e-business@ibm: fusion of business and it sim new...

e-business@IBM: Fusion of Business and ITSIM New York ChapterSeptember 9, 2002

Cathy LasserCathy LasserVice PresidentVice President

Service Provider Operations and B2B InitiativesService Provider Operations and B2B InitiativesBT/CIOBT/CIO

1 IBM Transformation Story for SIM 090902.PRZ 09/12/02 8:55 AM

Agenda

State of e-business

IBM's Transformation

Governance of Transformation

e-business@IBM

Architecture, Infrastructure and IT Efficiencies

Lessons Learned


Buzz on e-business still shows significant value to be captured

The efficiencies to be gained from collaborative design and supply chain coordination are

still in their infancy. – Forrester

Web merchants that set more modest growth goals in the first place... generally fared better

than their "growth at any cost" counterparts.

– New York Times

Selling to consumers online still makes sense. What didn't

make sense were business models that didn't reflect a

plan for profitability. – InfoWorld

Something surprising has emerged from the ashes of the Internet bust. A few dot-coms are actually making money.

– Wall Street Journal

The bubble of e-Marketplace euphoria popped sooner than expected, although

this should surprise no one... A return to sound business principles

and the resetting of realistic expectations means that the B2B

market can expand more rationally.– Gartner


e-business is just "plain old business" enabled by Internet technologies

The maximum benefits of e-business come from integrating Internet technologies into your core processes, opening up opportunities to link employees, customers, suppliers and distributors anytime, anywhere, driving revenue and profitability


Expectations are increasing

The demand for coordination across value chains, functions, markets and geographies will continue to accelerate, and it will be impossible to respond to this challenge without driving new ways of thinking through corporate ranks.

– IDC

CIOs expressed continued significant pressure to constrain spending increases while simultaneously investing to introduce innovative, customer facing and revenue-generating functionality in an increasingly networked environment.

– Morgan Stanley


So is the "pain"

Aligning IT with global business objectives

Measuring IT value

Evaluating complex trade-offs

Pet projects

Searching for an alignment process that is simple, logical, repeatable and proven


Top IT Priorities

Source: Merrill Lynch, 2002

ERP Implementation

Security / Disaster Recovery

CRM

Application Integration

Storage

e-Commerce

How to get more value


IBM's Transformation


1984 1992

"The IBM Era Is Over ... what was once one of the world's more vaunted high-tech companies has been reduced to the role of a follower, frequently responding slowly and ineffectively to the major technological forces reshaping the industry." - The New York Times, Dec. 16, 1992

When Lou Gerstner arrived at IBM, the company was on the verge of dissolution


24 independent 24 independent business unitsbusiness units

Redundant Redundant processesprocesses

Disconnected Disconnected information information systemssystems

$B

'85 '93 '01-20

0

40

80

120

Market ValueMarket Value

RevenueRevenue

ProfitProfit

160

200

The IBM Journey


IBM has undergone a major financial, competitive and cultural transformation

Restructuring began with a fundamental examination of everything IBM was doing and the processes by which the enterprise was being run

Serious self-assessment looked at:cost structurecompetitiveness of our productsstrategic directionbasic value proposition to our customers

Answered core questions:Where to concentrate resourcesWhere to investWhere to disinvestWhere to put energy in order to lead markets


FocusOur unique competitive advantage was our ability to serve our customers

GlobalizationTo be truly global required IBM to organize around customer groups

Competitive BenchmarkingNeed to quantify what it will take to be the best

Key characteristics of IBM's restructuring


Key characteristics of IBM's restructuring (cont'd)

ReengineeringInternal information infrastructure had to be completely reengineered

worldwide databasesmarketing systemsfinancial systemsfulfillment systemsmanufacturing systemscustomer care systems

Cultural ChangeObsession with the marketplaceSpeed of executionTeamwork is critical


Transformation is hard work

"You must have an institutional commitment to stay with this program over multiple years. And understand the hard part isn't getting started. The hard part is seeing the changes through until you've achieved whatever objectives you set. . ."

"This isn't just a matter of reassembling companies, assets and industries. Any truly serious, meaningful restructuring begins with a fundamental examination of everything you do. . .and the processes by which you run your enterprise."

– Lou Gerstner


Driving cultural change is difficult but possible

Customer focused

Breakthrough thinking

Drive to achieve

Teamwork

Team leadership

Decisive execution

Straight talk

Organizational capability

Internally focused

Inflexible

Entitlement

Internal Competition

Turf-protecting

Bureaucracy

Good news only

Redundancy


Speed

Passion for the Business

Sustain

M

omentum

Mobilize

ToE

xecu

teFocusto Win

Cus

to

mers

CompetitionFocus to win

Customer insightBreakthrough thinkingDrive to achieve

Mobilize to executeTeam leadershipStraight talkTeamworkDecisiveness

Sustain momentum Building organization capabilityCoachingPersonal dedication

The corePassion for the business

Building and retaining strong leadership is key


Governance of Transformation


Today, IBM CIO governs the transformation of core processes

Customers Suppliers

Employees

Integrated Product Development

Integrated Supply Chain

Procurement Production Fulfillment

Human Resources Finance

Market Planning

Customer Relationship Management

Stakeholders


Customer Facing

(SVP of Sales)

Supplier Facing (SVP of

Manufacturing)

Enterprise Information (CFO)

Value Chain Boundaries

Value Chain Owners (Business Unit GMs)

CRMDemand /

Supply Planning

Sales Procure

Distributed S/W

OEM H/W

Configured H/W

Financing

Services

Entitled S/W

Part-numbered H/W

Business Policies and Rules

Customers Suppliers

We shifted our focus from process commonality to value chain optimization with an emphasis on end-to-end integration


MarketPlanning

SupplyChain/

OfferingDelivery

SalesDemandGeneration

Product/OfferingDevelop.

MarketPlanning

SupplyChain/

OfferingDelivery

SalesDemandGeneration

Product/OfferingDevelop.

Value Chains

SuppliersCustomers

MarketPlanning

Post-Sales

Support

SupplyChain/

OfferingDelivery

SalesProduct/OfferingDevelop.

DemandGen.

Value chain model allows for customization while still fostering the "One IBM" for customers and suppliers


Global Services is our "contractual" transformation partner for implementation and operations

BT/CIO sets strategyGlobal Services executes

BT/CIO sets measurementsGlobal Services tracks achievement

BT/CIO aligns priorities, appraisal and pay

Global Services' prioritiesThought implementation leadership in e-businessBusiness value and reduced costImproved service delivery quality to enhance productivity and job satisfaction


Desired State

Initiatives

Strategic Priorities

Budget

IBM's approach to e-business investments identifies priorities and transformation initiatives

Identify priorities for enterprise, business unit

Identify e-business capability to support process changes - gap analysis

Identify re-engineering actions

Prioritize initiatives


e-business@IBM


e-business@IBM: Key Investments and Returns

SuppliersCustomers

Employees

Stakeholders

Customer-facing Processes


ibm.com

CRM-Siebel

e-Care

Total Order Management

B2B

Real-time use of information

We are simplifying and integrating customer-facing processes


Revenue$12 Billion in 2001, up 41% YTY14% of IBM's global S&D sales, up 4 points YTY

On-line shopping and purchasing experience14,000 products and services available online60% of "CallMe’s" converted to sales vs. 36% for inbound calls

The role of ibm.com is to develop e-relationships with customers


Customer Relations

+7,600 Siebel seats in 35 countries+7,600 Siebel seats in 35 countries

Call center productivity up 26%Call center productivity up 26%

Telesales 40% less than face-to-faceTelesales 40% less than face-to-face

Portfolio fulfillment apps reduced by 36%Portfolio fulfillment apps reduced by 36%

Fulfillment

Response time cut from 20 minutesResponse time cut from 20 minutes

Almost 70% of orders are "touchless"Almost 70% of orders are "touchless"

IBM's Results: Operational Efficiencies


SuppliersCustomers

Employees

Stakeholders

Supplier-facing Processes



e-Design

Demand supply planning

Strong participation in standards: RosettaNet / UDDI

e-Procurement and supplier management

We are simplifying and integrating supplier facing processes


Delivery cost / revenue reduced by 22%Delivery cost / revenue reduced by 22%

Integrated Supply Chain

On-time delivery improved to 95% from 30%On-time delivery improved to 95% from 30%

Procurement

33,000 suppliers33,000 suppliers

95% of goods and services95% of goods and services

$405M in savings in 2001$405M in savings in 2001

Order-to-delivery cycle time improved by 46%Order-to-delivery cycle time improved by 46%

IBM's Results: Operational Efficiencies


SuppliersCustomers

Employees

Stakeholders

Employee-facing Processes



We are simplifying and integrating employee-facing processes using our intranet as the foundation

HR

e-Learning

Lotus Notes and Domino

Knowledge Management


e-Learning

Benefits of distance learning have significant impact

26%26%

1999

Total Education Days 1.7M1.7M

Cost Avoidance $200M$200M

36%36%

2000

2.6M2.6M

$350M$350M

43%43%

2001

2.8M2.8M

$395M$395M

Total Distance Learning Days 442K442K 953K953K 1,236K1,236K

48%48%

YTDQ202

1.0M1.0M

$163M$163M

494K494K


SuppliersCustomers

Employees

Stakeholders

Financial Benefits of Transformation

e-business@IBM: Overall Transformation Results


We continue to gain financial benefits of transformation

e-Procurement

1999

Sales Via the Web

Service Transactions Via the Web

e-Learning

2000 20011998

$27B$27B$7B$7B

$3B$3B $15B$15B

14M14M 42M42M

26%26%N/AN/A

$43B$43B

$23B$23B

100M100M

36%36%

$40B$40B

$27B$27B

121M121M

43%43%

YTDQ202

$17B$17B

$11.5B$11.5B

63M63M

48%48%


Financial benefits of transformation contribute to bottom line

e-Procurement

1999

e-Support for Customers

Distance Learning

2000 20011998

$272M$272M$240M$240M

$300M$300M $750M$750M

N/AN/A $200M$200M

$377M$377M

$1.5B$1.5B

$350M$350M

$405M$405M

$1.4B$1.4B

$395M$395M

Cost Avoidance 1998 - Q202

YTDQ102

$171M$171M

$683M$683M

$163M$163M

$7.2B$7.2B


Architecture, Infrastructure and IT Efficiencies


Leverage strategic assets to:Enable rapid decisions Establish clear accountability Enable exploitation of information and knowledgeOptimize the infrastructure to support shared services

“Deliver an agile, global, standard information infrastructure for our employees, customers, suppliers and shareholders”

The benefits of change ...

Resulting in:Responsive changes to marketplace and customer needsImproving competitiveness & fueling of growthHigher returns on investmentsCustomer confidence


Before155 data centers

31 separate, private networks

Hundreds of client configurations

16,000 applications

Now12 data centers

One integrated, global network

Four standard configurations

5,670 applications

Streamlining infrastructure reduced cost and improved performance

Application and infrastructure standardsEnterprise development and deployment processPortfolio managementTelecommunications globalizationStandard client configurations


Cutting costs and investing result in a more efficient and functional environment

Cost Reduction 1997 to 1H02Service delivery costs declined 17.2%

Volumes, headcount, process deployment and e-business

Service delivery cost / headcount declined 24.2%$14K/HC to $10.7K/HC

ReinvestmentReengineeringY2K readinesse-business

Improved Service LevelsBandwidth: 2-3x/yearInternet response: 11 sec - < 3 secIntranet response: 11 sec - < 1 secNotes seats: 150K - > 380KNotes availability: 99.2% - > 99.8%


Customer Data

ShipperProduction

Partner

Inventory

Supplier Advertiser

SAP SAPIBM

i2Ariba

Siebel

Connected Customers

Connected Employees

Catalog

Internal and external integration is achieved using both IBM and partner products

Savings support transition to architecture best-suited for virtual company


Global Web Architecture is based on a multi-tiered model

Employees

Web Traffic ExpressTivoli Network Dispatcher

File Transfer Protocol

WebSphere Application WebSphere Commerce

Lotus Domino

Tivoli SecurewayCisco firewalls

Distributed File System

IBM HTTP Server(Apache)

MiddlewareMiddleware


Where to Begin?

Install a governance model suited to your company's culture

Infrastructure optimization

e-Procurement

e-Learning

Corporate functions (HR, Finance...)

Customer Relationship Management


We learned important lessons

e-business payoff is real

Web forces a holistic, customer-centric strategy

Integration is hard

Outsource for speed and business value

Invest in your IT architecture and infrastructure

Proactive leadership is required for cultural change


Cathy LasserCathy [email protected]@us.ibm.com


e-business@ibm: fusion of business and it sim new...

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