This document provides information about VI Consulting, an enterprise information systems integration and consulting firm. It discusses the key drivers, survival factors, and overall attractiveness of the industry. It also describes IBM's current strategy, goals, capabilities, performance compared to industry, organizational health, and key issues. Finally, it proposes changes to IBM's strategy to close gaps in marketing and innovation and projects future performance with the new strategy.

1. VI Consulting
IBMTegan Hasik
Greg Sanders
Terry Tate
Jared Leonard
Chris Alverson
Saeed Alyakoub
Tu Pham

2. Enterprise Information Systems
Integration and Consulting
 Drivers of Change
 Demand for Services
 Rate of demand of services is constantly fluctuating
 Firms must be able to keep up with changes in demand
 Rapid Technology evolution.
 Technology is constantly evolving and can become quickly outdated
 Firms must be able to keep up
 Economic Conditions
 Industry is positively related to economic conditions

3. Enterprise Information Systems
Integration and Consulting
 Key Survival Factors
 Skilled Workforce/Technical Expertise
 Firms rely heavily is skilled individuals to create and implement products
 Without a skilled workforce firms will quickly become obsolete
 Access Capital
 Innovating and creating new products is very expensive
 Companies must invest large amounts in research and development
 Innovative Services
 Technology changes are rapid, must be able to keep up in order to be
relevant.

4. Enterprise Information Systems
Integration and Consulting
 Overall attractiveness of the industry
 Industry is only moderately attractive
 Competitive Rivalry is very high, several large, distinguished firms
 Firms in the industry require a large amount of capital, Larger firms can
operate at an operating loss for some time to expel smaller competitors.
 Industry 5 years from now.
 Industry revenues were 191 billion in 2013 and are expected to more than
double by 2018
 Workforce expected to grow 25%

5. The Firm Strategy
 Mission Statement
 To be dedicated to every clients success
 To focus on innovation that matters
 Develop trust and personal responsibility in all relationships
 Vision Statement
 Shift Business focus to data, cloud and engagement services
 Spread innovations through IBM and all of it’s subsidiaries
 Open business relationship and collaborate innovation
 Value Proposition
 IBM creates value for its customers by offering business enterprise applications and
solutions. By partnering with IBM, value is created for the client with unmatched
experience in the technology industry, a proven reputation for innovation and a
guarantee of an open partnership with a trusted company.

6. Goals Product/Market Focus
 Goals
 Focus on Innovation that matters
 Maximize earnings per share
 Create lasting and trusted business relationships
 Be a leader in cloud computing software.
 Product Focus / Market Focus - Broad

7. Industry performance Vs. Firm
Performance
 Industry Performance
 Industry has been growing at a constant rate
 Improving economic conditions have allowed industry to expand
 IBM
 IBM’s revenue has steadily declined over the past several years
 IBM’s debt to equity ratio is higher than the industry average
 Significant free cash flows allowing company to quickly repay debt

8. Industry performance Vs. Firm
Performance

9. Organizational Health
 IBM over the last 3 years has experienced a decline in operational
performance.
 IBM has also experienced a decline in organizational health due to
policies such as mandatory layoffs each year
 IBM is in Quadrant 2 for the past 3 years and currently. Firm is likely to
move to Quadrant 4 if conditions do not improve.
Quadrant 2
Complacent Organization
X= Past and Current State
Quadrant 1
Desired State
Quadrant 4
Crisis
Y= Possible Future State
Quadrant 3
Troubled Organization

10. Firm Capabilities
 Customer Capabilities
 Ability to attract and retain customers
 Operational Capabilities
 Access to capital
 Ability to service worldwide
 Service in 170 countries
 Innovation Capabilities
 Ability to implement new products
 WATSON

11. Alignment between Environment
and Strategy
 Good Fits
 Demand for service DOC with global market focus
 Services are demanded all over the world, and IBM can provide it to them.
 Economic conditions DOC with market focus
 Regardless of economic conditions, IBM’s enterprise data software will be required.
 Gaps
 Outsourcing skills with skilled workforce KSF
 IBM’s strategy to outsource work doesn’t match the skilled workforce KSF
 Marketing versus competition with marketing KSF
 IBM isn’t marketing their product well to match up with the KSF for marketing
 Rapid Technology revolution DOC with innovation speed
 IBM isn’t innovating the market like they used to

12. Alignment between IBM’s Strategy
and Organizational Capabilities
 Good Fits
 Access to capital capability with small business acquisition strategy
 IBM is able to purchase smaller firms due its large revenues.
 Gaps
 Marketing with vision statement and strategy
 IBM’s vision to spread innovation that matters is hindered by their inability to market themselves.
 Innovation capabilities with current acquisition strategy
 IBM has the ability to create and innovate but is purchasing other companies innovations instead.
 Innovation capability with IBM’s bulky management structure
 Slow to introduce products that are already on the market.

13. Key Problems/Issues faced Firm
 Marketing
 Public perception of IBM is that they are an outdated, old company
 Innovation
 No longer thought of as a company that is a leader in innovation
 Bulky management
 Company slow to react to changes in environment because of excess
management layers
 Declining Revenue
 Several years of declining revenue

14. Projection of Future Performance
 IBM’s market performance will likely experience little to no growth
over the next several years
 Changes will be required in the future to prevent further decline and
to close strategic gaps

15. Proposal 1
 Focus of closing Marketing and Innovation Gaps.
 Commitment to innovation
 Create an innovation department & focus on R&D
 Bring Back Outsourced
 Invest less in buying other companies, invest more IBM
 Marketing Campaign for brand image
 Huge marketing campaign that focuses on history and futuristic products
 Update Website
 22nd century logo

16. Proposal 2
 Focuses on closing speed of adapting and marketing gaps
 Revamp Operating Structure
 Diversify Board of Directors
 Reduce layers of management
 Examine operating procedures for efficiently
 Market current and Upcoming Products
 Remind public what IBM stands for
 Market WATSON
 Partner with industry leaders

17. Selected Proposal
 Proposal One!
 More feasible to do. Doesn’t require cutting, or restructuring,
management

18. Changes to Current Organizational
Capabilities
 Operational Capabilities
 1. Reduce outsourced operations by bringing operations in-house
 2. Invest more in research and development

19. Changes to Current Organizational
Capabilities
 Customer Capabilities
 1. Update marketing campaign to attract and retain more customers
 2. Update website and logo to build better brand image and recognition

20. Changes to Current Organizational
Capabilities
 Innovation Capabilities
 1. Create innovation department.
 2. Acquire less technology companies and focus on IBM’s original
innovations.

21. Departments Affected by the
change
 Marketing department
 Innovation department
 Human Resources department

22. Income Statement with New
Strategy

23. Cash Flows, NPV, & Sensitivity
Analysis

24. Financials
 Cost $12.3 B
 Subtracted $608 M from Acquisitions Cost
 Added $300 M 1st year to R&D for Innovations Dept
 Costs decrease after 1st year to $150 M
 $458 M Savings per Year in Years 2-5
 Revenue Growth Rate
 2015 -7.3%, 2016  4%, 2017-2018  15%
 NPV $31.5 B

25. Q&A
Thank you for your time
and hope you accept
our partnership