Download - IBM Managed Services Overview Nashville
© 2009 IBM Corporation
Nashville Virtual Trade Mission –Smarter Sourcing
Impacting the bottom-lineA discussion around a transformation framework leveraging the value of IBM Services
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Payers and Providers are focused on managing cost and operational efficiency while being responsive to an demanding/competitive consumer marketplace
Business Imperatives
Transformational Business Processing
Aligning IT with Business
Modernizing Core Systems & Processes
Infrastructure Consolidation/ Virtualization
Resiliency
Medical Costs
Healthcare Competitive Levers
Disease Health & Wellness Management
Consumerism
Pay for Performance
Mergers & Acquisitions
Reduce Admin Costs & Improve Efficiency
Grow the Business
Provider Collaboration
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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
% o
f re
spo
nd
en
ts
Outperformers source 30% more ideas from external
sources
0%
Sp
end
ing
as
per
cen
tag
e o
f sa
les
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
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A high-level framework for identifying opportunities for cost savings and operational improvements using outcomes based sourcing
Sub-optimal Industry Standard
Commodity
Differentiator
Strategic CriticalityMeasures a process or component’s level
of importance in terms of adding value to a
firms competitiveness.
Optim
ized
Develop/ Keep In House
Sourcing Candidate
Tra
nsfo
rmat
ion
Partnering Candidates
Investment Candidates
Critical yet non-differentiating(commodity)
Unique and Differentiating(proprietary) OptimalSub-Optimal
Business Component PerformanceMeasures how well a component functions
vs. other competitors
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IBM is a Services Led Company: IBM delivers the “full equation” by aligning business needs with enabling technologies
Upgrades, user supportNetwork operations center
help desk
Application development,migration, maintenance
Applications
System support
Telecom operations
Hardware operations
Desktop support
Infrastructure
Support processes
Operational processes
Managementprocesses
Business transform
ation
Infrastructure management Data center e-business hosting Network management Desktop management
Business transformation services Claims processing Human resources Finance and administration Procurement Customer relationship management
Application services Package Custom Web-based Development Maintenance
Business solutions Application innovation Business intelligence Customer relationship management Financial management Industry-specific solutions Secure identity solutions Human capital management Supply chain management
Server Migration Services
Storage Migration Services
Proof-of-Concept Centers
IBM Innovation Centers
Middleware Development
SOA
Technology enablers
IBM Global Services contribution to IBM total revenue
IGS 55%
Midrange Servers
6%
9%
2%6% 1%
76%
IBM
SUN
HP
COMPAQ
DELL
OTHER
%
Multi-Vendor Technology Profile
Data Centers 423
Mainframes 1,286
MIPS 1,110,289
Storage (TBs) 11,205
Mid Range Servers 206,641
End User Seats Supported 3,808,000
Skills 84,628
Global Infrastructure Statistics
Services is a significant contributor of value to our clients, and is a key growth area for IBM
Services Revenue is Significant to IBM
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IBM's global sourcing footprint is unmatched
Mexico
Costa Rica
Peru
Venezuela
Canada
United States
Legend
Application Services
Business Process Outsourcing
Remote Infrastructure Management
Argentina
Brazil
Romania
Okinawa
India
China
Czech Rep.
Hungary
Australia
Philippines
New Zealand
Spain
UK
Poland
Slovakia
France
South Africa
Ireland
Portugal
Vietnam
Work flows to the places where it will be done best – that is, most efficiently and with the highest quality. It’s like water finding its own level. The forces driving it are irresistible. The genie's out of the bottle, and there's no stopping
it. It's only going to evolve from this point forward. -- Sam Palmisano, Oct 3, 2006, ISEAD Global Leaders Series
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Examples of Outcome Based IT Outsourcing Engagements & Business Value
Data Center Outsourcing
15-Year IBM outsourcing client, contract extension recently signed
Expected savings of 33% over life of extensionFocus on new business opportunities Improved market visibility and competitivenessIncreased systems availabilityMinimized maintenance of existing processes
eBusiness Hosting
Speed to market: 6 weeks vs/ 6 months
Dynamically manage costs to growth as business expands
Quickly meet HIPPA/CMS security requirements
Quick access to skills not readily available
Access to leading technical capability: IBM Partnership
Top 15 BCBS PayerTop 10 BCBS Payer
BCBS Claims Processor
Data Center Outsourcing/End User ServicesEnabled more responsive capability developmentImproved customer serviceImproved service levels Consistent system availabilityImproved system response timeHeightened operational efficienciesDelivered expected customer savings
Comprehensive IT Outsourcing AgreementSaving $100M over 5 year termSignificantly improved PMPM costs
Labor, Hardware and Cost AvoidanceFlexible, responsive and resilient infrastructure that
increases business effectiveness and improves customer satisfaction while decreasing risk
Data Center Move to Hardened FacilityImproved visibility and competitiveness in the
marketplaceMet efficiency expectations of financial markets
Top 10 For Profit Payer
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Examples of Outcome Based Busines Process Outsourcing Engagements & Business Value
Hardcopy Claims Processing Business Value:Savings estimated $4M+Consistently exceeding 99% data qualityProcessing 6,341,000+ hardcopy claims/yearImplementation of Six Sigma quality effortsOptimized existing processesIntroduction of technology improving accuracy
Claims Pend Processing:$80M of annualized savings through:
• Accuracy Improvement• Labor Savings
$3M savings in productivity improvement of 15%/3 YearsProcessing Accuracy 99.75%+, TAT reduction by 48%Out-performed onsite contact over 14%Increased Productivity 80% from 140 to 240 Claims/day
Enrollment Processing: $1M of annualized savings $300K savings in 12-15% productivity gains/3
years Improvement in Accuracy TAT reduction by 50% and errors by 35%. Robust, real-time and flexible reporting Sales team focuses on core responsibility. Stable workflow environment supports high
compliance
Claims Finalization-Other Payment Liability Processing:Over $4M of estimated annualized savings through:
Accuracy Improvement Process improvement Labor Savings
Lowering cost while improving service levels.Reinvesting savings for customer facing growth activities
Payer
Top 5 Payer Top BCBS Payer
Top 5 BCBS Payer
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Examples of Outcome Based Application Management Services Engagements & Business Value
Core Systems ModernizationProjected savings over 5 years up to $61M.Flexible, responsive infrastructure to increase business
effectiveness improve customer satisfaction.Faster response to market changes and customers.Major savings payback in health management costs.Ability to release and support new products in less time.
Application Management ServicesNew contract saves $20M/year, provides usage
based pricing5X improvement in product launches in 5 yearsIncrease in application availability to 99.8%Reduction in reported problems by 80%Access to broad skill base within IBMLeverage synergies of AMS staff & IBM Experts
to deploy new technologies
Applications Development and Maintenance:Implemented CMMI V 1.2Six Sigma Reduction of Post Production Defects to 3.6Saving of 2K hours every year by Reduced Turnaround TimeTicket Backlog Reduced in 60% Year 1Leveraged Tools Reduced Reengineering Effort by 75%Implemented Single Project Management Tool
Core Systems Modernization: Legacy Systems Maintenance
Cost of IT support and maintenance reduced by 30-40%.
4 improvement projects implemented each month; 30% for users, 45% for IT labor reduction, 25% for system efficiency.
IT labor reduction projects: permanent reduction of 300 labor hours/month achieved in each of 2 years.
Top 10 BCBS Payer
Top BCBS PayerTop 10 BCBS Payer
Top 5 Payer
© 2009 IBM Corporation
Nashville Virtual Trade Mission –Smarter Sourcing
Smarter sourcing- combining process-based effectiveness with the ability to leverage wage arbitrage selectively to yield better results at lower costs.
May 2009
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Client needs and global labor supply, coupled with technology and macro- economic trends are driving the evolution of a Globally Integrated Enterprise Model
Technology: Internet and wireless comms. Open standards - shared IP …enables global componentization
Macro Economic Trends: The rise of Emerging markets…GDP
growth of 6.5% 2X of developed mkts
Emergence of a “developing country” middle class
Global trade and mobility
Client Needs: Grow markets, cross border M&A Reduce cost Diversify sourcing strategy - multi-
country Reduce number of vendors
Global Labor Supply Emerging economies provide low-cost
high-quality talent War for Talent Increase Talent expertise
“The new business models are based on integration, cooperation and an exchange of resources – and above all the new business model is focused on the requirements of the global client.” Oswald Grubel, CEO, Credit Suisse Group
Clients Needs
Global Labor Supply & Expertise Globally Integrated
Enterprise
+
Technology
Macro-Economic Trends
=
Globally Integrated Enterprise Global talent pool and specialization Diversified supply base Global centers of excellence Flexible sourcing capabilities Global resource optimization Streamlined infrastructure Internal & external collaboration Seamless integration
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Why Smarter Sourcing Now?
Outsourcing for less expensive labor alone does not provide enough value in today’s demanding economy
– IT cost ratio for India vs. the U.S., used to be 5-to-1; it is now just 2-to-1 or 3-to-1, and it continues to decline1
Companies must go beyond traditional outsourcing and wage arbitrage
Companies need to establish a more strategic or smarter sourcing approach
– Strategic partnership with vendor
– Target process improvements
– Yields improvements in quality and cycle time 1 Organizational Effectiveness, Mark A. Thompson, Dean, Quinnipiac University School of Business, Fall 2007
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Smarter Sourcing Benefits
Offers measurable benefits in three key areas
– Cost, quality, and cycle time
Provides insight into progress, status, and risks of in-flight projects
Bridges inherent global communication, cultural and process gaps
Leverages vendor’s leading-edge development practices within client organization
Ensures more effective knowledge transfer from sourcing partner to the organization
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Staffing “Pyramid” Optimization
Process Improvements
Global Development Plan
Helping our clients “do something better, more efficiently, more productively.”
Smarter Sourcing Approach
Smarter sourcing combines process-based effectiveness with the ability to leverage wage arbitrage selectively to yield better results at lower costs.
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GBS has implemented and is expanding its Globally Integrated Capability Model
Third GenerationGlobally Integrated Delivery
Network 2008-2009
Fourth GenerationGlobally Integrated Capability Model
2009-2011Integration across our GBS network
Cost competitiveness + Low Cost Labor
Integration across GDC network
Emergence of regional delivery centers
Common Process, Methods and Tools for seamless integration
Specialized domain and industry skills; global centers of excellence
Higher IP content
Planned geo work shift
Globally Recognized: Recognized by clients and competitors for insights and capabilities in the industry Attract best candidates externally and internally
World Class Capabilities: Provide clients with access to expertise, assets and delivery
capabilities in critical industry solutions Deployed in roles in sales, solutioning, service delivery and asset
harvesting/development for the industry
Globally Deployable: Resources are globally deployable with aligned performance
metrics Plays a critical role in the rapid expansion in the Growth Markets
The Best of IBM: Integrates GBS Service Line insights and capabilities into the
industry solutions Collaborates across IBM (e.g., S&D, SWG, IBM Research, GTS)
in the development and enhancement of differentiated propositions and solutions
Hub for Capability Network:: “Nerve center” for industry and domain capability networks across GBS
based in GD Links community of practitioners along industry, solution, service line and
ISV dimensions Bulk of resources co-located with delivery teams for several major client
engagements Closely integrated with GBS industry teams in the IOTs as well as with GD
Expertise and Quality: “Best of IBM” across the service lifecycle
Value: Business outcomes aligned to strategic objectives at a competitive price
Speed of Response: Seamless and timely access to resources and assets
Ease of Doing Business: Consistent & seamless relationship with IBM
Client Benefits
1
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Faster. Local. More flexible.
Because we can.Because we must.
Because we want to.
…and we Close the Loop on Globalization…leveraging the best of offshore back to our shores
Bringing the best of breed of global experience, tools, methods and processes locally completes the ‘loop’ of globalization