Ibmstransformationjourney 110428234051 Phpapp01

IBMs Transformation Journey
Enabling growth, productivity, and culture change
George Mattathil 4/28/2011
2009 IBM Corporation
IBMs 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%
$10
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)
$16
Revenue ($B) EPS

Pre-tax income Free Cash Flow EPS $10
$6
16% 2003 49% Segment Revenue Mix 35%
21%
2008 Segment Revenue 21% Mix
57%
Software Services Hardware & Financing
$4 2000 2001 2002 2003 2004 2005 2006 2007 2008
$2
$8.93 Earnings Per Share, up 24% Strong performance in services, software and growth markets
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
The Evolution of the Enterprise

20th
Century
IBM Strategy
21st
Century
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
IBMs 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
Enabling Growth
Enabling Growth
Growth Markets Leadership Mergers & Acquisitions
Client Value Focus

State-of-the-art Sales Enablement
Growth Markets Leadership

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
Central & Eastern Europe Middle East & Africa
Enabling Growth
What weve 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 cant leapfrog into being a global company.Youve got to be committed for the long term, and you have to invest, on multiple levels.
Sam Palmisano, 2007 IBM Annual Report
Growth Markets Leadership (continued)

How we did it
Created Growth Markets unit in Shanghai
Covers nearly 150 countries across Asia, Africa, Eastern Europe & Latin America
Enabling Growth
Impact
IBMs business in growth markets grew by 10% in 2008 Revenue in Brazil, Russia, India and China (BRIC) up 15% in 2008 Growth countries contributed 18% of IBMs 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
Mergers & Acquisitions
Enabling Growth
Why?
What weve done
IBM growth strategy includes acquiring high-value solutions and exiting commoditizing businesses
IBMs revenue growth must come from both organic and non-organic sources to meet investor expectations
Over past 5 years, invested nearly $16B in acquiring more than 70 companies
Continued to divest low growth, low margin, commoditizing product lines
Acquired new technology AND complementary business models and channels to create new revenue
In todays rapidly changing marketplace, one must look atall sources of innovation to sustain ones value proposition to the customer. As a consequence, IBM has become more and more acquisitive. - Mark Loughridge, IBM Chief Financial Officer
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, IBMs 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
Client Value Focus

Why?
To better meet our clients expectation of value; 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 weve 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 clients agenda

Enhanced industry-focused skills and capabilities Aligned market-facing teams around an industry
Client Value
focuses on the client, not IBM is from the clients perspective delivers positive impact
Reinforced Values-based leadership and enhanced employee experience to deliver client value
Client success isnt just the customer is always right. It means maintaining a longterm relationship where what happens after the deal ismore important than what happens before its signed. Sam Palmisano, Harvard Business Review, December 2004
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, leading Chinese retailer, improves competitiveness by combining supply chain & ERP
Order lead time reduced from 2.5 days to 4.5 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, European furniture retailer, implements green data centers to support rapid growth
Energy consumption reduction of up to 40%
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 weve 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 InformationWeeks
Top 20 Great Ideas

OnTARGET is the best resource for getting an overall picture of a territory and identifying high potential accounts. IBM Seller
State-of-the-Art Sales Enablement (continued)

How weve addressed it
Worked with business units frontline to top management to ensure relevance, 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, responsibilities and management systems Look locally...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
Global Shared Services

IT Enablement
Enterprise Integration Shared Services Consolidation/Standards

Common Processes Automation Web Enablement Core vs. Non-Core Global COEs Globally Integrated Support Processes Radical Simplification
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
What weve 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, regionally, globally Elevate: Move resources to higher value-add work to drive further efficiency and effectiveness
Mktg & Comms
Legal Real Govt & Estate Contract Relation
Integrating Globally
Global Shared Services (continued)

How we did it
Established consistent set of processes, measures, 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
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.We are optimizing key operations in the right places in the world eliminating redundancies and excess overhead andintegrating those operations horizontally and globally.This is aboutdoing the right tasks, with the right skills, in the right places. Sam Palmisano, May 20, 2005 Analyst Meeting

Why?
Complexity of processes major source of frustration for employees, partners and clients Unit-specific, geo-specific approaches contributed to complexity and inefficiency Siloed processes inconsistent with vision of globally integrated enterprise
What weve 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, based on SAP
Key opportunity-to-cash processes Financial management processes
Geos
Brands
Sectors/ SMB
Support Functions
Horizontal Integration Integration Horizontal
Business Process Excellence (continued)

How we did it
Focused on driving horizontal, end-toend 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 Identified principles for radical simplification
Radical Change Simplification
Impact
Process improvements contributing to growth & productivity:
Lean Sigma projects drive $100M cost benefit in 2008, 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.S.

2-signature contracts from 2 days to 15 mins 3-signature contracts from 1 wk to 2 hrs
Current Baseline
Horizontal Integration
IT Enablement
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 weve done

Consolidated disparate systems, created common platforms and standards worldwide Centralized CIO role
Established enterprise-wide governance model

Built a flexible, responsive and open global infrastructure Embraced open standards & Web 2.0 technologies
The IT organization plays a strategic rolein driving a firms global competitiveness. Rather than remain on the sidelines, globally-minded CIOs must help shape and drive their companies business transformation initiatives.
".
Forrester Research
IT Enablement (continued)
How we did it
Began with a massive consolidation:
128 CIOs to one 155 data centers to 5 16,000 applications to 4500
Impact
$1.5B in IT savings over past four years; IT E/R reduced by 1.7 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 2.0 fueling collaboration:
110,000 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
Transformational Leadership
Values-based Culture Collaborative Innovation
Transformational Leadership
Why?
Need to develop global leaders for the 21st Century who:
- are culturally adaptable - unleash IBMers energy - leverage IBMs enterprise-wide capabilities
What weve done

Established and periodically refreshed a core set of leadership competencies for all IBMers Pervasive use of competencies for development, 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
- enable IBMers to execute IBMs 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
IBMs Leadership Framework
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, mentors and coaches
Impact
IBMs leaders competencies have steadily improved each year IBMs leaders, at all levels, demonstrate a broader set of effective leadership behaviors I&VTleaders driving integration and enabling key transformation efforts IBMs 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 IBMs Future Strategic Risk Taking
Earning Trust
Enabling Performance and Growth Developing IBM People and Communities
Informed Judgment
Thinking Horizontally Collaborative Influence
Values-based Culture
Why? Needed to re-establish a set of Values as the core of IBMs culture and brand
What weve 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
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
Impact
IBMs Values are integral in our performance, recognition and talent management systems
IBM employees actively participate in advancing our Values-based culturevia collaborative technologies
1500 communities of practice with 250,000+ 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... 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, Harvard Business Review, December 2004
Collaborative Innovation
Why?
Become our clients innovation partner
Address client priorities Build deeper client relationships
What weve 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 organizations 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, said to the world, Here are our crown jewels, have at them. The Jam -and programs like it are greatly accelerating our ability to innovate in meaningful ways for business and society. - Sam Palmisano, IBM CEO
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, idea creation: Jams Content creation: BluePedia Dynamic interaction: Sametime
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 worlds 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
Dear IBM Investor:
Put it all together, and IBM today is very different from what it was when we entered the decade.
Sam Palmisano, 2007 Annual Report, Letter to Investors
Appendix
Lessons Learned How to get started? Global Business Services Portfolio Snapshot Other topics:
IBM at a Glance IBMs History of Transformation IBMs Leadership Governance
Business Transformation / Information Technology Governance

Enterprise Risk Management Corporate Social Responsibility
Other Shared Services Examples:

Integrated Supply Chain
Human Resources
Finance Transformation
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, act and optimize globally Implement governance, performance goals and reporting discipline
Business transformation and IT should be closely aligned Dont automate a mess fix processes first, then apply IT Sunset legacy systems and tools as new ones are deployed Take an end-to-end, 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

Engage leaders at all levels Address the underlying drivers of behavior Engage employees broadly Make culture tangible Recognize that changing culture is a journey
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?
Are we leveraging scale, global talent and resources across our organization? Do we have the capabilities to quickly cut lowvalue spending and redeploy to activities, products, markets that generate growth/productivity? How effective and efficient are our support functions (e.g., 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?

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?
IBMs GBS portfolio supports Transformation

Practice Areas Strategy & Change (S&C)
Customer Relationship Management (CRM) Supply Chain Management (SCM)

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
IBM Strategy and Change - What we offer

IT Strategy & Planning Service Oriented & Enterprise Architecture IT Performance Management
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 IBMs unique research and technology capabilities
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, 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
Organization Design
Clarify work responsibilities and redefine jobs as well as their relationships to one another (structure), governance mechanisms, and other organizational elements to drive new behaviors Realign key performance measures (e.g., job measures, 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
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 transformations success
Stakeholder Engagement and Communications

Identify, classify, align, 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, set expectations, and create buy-in, or commitment, 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, measurements, structures, processes, etc) and soft-wired (mindsets, business practices, behaviors) components
IBM at a Glance: Y/E 2008
IBM at a Glance
Revenue Pre-Tax Profit
$103.6B $16.7B
Global Presence Employees Business Segments
170 Countries
398,455
Services, Software, Hardware, Research and Financing
Business Model
Helping clients succeed in delivering business value by becoming more innovative, efficient and competitive through the use of business insight and information technology (IT) solutions, and providing long-term value to shareholders
IBMs Transformation: An Ongoing Journey

Keeping company together & stabilizing business
Focus Areas
IBMs History of Transformation
Bringing massive decentralization under control (e.g., 128 CIOs to 1; 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, structure and culture to a world of constant change. I cant promise this journey will be easy or fast the steps we will take will not be pussyfooting but bold strides. -- Lou Gerstner, 1993
1993
1995
1997
1999
2001
2003
2005
2007
2009
Phase One
Gerstner era (93 thru 2002)
IBMs Transformation: An Ongoing Journey (continued)

Thecrisis in our financial marketshas jolted us awake to therealities and dangers of highly complex global systems. But in truth, the first decade ofthe 21st century has been a series of wake-up callswith a single subject:the reality of global integration.- Sam Palmisano, Nov. 6, 2008
Focus Areas
IBMs 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)
IBM Leadership Governance Model

IBM Organization At a Glance
Geographies
North America
IBMs 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
IBMs strategic direction and emerging business opportunities
Financial Services
Distribution
Technology Team
Near- and long-term emerging technologies, 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.
Globally Integrated Support Functions

HR Comms IT Finance Legal Sales Marketing/ Strategy Operations
Integration and Values Team (I&VT)

Integrate IBMs enterprise-wide capabilities, and align and communicate strategies and values
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
Enterprise Risk Management
ERM
Why?
Contribute to consistent growth and economic return by improving the companys ability to take calculated & fully-informed risks
What weve 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, country by country, or contract by contract isn't adequate.- Mike Daniels, SVP GTS
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, implemented actions, and defined metrics for ongoing monitoring
Risk assessments in Brazil, Russia, India, China, and Argentina established common frameworks and improved risk outcomes:
Integrity in the Hiring Process: 13K new hires, 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 99.7% compliance
Corporate Social Responsibility

What weve 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, 2.8 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 100,000 registrants and over 6 million total hours of volunteer time,the On Demand Community is an extraordinary example of corporate philanthropy. Even more than the massive numbers, it is notable for leveraging the core strengths of IBM its technology and the vast skills of its employees to make a global difference.
- David Eisner, CEO, Corporation for National and Community Service
Desire to create real solutions (not just make donations) and deliver innovation that matters the world
Corporate Social Responsibility (continued)

How weve done it
Empowering IBMers to acquire new skills, transition to new careers and make a difference in the world Created the Global Citizens Portfolio:
Corporate Service Corps Personal Learning Accounts Transition2
CSR
Impact
Corporate Services Corps
sending 1,500 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, cancer, dengue fever, 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
Integrated Supply Chain

Why?
The ISC is accountable for $40 billion, or roughly 50 percent, of IBMs 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 weve done

Established online links to suppliers, partners and clients, cutting processing time for average PO from a month to less than a day 95% of business partner orders now touchless In 2002, formed the Integrated Supply Chain as a single business unit Manage entire ISC from procurement and logistics to strategy and planning -- on a global basis (moved procurement HQ from Westchester to Shenzhen, China) Consolidated transaction processing in global delivery centers in Malaysia, Bratislava, 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...I think the interesting thing is the strategic implications. For IBM it sayswe are shifting, yet again,from being a traditional manufacturing business, to a solutions business. - Kevin OMarah, AMR Research
Integrated Supply Chain (continued)

How weve 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, speak 80 languages, 31K suppliers connected online In 2005, introduced worlds 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; now spending 38% more time with clients Turning orders 32% faster and improving client satisfaction
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 weve 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 30,000 new employees a year globally
The globally integrated enterprise will require fundamentallydifferent approachesto production, distribution, andwork-force deployment.New kinds of managerial skillsare also needed. - Sam Palmisano, Foreign Affairs, 2006
Human Resources (continued)

How weve done it
Aligned Talent, Learning and Diversity as one integrated function Established HR Integrated Services Team with specialized skills and practices Transformation to a new HR partner model; 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 100,000 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 Bus. Partners
Support Support
Delivery
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 weve done

Drove 3-prong approach to finance transformation: process, data, IT Standardized processes & controls Created common ledger, common data definitions, 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
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% in05 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 $2.1B 3.3% 1996 15 95 8 $1.4B 1.8%
Change 2005 vs. 1994 6 44 7 $1.2B 1.3% -91% -70% -62% -43% -2.0 pts
Trademarks and notes

IBM Corporation 2011
IBM, the IBM logo and ibm.com are registered trademarks, and other company, product or service names may be trademarks or service marks of International Business Machines Corporation in the United States, other countries, or both. A current list of IBM trademarks is available on the Web at Copyright and trademark information at www.ibm.com/legal/copytrade.shtml
Adobe, the Adobe logo, PostScript, the PostScript logo, Cell Broadband Engine, Intel, the Intel logo, Intel Inside, the Intel Inside logo, Intel Centrino, the Intel Centrino logo, Celeron, Intel Xeon, Intel SpeedStep, Itanium, IT Infrastructure Library, ITIL, Java and all Java-based trademarks, Linux, Microsoft, Windows, Windows NT, the Windows logo, and UNIX are trademarks or service marks of others as described under Special attributions at: http://www.ibm.com/legal/copytrade.shtml#section-special Other company, product and service names may be trademarks or service marks of others. 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.
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
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IBMs Transformation Journey

Enabling growth, productivity, and culture change

George Mattathil 4/28/2011

2009 IBM Corporation

IBMs Ongoing Transformation Journey

Shift in geographic mix 2008 revenue:

Strengthened position in:

71% of employees outside US

Record Performance in 2008

Acquired over 60 companies in last 5 years

Pre Tax Income & Free Cash Flow ($B)

Revenue ($B) EPS

16% 2003 49% Segment Revenue Mix 35%

2008 Segment Revenue 21% Mix

$4 2000 2001 2002 2003 2004 2005 2006 2007 2008

IBM Strategy and Values

Building a Smarter Planet

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.

2009 IBM Corporation

The Evolution of the Enterprise

The international era -- exporting

The multinational era -- replicating

A globally integrated enterprise-- business in a connected world

2009 IBM Corporation

IBMs Approach to Transformation

Guided by the IBM Strategy and grounded in our Values

Business Process Excellence

Information Technology Enablement

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

Transformation Focus Areas

Enabling Culture Change

2009 IBM Corporation

Growth Markets Leadership Mergers & Acquisitions

Client Value Focus

2009 IBM Corporation

Growth Markets Leadership

What weve done

Asia Pacific Latin America

Capturing opportunities to build out public & private infrastructures

2009 IBM Corporation

Growth Markets Leadership (continued)

Leveraged efficiencies from global support functions to free up investments

Focused management system on future and current period

2009 IBM Corporation

Mergers & Acquisitions

What weve done

Mergers & Acquisitions (continued)

Post-acquisition performance metrics aligned with our management system

2009 IBM Corporation

Client Value Focus

What weve done

Increased industry orientation to serve the clients agenda

Client Value Focus (continued)

Client based Measurements

Client First Organization

City of Stockholmbreaks gridlock with a smart road management system