Lecture by Mario Derba at GE Seminar on IBM Services Transformation

545
-1

Published on

Mario Derba Lecture at General Electric Seminar, Florence, October 2004

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
545
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
26
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Lecture by Mario Derba at GE Seminar on IBM Services Transformation

  1. 1. IBM’s road to becomeA Leading Service Company Mario Derba Partner, IBM Business Consulting Services Industrial Sector Leader, South Region IBM Europe, Middle East, Africa General Electric’s European Service Leadership Program Florence - October 5th, 2004 © 2004 IBM Corporation
  2. 2. My Background 1983 Electronic Engineering degree – University of Bologna 1984 joined IBM Sales & Services 1993 Italian Automotive Field Business Unit Executive 1996 on international assignment in the office of Ned Lautenbach, Senior VP & Group Exec, Global Sales and Services, IBM Corporation 1998 GM of Industrial Sector Sales for Latin America ~$400M revenue with ~70 sales professionals 2000 leader of e-business solutions for South Europe hardware/software/services integration 2001 joined IBM Global Services head of Operations for ~$3B service business (acquisitions, marketing, resources management, solutions design, contracts & negotiations) 2003 Partner, Business Consulting Services for Industrial Sector, South Europe ~500+ services professionals: consulting, systems integration and application development 2 October 5, 2004 © 2004 IBM Corporation
  3. 3. LVG’s N° 7: We grew a business from the ground upNothing that grows starts large; it always starts small 3 October 5, 2004 © 2004 IBM Corporation
  4. 4. We Were on the Verge of Breakup 4 October 5, 2004 © 2004 IBM Corporation
  5. 5. IBM and the boiled frog similitude ‘60-’70 - the warming up phase IBM traced the roadmap and outpaced competition. Undisputed leadership in business model and IT competences. ‘80-’90 – the boiling crisis Technologies and customers needs were changed.5 October 5, 2004 © 2004 IBM Corporation
  6. 6. IBM Share in the Mainframe Era6 October 5, 2004 © 2004 IBM Corporation
  7. 7. IBM Share and Client Server Architecture7 October 5, 2004 © 2004 IBM Corporation
  8. 8. IBM, L.Gerstner and the e-business strategy •Microsoft •Client/Server •Sell Mainframes8 October 5, 2004 © 2004 IBM Corporation
  9. 9. IBM turning point 200 Change strategy 150 Organization Processes M arket Value Management System 100 Measurements and incentive plans Leadership 50 Revenue 0 P rofit -50 1985 1993 1998 9 October 5, 2004 © 2004 IBM Corporation
  10. 10. IBM’s On Demand Transformation:Reinventing the Enterprise © 2004 IBM Corporation
  11. 11. IBM undertook a major financial, competitive andcultural transformation 1993 - 1998 1998 - 2002 Driving common processes Enabling e-business required across lines of business was end-to-end integration across critical first step the value net •Market Planning •Customers •Product Development •Partners •Procurement •Suppliers •CRM •Employees •Fulfillment 11 October 5, 2004 © 2004 IBM Corporation
  12. 12. Processes were automated and reengineered 1992 2001 Financial data centers 67 8 Key applications 145 55 Days for accounting close 18 7 Expense $2.1B $1.3B Expense / revenue % 3.2% 1.5% 12 October 5, 2004 © 2004 IBM Corporation
  13. 13. Infrastructure and governance were simplified BEFORE AFTER CIOs 128 1 Host Data Centers 155 11 Web Hosting Centers 80 7 Network 31 1 Applications 16,000 5,200 13 October 5, 2004 © 2004 IBM Corporation
  14. 14. Relationships were transformed: Customers and suppliers e-Commerce e-Commerce $26.4B in 2002, up 4% YTY $26.4B in 2002, up 4% YTY $11.6B from ibm.com, up 3% $11.6B from ibm.com, up 3% Customer Relationship Management Customer Relationship Management Cost avoidance from e-Support in 2002: ~$600M, up 17% YTY Cost avoidance from e-Support in 2002: ~$600M, up 17% YTY 60% of “Call-Me’s” result in sales 60% of “Call-Me’s” result in sales Fulfillment Fulfillment Applications reduced by 42% Applications reduced by 42% 70% of PC orders “touchless” 70% of PC orders “touchless” Procurement Procurement 90% orders “hands-free” 90% orders “hands-free” Cost avoidance from e-procurement in 2002: ~$450M, up 8% YTY Cost avoidance from e-procurement in 2002: ~$450M, up 8% YTY 14 October 5, 2004 © 2004 IBM Corporation
  15. 15. What’s next? The Next Era of Computing 15 October 5, 2004 © 2004 IBM Corporation
  16. 16. Phases of e-business adoption 16 October 5, 2004 © 2004 IBM Corporation
  17. 17. IBM’s e-business adoption survey Companies on the Cusp of On Demand 17 October 5, 2004 © 2004 IBM Corporation
  18. 18. What do we mean by “on-demand” An enterprise whose processes -- integrated end-to-end across the organisation and with key partners, suppliers and customers -- can respond with speed to any stakeholder demand, market opportunity or external threat. We used to call this the “advanced” phase of e-business It has four key components 18 October 5, 2004 © 2004 IBM Corporation
  19. 19. Responsive: Variable: Capable of sensing changes in Able to adapt cost structures andthe environment and responding processes flexibly, reduce riskdynamically and drive business performance.Resilient: Focused:Prepared for changes and threats -- Committed to concentrating onbe they computer viruses, core competencies andearthquakes, or sudden spikes in differentiating tasks and assets.demand. 19 October 5, 2004 © 2004 IBM Corporation
  20. 20. IBM’s on demand goals Enable organizational productivity and collaboration throughout the enterprise Enhance customer experience by improving responsiveness and delivering more innovation Become the premier on demand business Improve financial performance 20 October 5, 2004 © 2004 IBM Corporation
  21. 21. A transformation framework to enable on demand capabilities Collaboration & Teaming Business Culture Assembly of Products Transformation and Services IT Enablement Sense and Respond with Velocity Core Competency Focus 21 October 5, 2004 © 2004 IBM Corporation
  22. 22. On demand measurement system Capabilities Enterprise Measures On Demand Value Solutions Revenue Growth Assembly of Products and Win % by Solution Area Market share Services Brand attach rates Revenue Growth IBM Revenue / PY ($K) Sales Productivity Collaboration Workplace Effectiveness and Teaming Satisfaction SG&A E/R Customer Profit Growth Unit Specific Productivity Productivity Reuse (HW) Sense and Fulfillment Quality Respond with Cost Takeout Return on Velocity Invested Capital Transform IT/Total IT Core Variable Labor/Total Labor Competency Variability Focus % Cost/Exp Procured 22 October 5, 2004 © 2004 IBM Corporation
  23. 23. IBM’s on demand governance model Operating Team Investment Review Board on demand Executive Team Employee Advisory Boards Customer, Supplier & & Champions On Demand Innovation Team CIO Transformation Management System 23 October 5, 2004 © 2004 IBM Corporation
  24. 24. Reinventing key processes Total Buyer On Demand Experience Supply Chain IT Enablement Identify value Portfolio Total Buyer Experience Development Realize Invest in Environment value value Operating On Demand Environment Workplace 24 October 5, 2004 © 2004 IBM Corporation
  25. 25. IBM’s evolution to on demand Customer Coverage Model Relationship Project Simplify Total Buyer Experience Management Routes-to-market Integrated Product Development Direct Model Integrated Supply Chain On Demand Supply Chain Fulfillment On-line Order Mgmt Procurement Communications w3 Portal HR On Demand Workplace HR Self-service Finance IT Consolidation IT Integration IT Enablement Internally Focused Hierarchy Market Driven Matrix Horizontally Integrated Teaming Access Integration On Demand 25 October 5, 2004 © 2004 IBM Corporation
  26. 26. Evolution to on demand: IBM IT environment Focus: simplification, Focus: Federated Focus: full integration common standards model -- value chain across extended optimization enterprise, leverage new technologies 31 IBM Networks to 1 Established BT/CIO Outsourced Global Network organization and 1 CIO Internal gridCommon hosting environment: Global Web 155 to 12 host data centers Infrastructure Drive to efficiency: WebSphere integration Hundreds of configurations Improved HC productivity to 4 standard platforms 16,000 applications to Transferred IT service NextGen Utility Offering 5,300 applications to IBM Global Services - $500M in savings IT Consolidation IT Integration IT Enablement Access Integration On Demand 26 October 5, 2004 © 2004 IBM Corporation
  27. 27. Evolution to On Demand: Financial Drivers Velocity (doing more, faster) Revenue growth Variability of cost/expense Return on invested capital Market share growth Market share growth Productivity Productivity Cost/expense Cost/expense Cost/expense Resource allocation Resource allocation Resource allocation Cash generation Cash generation Cash generation Access Integration On Demand 27 October 5, 2004 © 2004 IBM Corporation
  28. 28. Evolution to On Demand: Culture Horizontally integrated team Market-driven matrix Internally focused hierarchy Access Integration On Demand 28 October 5, 2004 © 2004 IBM Corporation
  29. 29. Integrated supply chain Sense and respond to customer demand End-to-end integration of processes and systems 33,000 connected suppliers $39B of IBM’s cost and expense Center for On Demand Client satisfaction doubled Supply Chain Research Improved supply chain management in 2002: Improved supply chain management in 2002: $2.5B in hardware costs $2.5B in hardware costs $1.5B in customer solutions procurement $1.5B in customer solutions procurement in support of IGS in support of IGS $1.1B in general procurement $1.1B in general procurement 29 October 5, 2004 © 2004 IBM Corporation
  30. 30. 300mm Semiconductor Facility World’s most advanced chip-making facility Development and manufacturing combined First chip-making plant to run on Linux Sense and respond touchless Customers can track manufacturing process Customers can track manufacturing process Suppliers can access remotely to diagnose Suppliers can access remotely to diagnose problems and make repairs problems and make repairs On demand manufacturing: On demand manufacturing: Cycle time improved by 35% Cycle time improved by 35% Process yields up to 2 points higher Process yields up to 2 points higher Direct labor spending 50% lower than Direct labor spending 50% lower than previous 200mm facility previous 200mm facility 30 October 5, 2004 © 2004 IBM Corporation
  31. 31. On demand workplace w3.ibm.com Knowledge Management Content Collaboration e-Learning Employee self-service Employees #1 source of information Employees #1 source of information 68% view w3 as critical to doing job 68% view w3 as critical to doing job Over 7,000 Web conferences with over Over 7,000 Web conferences with over 42,000 participants each month 42,000 participants each month 48% of employee training 48% of employee training Cost avoidance from e-learning: $750M Cost avoidance from e-learning: $750M over past two years over past two years 31 October 5, 2004 © 2004 IBM Corporation
  32. 32. Next Generation Infrastructure IT service provided on demand to IBM and customers Application processing Application processing Storage Storage Consumption-based billing Advanced systems management Provision, allocate and deallocate resources dynamically Provision, allocate and deallocate resources dynamically Maximize sharing and utilization of resources Maximize sharing and utilization of resources Autonomically manage resources as a pool Autonomically manage resources as a pool Handle workload surges Handle workload surges Potentially significant reduction in cost Potentially significant reduction in cost of operations is expected: of operations is expected: target of 10 to 40 percent improved target of 10 to 40 percent improved productivity productivity 32 October 5, 2004 © 2004 IBM Corporation
  33. 33. Lessons Learned10. Create a “sense of urgency” that the company can rally around 9. Create a revisionist history – you’ll be surprised at how far you’ve come 8. While you’re creating – define short term projects with near-term results 7. Review business processes to see if changes are needed before you deploy technology 6. Technology enables and hastens transformation 5. Set your milestones and metrics with an end-to-end life cycle view 4. Sunset legacy systems/applications/tools as new ones are deployed 3. Can NOT overemphasize the importance of culture – this will make you or break you 2. Transform constantly or risk extinction – there is no other option 1. Always, always, always, listen to your customers 33 October 5, 2004 © 2004 IBM Corporation
  34. 34. Becoming a services-led company:Lessons Learned © 2004 IBM Corporation
  35. 35. Agenda IBM services evolution Strategic considerations Business models Go to market Delivery People Cross line of business considerations 35 October 5, 2004 © 2004 IBM Corporation
  36. 36. Evolution of IBM Global Services – a high level view 2003 1990s 160,000 staff Competitive Maintenance Product Affinity Infrastructure maintainers Business Transformation Services Services Business Global Competitive IT IT Transformation outsourcers Outsourcing Outsourcing Transformation Outsourcing Product Fee to free Consulting, System Transformation profit erosion Exploit internal IT Integration, Consulting Development Shift to Consulting PwC business value services Consulting & solutions 36 October 5, 2004 © 2004 IBM Corporation
  37. 37. Global Services revenueGlobal Services as a % of IBM revenue Global Services as a % of IBM Employees1996 1996 29% IBM 35% IBM Global Global Services 65% Services 71%2002 2002 IBM IBM 45% 45% 55% Global Global 55% Services Services Global Services as a % of IBM Pre-tax Income 1996 30% IBM Global 70% Services 2002 IBM 49% 51% Global Services 37 October 5, 2004 © 2004 IBM Corporation
  38. 38. Building a Services-Led Enterprise $42+B* $35.0B $33.2B $32.2B Services $28.9B Maintenance $25.2B $22.3B $20.1B $17B $16.9B $15B $13B 5.6 7.41989 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 First 1st $1 billion deal w/ Created IBM embraces Sold Global Brand e-businessoutsourcing Formed McDonnell Douglas IGS e-business Network Expansion Hosting deal with Kodak ISSC CEO calls IBM a Launched Formed IBM Became Worlds Largest Backlog Tops services-led Co. BCS Consulting Group IT Services Provider $50 Billion 38 October 5, 2004 © 2004 IBM Corporation
  39. 39. IBM Global Services Value Framework 39 October 5, 2004 © 2004 IBM Corporation
  40. 40. IGS strategic intent…materially improve our clients business effectiveness through expert applicationof technology...by delivering services that help clients to reduce operating costs,transform the way they run their business, and expand into new markets. SO BCS Business Infrastructure Value Value Utility & Application EBOs Services ITS 40 October 5, 2004 © 2004 IBM Corporation
  41. 41. IT Industry Services: the new frontiers Business Value • Business Performance Transformation Services InfrastructureEnhanced Value Value Services • Full Equation Software • Rationale SW acquisition Hardware Component • “Commodity” Technologies out Value • “Innovative” Technologies R&D 41 October 5, 2004 © 2004 IBM Corporation
  42. 42. To succeed in the Services business you need tocouple with several strategic dilemmas Portfolio management – “product” cycle time Accommodating investments One of a kind or mass customised services Looking at your capabilities in a new light (eg research in IBM) Margin or growth Enter from bottom (installed product) or top of value chain Market polarization: business vs commodity value Cultural readiness Annuity or project based services 42 October 5, 2004 © 2004 IBM Corporation
  43. 43. Overall lessons Strategy Start with what you know (build on the installed base) Move into commitment business very, very carefully Avoid consulting until your culture is ready for it – and it will drive end to end business Client management Client satisfaction – eg implicit brand commitments Change management Profit dynamic changes – profit skew changes Culture and people From strategy to engagement and delivery Key leaders, rainmakers, can make enormous impacts The transition to services for sales, leaders, etc takes time and mistakes are costly Process is key Portfolio, sales, bidding, delivery Eg Workdirect 43 October 5, 2004 © 2004 IBM Corporation
  44. 44. Thank you business on demand Mario Derba mario_derba@it.ibm.com44 October 5, 2004 © 2004 IBM Corporation
  45. 45. Discussion © 2004 IBM Corporation

×