IBMStrategicOutsourcing.pptx

IBM Global Services-Strategic OutsourcingIBM Strategic Outsourcing 2003 IBM Corporation IBM Strategic Outsourcing Emily WrightBusiness Consulting Services1IBM Global Services-Strategic Outsourcing 2003 IBM CorporationIBM Strategic OutsourcingThe Market EnvironmentStrategic OutsourcingIBMs CapabilitiesOn DemandAgenda2IBM Global Services-Strategic Outsourcing 2003 IBM CorporationIBM Strategic OutsourcingSlow economic growth and pressures to improve earnings are combining to make cost cutting the primary agenda item for a large majority(78%)of companies Growth is emerging as an important issue as economic recovery has been postponed(and may be slow to return).IT continues to be an important lever in achieving the cost saving objective for most companies in two very different waysIT is being tasked to enable business process efficiencyIT spending is also a source of savings as budgets for all functions are being trimmed.In general,IT budget pressure is in line with the overall business,however 30%of respondents indicate that IT spending has been cut more than other functions while 10%state that IT has been protected from cutsSource:2003 SO Market Insights study of 300 senior executives,Mercer Management ConsultingCompanies are taking actions to improve their bottom line rather than waiting for“the recovery”to solve problemsIn a weak global economy,companies face uncertainty about their economic and strategic future3IBM Global Services-Strategic Outsourcing 2003 IBM CorporationIBM Strategic OutsourcingTodays Economy is Forcing Companies to Address Complex Needs to Enhance Shareholder ValueShareholder ValueManagement NeedsReal-time decision support analytics and toolsOperating model flexibilityFinancial NeedsReduce and control operating costsImprove cash flowImprove return on capitalStrategic NeedsImproved core business focusTransformed business designAdditional dollars invested in higher-value projects4IBM Global Services-Strategic Outsourcing 2003 IBM CorporationIBM Strategic OutsourcingStrategic outsourcing positively impacts shareholder value.Our research suggests the difference is in the order of 5.4%above the individual sector average and 4.9%above the overall FTSE 100.-Source:Morgan Chambers,Outsourcing in the FTSE 100:The Definitive Study Evidence shows that IT outsourcing has a discernible positive impact on share prices.A study of 27 companies undertaking large IT outsourcing initiatives indicates an average gain in shareholder value of 5.7%over and above the general market trend.-Source:Stern Stewart,IT Outsourcing and Shareholder ValueWhy outsource?To increase shareholder value.5IBM Global Services-Strategic Outsourcing 2003 IBM CorporationIBM Strategic OutsourcingCost Revenue CustomerEfficiency Growth SatisfactionSource:2003 SO Market Insights study,Mercer Management Consulting -300 interviews with senior executivesSenior Executive Priorities6IBM Global Services-Strategic Outsourcing 2003 IBM CorporationIBM Strategic OutsourcingSubstantial market growth over last five years;growth anticipated at 9%through 2007.IBM is a market share leader.Source:GMV 2H03The MarketplaceThe MarketplaceMarket OpportunityMarket OpportunityCustomersTop two business priorities-cost efficiency and revenue growth Services-savvy customers;increasing 3rd party involvementSophisticated marketplace(customers,suppliers)CIOs playing a strong role in outsourcing decision makingIncreasing interest in On Demand Growing interest/expectation of a collaborative relationshipDealsPrice pressure offshore acceptanceCompetition is fierceMore complex deal structuresSO is a Mainstream IT Solution7IBM Global Services-Strategic Outsourcing 2003 IBM CorporationIBM Strategic OutsourcingSO as percentage of IBM revenue19%SO as percentage of IBM PTI28%Other IBMSOSO as percentage of IBM employees21%Strategic Outsourcing represents a major source of revenue and profit for IBM8IBM Global Services-Strategic Outsourcing 2003 IBM CorporationIBM Strategic OutsourcingThe strategic(transformational)and constraint(necessary evil)segments are becoming less prevalent.Customers are tending to view IT as a support or enabler9IBM Global Services-Strategic Outsourcing 2003 IBM CorporationIBM Strategic OutsourcingPercent of the Fortune X that Outsourced from 1997-200260%of Fortune 100 firms have their outsourcing business strategies in placeSource:IDC Contracts Database 1997-2002 80%64%60%36%23%Fortune 10Fortune 25Fortune 100Fortune 500Fortune 1000Outsourcing has become a common business strategy10IBM Global Services-Strategic Outsourcing 2003 IBM CorporationIBM Strategic OutsourcingStrategic Outsourcing:What is the Value for the Customer?Cost reductionAbility to focus on core competenciesIncrease availability of specific skills and resourcesImprove stability,effectiveness and service levels of ITEnable rapid business change/expansionObtain access to advanced technologies&research,and to industry,business and technology experts Predictable expense managementGain contractually committed service levelsFlexibility to transition to the next generation of infrastructure and applicationsBuild a long term strategic relationship.for competitive advantageIncrease shareholder value11IBM Global Services-Strategic Outsourcing 2003 IBM CorporationIBM Strategic OutsourcingUnderstand your core competencies in light of your business strategyDetermine what portions of your portfolio to outsourceIBM can partner with your company in a variety of ways-from out-tasking,to selective outsourcing of one of more IT functions,to full-scale outsourcingSelect an outsourcing provider who will build a strong relationship with your companyIBM takes a relationship approach that ensures clear expectations,allows for flexibility,collaborative planning and mutual accountabilityA Roadmap to Successful Outsourcing12IBM Global Services-Strategic Outsourcing 2003 IBM CorporationIBM Strategic OutsourcingA successful outsourcing relationship focuses on:Setting clear expectations for the relationship at the outsetEstablishing appropriate governance protocols to guide joint action that can deliver on the promise of the relationshipRecognizing the need to adjust the relationship over time Shared risk and returnMeeting service level expectations-not just SLAsContract flexibility-the ability to change the scale and content of what is being delivered as the business environment changesKeys to a Successful Outsourcing Relationship13