The document discusses how organizations can leverage outsourcing and strategic partnerships to drive operational efficiencies and cost savings while freeing up resources to invest in growth initiatives. It provides examples of IBM clients that achieved significant cost reductions and performance improvements through outcomes-based outsourcing of services such as IT infrastructure management, business processes, and applications management. The document advocates for a "smarter sourcing" approach that combines process optimization with selective use of lower-cost global resources.

1. Impacting the bottom-line A discussion around a transformation framework leveraging the value of IBM Services

3. CEO Business Model Question: How will I compete in the marketplace? What are my differentiating capabilities? What processes should I own? Source: IBM Institute for Business Value based on McKinsey analysis Source: The Global CEO Survey 2006 (Sample size = 765) Sourcing frees up resources and lower cost of non-differentiated activities Sourcing enables innovation & transformation to enhance differentiation 10% 20% 30% 40% 50% 0% Underperformers Outperformers Quantity of New Ideas from External Sources % of respondents Outperformers source 30% more ideas from external sources 0% Spending as percentage of sales 23 – 27% Product or service building blocks 32 – 47% Critical yet non - differentiated business processes and components Differentiated business processes and components 13 – 28% EBITDA 5 – 10% Prototypical company Sourcing funds innovative changes Sourcing: Leveraging Partners in Strategic Ways to Drive Higher Priorities, Gain Access to Skills, and Free Up Monies to Invest in Growth

4. A high-level framework for identifying opportunities for cost savings and operational improvements using outcomes based sourcing Sub-optimal Industry Standard Commodity Differentiator Strategic Criticality Measures a process or component’s level of importance in terms of adding value to a firms competitiveness. Optimized Develop/ Keep In House Sourcing Candidate Transformation Partnering Candidates Investment Candidates Critical yet non-differentiating (commodity) Unique and Differentiating (proprietary) Optimal Sub-Optimal Business Component Performance Measures how well a component functions vs. other competitors

10. Smarter sourcing- combining process-based effectiveness with the ability to leverage wage arbitrage selectively to yield better results at lower costs. May 2009

14. Smarter Sourcing Approach Smarter sourcing combines process-based effectiveness with the ability to leverage wage arbitrage selectively to yield better results at lower costs. Staffing “Pyramid” Optimization Process Improvements Global Development Plan Helping our clients “do something better, more efficiently, more productively.”

16. … and we Close the Loop on Globalization…leveraging the best of offshore back to our shores Faster. Local. More flexible. Because we can. Because we must. Because we want to. Bringing the best of breed of global experience, tools, methods and processes locally completes the ‘loop’ of globalization