Information Management: Our Own Journey

1. Information Management: Our Own Journey Fiona CapstickVice President, Geography Integration, IBM Office of the CIO

2. Topics IBM Transformation Journey Becoming a Globally Integrated Enterprise Smarter Enterprise Information Strategy New Intelligence Smart Work Lessons Learned

3. IBM’s transformation: An ongoing journey – Phase 1 “I think the greatest challenge facing the company is … to adapt our strategy, structure and culture to a world of constant change. I can’t promise this journey will be easy or fast … the steps we will take will not be pussyfooting but bold strides.” -- Lou Gerstner, 1993 • Keep company together • Centralize operations • Move to integrated solutions • Grow services business Focus Areas 1993 1995 1997 1999 2001 2003 2005 2007 2009 Phase One Gerstner era (’93 - 2002)

4. 1993 1995 1997 1999 2001 2003 2005 2007 IBM’s transformation: An ongoing journey – Phase 2 • Shift to high-value solutions • Lower center of gravity for decision-making • Become a globally integrated enterprise • A Smarter Planet “The crisis in our financial markets has jolted us awake to the realities and dangers of highly complex global systems. But in truth, the first decade of the 21st century has been a series of wake-up calls with a single subject: the reality of global integration.”-- Sam Palmisano, 2008 Focus Areas 2009 Phase Two Palmisano era (‘03 - present)

5. 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 Complement and scale our portfolio of products and offerings Services Hardware & Financing Software Business Model, Operating Model and Workforce Transformation IBM’s ongoing transformation journey 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 • 71% of employees outside US • 84K in India, 60K increase in 5 years • 16K in China, 10K increase in 5 years • Record Performance in 2008 • $103.6B revenue, up 5% • $16.7B pre-tax earnings, up 15% • $8.93 earnings per share, up 24% • Strong performance in services, software and growth markets Revenue ($B) Pre Tax Income & Free Cash Flow ($B) EPS 21% 16% 2008 Segment Revenue Mix 2003 Segment Revenue Mix 49% 57% 21% 35%

6. Create culture that reflects IBM global presence and priorities Instill values that promote global collaboration IBM is undergoing a long-term transition from a multinational company to a Globally Integrated Enterprise, impacting most aspects of the organization Global Marketplace • Capture opportunity of global marketplace • Leverage IBM’s scale and expertise to optimize growth • Serve needs of global clients Global Support Functions • Take advantage of global sources for high-quality skills • Rationalize support functions for greater efficiency • Create flexibility to quickly manage change in marketplace Global Culture

7. Our framework for transformation I n n o v a t i o n Collaboration Simplification Business Process Culture and Leadership Information Technology Integration

8. IBM’s transformation experience Information Technology Integration

9. IBM as Smarter Enterprise IBM: Becoming a Smarter Enterprise – Information Strategy Why? What we did • Requirement to drive down “run” costs of internal IT – key factor in meeting IBM’s productivity targets • Need for integrated enterprise data center model that is flexible, effective, efficient & responsive • Increased threats to global infrastructure and employee IT security • Moved from distributed, fragmented, labor-intensive IT environment to centrally-governed enterprise model • Centralized CIO role • Embraced open standards and SOA approach • Greatly reduced internal application portfolio and limited customization Benefits

10. IBM as Smarter Enterprise IBM: Becoming a Smarter Enterprise – Information Strategy How we did it Results • Centralization: 128 CIOs => 1, 155 data centers => 5, 16,000 applications to 4,700 • Virtualization: 1000+ servers – projected 80% energy cost savings & 85% floor space reduction • Global Delivery Centers: 80% AS, 60% SD • $1.5B in IT savings over past four years; IT E/R reduced by 1.7 pts • Centralized operations; continuing to radically simplify • Closely link business transformation & IT function to optimize ROI on technology • Capitalized on open standards and virtualization • Leveraged SOA to enable integration & faster development • Established a comprehensive approach to cyber security

11. IBM as Smarter Enterprise IBM As Smarter Enterprise: New Intelligence Why? What we did • Need to transform client information into insights that improve sales performance • Need to improve sales productivity by aligning resources with opportunities • Sprawling client records an obstacle to customer service and delivery of client value • Lack of integration and unique measurement systems • Collaborated across IBM to develop advanced analytics to sales issues • OnTARGET prospecting tool to identify clients with highest propensity to buy • Market Alignment Program (MAP) to ensure that resources shift to growth areas • Created trusted source for client information • Created common ledger, data definitions, finance planning system

12. IBM as Smarter Enterprise IBM Becoming a Smarter Enterprise: New Intelligence How we did it Impact • Analytic tools identified nearly $8B in incremental revenue opportunity worldwide in 2008 • OnTARGET tool identified nearly 100K new sales leads in 2008 • MAP analysis identified 3700 top opportunity accounts for next three years • 360-degree view of client = better insights, better service, better value delivery • Worked with business unitsto ensure relevance, buy-in and ownership of new sales tools • Consolidated nearly 10 million client records into single trusted source • Systematically transformed IBM finance: • Common processes, data and systems for accounting, auditing, pricing, etc • CFO portal integrated more than 80 back-end systems

13. IBM as Smarter Enterprise IBM As Smarter Enterprise: Smart Work Why? What we did • Complexity of processes a major source of frustration • Siloed processes inconsistent with globally integrated enterprise • Vertically-aligned support functions incompatible with global integration • Need for collaboration and innovation in a globally diverse workforce of 400,000 • Sub-optimized enterprise returns on transformation investments • Took “outside-in” approach to address critical client and employee pain points, focusing first on client-facing teams • Established Enterprise Process Framework with owners for 12 processes • Launched enterprise-wide effort to provide common global processes, based on SAP • Created globally integrated support functions • Developed intranet into robust social networking platform

14. IBM as Smarter Enterprise IBM Becoming a Smarter Enterprise: Smart Work How we did it Impact • Drove horizontal, end-to-end process improvements; put senior leaders in charge of key processes • Developed professionals with business process skills, including Lean Sigma black belts • Simplified and standardized processes across IBM • Implemented Shared Services Council for common approach to identify opportunities • Developed Technology Adoption Program to spur development & early adoption of Web 2.0 technologies • Lean Sigma projects drove $100M cost benefit in 2008 • Improved client-facing processes reduced cycle time on automated special bids by 75% • Shared Services reduced spending by $3B over the last three years • Web 2.0 fueling collaboration: • 120K employees participate in Technology Adoption Program • 66K BlogCentral users; 27K wikis • 150K in InnovationJam 2008 • Instant messaging: 2M per day

15. Change must be driven from the top The vision is key It is important to track ‘journey’ milestones Transformation is a way of life Flexibility is critical The business changes along the way The lessons we learned

16. Fiona Capstick fcapstick@uk.ibm.com

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