ibm's transformation journey

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IBM Strategy and Values: (1) Focus on open technologies and high- value solutions, (2) Deliver integration and innovation to clients, (3) Become the premier Globally Integrated Enterprise.


  • 2009 IBM Corporation

    IBMs Transformation Journey Enabling growth, productivity, and culture change

    George Mattathil 4/28/2011

  • 2009 IBM Corporation

    Business Model, Operating Model and Workforce Transformation

    Remixed our portfolio toward services,

    software, and integrated solutions Shift in geographic mix















    2008 revenue: 21% Asia Pacific 37% Europe, Middle East, Africa 42% Americas


    & Financing



    71% of employees outside US 84K in India, 60K increase in 5 years 16K in China, 10K increase in 5 years

    IBMs Ongoing Transformation Journey

    Record Performance in 2008 $103.6B revenue, up 5% $16.7B pre-tax earnings, up 15%

    $8.93 Earnings Per Share, up 24% Strong performance in services, software and

    growth markets




    2000 2001 2002 2003 2004 2005 2006 2007 2008




    Pre-tax income

    Free Cash Flow





    Tax Incom

    e &


    e C

    ash F




    Revenue ($B)

    Exited commoditized businesses: PCs Hard disk drives Printing Systems

    Strengthened position in: Business Consulting Service-Oriented Architecture Information on demand Virtualization Open, modular systems

    Acquired over 60 companies in last 5 years to complement and scale our portfolio

    of products and offerings

  • 2009 IBM Corporation

    IBM Strategy and Values

    Deliver integration and

    innovation to clients

    Become the premier Globally

    Integrated Enterprise

    Focus on open technologies

    and high- value solutions

    All things are becoming


    Our world is becoming

    INSTRUMENTED. Smart traffic


    Smart energy grids

    Smart healthcare Smart


    Smart supply chains

    Smart food systems

    Building a Smarter Planet

    Our world is becoming


    IBM Strategy

  • 2009 IBM Corporation

    A globally integrated

    enterprise-- business

    in a connected world

    The multinational era

    -- replicating The international

    era -- exporting

    20th Century

    21st Century

    The Evolution of the Enterprise

    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 Demand Capture

    Global Supply Management

    Global Production Optimization

    IBM Strategy

  • 2009 IBM Corporation

    IBMs Approach to Transformation

    Transformation Framework

    Business Process


    Values-based Culture

    Information Technology Enablement

    Enabling Growth Enabling Productivity Enabling Culture Change

    Growth markets leadership

    Mergers & acquisitions

    Client value focus

    State-of-the-art sales enablement

    Global shared services

    Business process excellence

    IT enablement

    Transformational Leadership

    Values-based culture

    Collaborative innovation

    Transformation Focus Areas

    IBM Strategy

    IBM Values

    Guided by the IBM Strategy

    and grounded in our Values

    Enable transformation at

    the intersection of business

    process, technology

    and culture

    Sustain our strength in the

    global marketplace by focusing

    on areas that enable growth,

    productivity, and culture change

  • 2009 IBM Corporation

    Enabling Growth

    Growth Markets Leadership

    Mergers & Acquisitions

    Client Value Focus

    State-of-the-art Sales Enablement

    Enabling Growth

  • 2009 IBM Corporation

    Central & Eastern Europe Middle East & Africa

    Latin America

    Asia Pacific

    Central & Eastern Europe Middle East & Africa

    Latin America

    Asia Pacific


    Emerging markets growing at more than twice the rate of

    major economies

    Growth markets source of global innovation, high-value, and

    competitively-priced skills

    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

    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 Enabling Growth

  • 2009 IBM Corporation

    Growth Markets Leadership (continued) Enabling Growth

    Impact How we did it

    Created Growth Markets unit in Shanghai

    Covers nearly 150 countries across Asia, Africa, Eastern Europe & Latin America

    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

    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

  • 2009 IBM Corporation

    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


    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

    Mergers & Acquisitions

    What weve done

    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

    Enabling Growth

  • 2009 IBM Corporation

    How we did it

    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

    Mergers & Acquisitions (continued)


    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

    Post-acquisition performance metrics aligned with our

    management system

    Enabling Growth

  • 2009 IBM Corporation

    Client Value Focus

    Client success isnt just the customer is always right. It means maintaining a long-term relationship where what happens after the deal ismore important than what

    happens before its signed. Sam Palmisano, Harvard Business Review, December 2004

    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

    Reinforced Values-based leadership and enhanced employee experience

    to deliver client value

    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

    Client Value

    focuses on the client, not IBM

    is from the clients perspective

    delivers positive impact

    Why? What weve done

    Enabling Growth

  • 2009 IBM Corporation

    How we did it

    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

    City of Stockholmbreaks gridlock with a smart road management system

    25% reduction in traffic

    40K more citizens on public transportation

    Less noise & carbon pollution

    Kika-Leiner, European furniture retailer, implements green data centers to support rapid growth

    Energy consumption reduction of up to 40%

    Client Value Focus (continued)




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