services

2 The 2009 Outsourcing World Summit Bill Payne, VP IBM Bill Payne is Vice President of Strategy and Development in Managed Business Process Services (MBPS) in IBM. The role encompasses the development of the business strategy and service development for MBPS in Europe, including IBM s drive to offshore Business Process outsourcing. In the last three years, Bill has spearheaded the development and delivery of MBPS services in procurement, finance and accounting, and HR. Bill has also led major deals from inception through to delivery and has been responsible for the management of IBM s recent acquisitions and development of new targets.

3 The Story The Story What s Driving This Emergence? The Globally Integrated Enterprise Three Prism View Innovation Service Delivery Domestic Opportunity The Next 10 Years

4 IBM s journey to become a Globally Integrated Enterprise encompasses our ongoing business transformation In the 1990s, IBM was fast becoming marginalised in the marketplace and needed to regain customer and shareholder confidence Company-wide business process reengineering was performed as we renewed our focus and dedication to our clients wants & needs These past and ongoing actions have helped form the basis for IBM s 21 st century business design The Globally Integrated Enterprise

5 The Story The Story What s Driving this Emergence? The Globally Integrated Enterprise Three Prism View Innovation Service Delivery Domestic Opportunity The Next 10 Years

6 The Globally Integrated Enterprise will replace the multinational corporation for competing in the Flat World 19 th Century 1914 (World War I) 1914 (World War I) beyond International Corporation Independent enterprises emerged and explored overseas markets Imported raw material and exported manufactured products through international trade routes All operations handled at HQ Vertically integrated operation Multinational Corporation Wide-spread protective trade laws closed trade routes of the past Replicated HQ org. & functions at regional centers Manufactured and sold within local/regional boundaries Mini-companies covering regions Local/regionally centered operation Globally Integrated Enterprise Free trade, overseas investment, IT revolution, open standards of technology & processes Focused on optimizing operations beyond country boundaries Shift from what to make to how to make Open Network Horizontally, globally integrated operation

7 The Globally Integrated Enterprise represents a business design for the 21 ST century Globally Integrated Enterprise Global Resources Global Production Global Infrastructure A Globally Integrated Enterprise shapes its strategy, management and operations in a truly global way. It locates operations and functions anywhere in the world based on the right cost, the right skills, and the right business environment. And it integrates those operations horizontally and globally.

8 Technology and business landscape changes are driving the requirements for global integration Global Resources Global Production Enabling Culture and Legislation Global Infrastructure Technology Landscape Changes Business Landscape Changes Localized Global Infrastructure Local Resources Global Resourcing Proprietary Open Proprietary Innovation Open Innovation Custom IP Asset-based Simple Value Chain Componentization

9 To become globally integrated, requires aligned strategic, operational, and IT infrastructure transformation efforts, all guided by a shared set of global company values Strategic Transformation Operational Transformation IT Infrastructure Transformation Strategy linkage linkage Business Processes & People Enabling Technology & IT Infrastructure

10 The Sourcing Argument: The Old models are the best. used in a modern way Somewhere On EARTH Good At Bad At Make it Better Outsource Something Source 1990 s Thinking Noughties Thinking?

11 A Universe of Modular Business Services Allows Even Small Businesses and Start-ups to Become Globally Integrated Setup Your Resources Build Your Product Reach Your Customers Service Your Customers Support Your Business

12 The Story The Story What s Driving This Emergence? The Globally Integrated Enterprise Three Prism View Innovation Service Delivery Domestic Opportunity The Next 10 Years

13 We look at emerging markets through three distinct prisms Global Innovation Hubs Global Service Delivery Domestic Opportunity

14 Selecting the right point of delivery is key People Skills & Availability Financial Skills Availability Language Skills Size of Labor Force Unemployment Rate Salary + employer social costs Country Infrastructure Flexibility of Labor Government Support Political Environment Economic Freedom Corruption Currency Stability Data Privacy Financial Structure Business Environment Category Definitions Financial Structure Compensation Infrastructure costs Tax & regulatory costs People & Skills Availability Relevant experience Size & availability of workforce Education Language skills Attrition risk Business Environment Country stability risk Country infrastructure Cultural adaptability Security of IP Environmental

15 Philippines Other low-wage Asian countries** Poland Canada Russia Other Eastern European Countries** Mid-wage Asian Countries** Germany Japan In field after field, low-cost global talent is reshaping global business Relative Cost Relative Cost and Supply of Young Professional Engineers* Demand: 596k Ireland South Africa Other Latin America Countries** Hungary Czech Republic Mexico 2.6 Malaysia Brazil 2.2 UK US 1.8 India China ,000 1,200 1,400 1,600 1,800 2,000 2,200 Size of Suitable Labor Pool (k) Source: McKinsey Emerging Global Labor Market 2005 * Less than or equal to 7 years of work experience; supply does not consider limited talent accessibility and domestic labor demand ** The LCI values for other countries are estimated Location Cost Index Weighting emphasizes Cost above other measures including: domestic market, environment, vendor landscape, risk profile and quality of infrastructure

16 Outsourcing today involves a broad spectrum of talent Likely Low-Wage Suitable Labor Supply (2008) Position Type Supply (K) Support Staff 5,000 Generalist Young Prof. 3,245 Finance/ Accounting 2,184 Analyst Young Prof. 1,799 Nurses 1,089 Engineering Young Prof. 946 Doctors 742 Life Science Young Prof. 333 Full Time Equivalents Young Prof. Young Professional, less than or equal to 7 years of work experience Assumes constant suitability rates from 2003 to 2008, aggregated low-wage supply from 28 Companies Source: McKinsey Emerging Global Labor Market 2005 India Medical Packages Dental Care Eye Care Heart Care Heart Surgery Cosmetic Treatment Nephrology Psychiatry Urology

17 For example, in moving work to where it can be done best, we deployed eleven support functions as global shared services 11 Globally Integrated Support IBM Communications Business Transformation & Information Technology Governmental Programs Contracts & Negotiations Finance 11 Shared Service Support Functions Human Resources Integrated Supply Chain Global Real Estate Operations Legal Global Sales Operations Marketing

18 And we globally integrated in order to participate in the world s growth markets and improve our productivity Focus on four emerging countries as key to our growth and global sourcing strategy IBM Continues to extend its reach into high-growth markets around the world, In 2006, the company grew in, Brazil with primary sites in Hortolandia, Sao Paulo and Rio de Janeiro India with primary sites Bangalore, Pune, Delhi, Kolkata, Hyderabad and Chennai China with primary sites Shanghai, Dalien and ShenZhen Russia with primary sites Moscow and St Petersberg IBM Established 1917 IBM established 1951 IBM Established 1939 IBM Established 1974

19 The Story The Story What s Driving This Emergence? The Globally Integrated Enterprise Three Prism View Innovation Service Delivery Domestic Opportunity The Next 10 Years

20 There continues to be vigorous societal debate over globalization Has globalization made the world grow faster? Has poverty declined at a faster pace during globalization? Who gained from globalization? free trade doesn t promote growth in either developed or developing countries, but simply shifts well-paying American jobs to Third World sweatshops. A market economy is the only arrangement capable of generating sustained increases in prosperity, and the world needs more, and better, globalization Economic theory does not say that everyone will win from globalization, but only that the net gains will be positive, and that the winners can therefore compensate the losers and still come out ahead

21 While companies continue to push ahead to capitalize on global integration 75% actively enter new markets in pursuit of new customers and scarce talent 86% plan fundamental changes in capabilities that distinguish leading organizations knowledge and asset mix 85% of CEOs plan to partner to globally integrate more than half plan to do so extensively Source: IBM Global CEO Study 2008, n = 872, n=860, n= Actively enter new markets 43% 37% 37% Deeply change mix of capabilities, knowledge and assets Partner extensively 75 % * 20% % 86 % * 32% 11% % 85 % * 35% 10% Defend your core Maintain current mix Do everything in-house * total % of CEOs who answered between left hand side 3 to 0 (0 = both sides equally important)

22 Questions to consider for becoming a Globally Integrated Enterprise» Where am I today?» What are my target markets and value proposition?» What capabilities do I need?» What operating model will work for me?» How can we get there? Globalization Open Standards Deregulation Commoditization Internet Changing Demographics

23 The 2009 Outsourcing World Summit Thank You for Listening