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VI ConsultingIBMTegan HasikGreg SandersTerry TateJared LeonardChris AlversonSaeed AlyakoubTu Pham
Enterprise Information Systems Integration and Consulting
Drivers of Change Demand for Services
Rate of demand of services is constantly fluctuating
Firms must be able to keep up with changes in demand
Rapid Technology evolution.
Technology is constantly evolving and can become quickly outdated
Firms must be able to keep up
Economic Conditions
Industry is positively related to economic conditions
Enterprise Information Systems Integration and Consulting
Key Survival Factors Skilled Workforce/Technical Expertise
Firms rely heavily is skilled individuals to create and implement products
Without a skilled workforce firms will quickly become obsolete
Access Capital
Innovating and creating new products is very expensive
Companies must invest large amounts in research and development
Innovative Services
Technology changes are rapid, must be able to keep up in order to be relevant.
Enterprise Information Systems Integration and Consulting
Overall attractiveness of the industry Industry is only moderately attractive
Competitive Rivalry is very high, several large, distinguished firms
Firms in the industry require a large amount of capital, Larger firms can operate at an operating loss for some time to expel smaller competitors.
Industry 5 years from now.
Industry revenues were 191 billion in 2013 and are expected to more than double by 2018
Workforce expected to grow 25%
The Firm Strategy
Mission Statement To be dedicated to every clients success
To focus on innovation that matters
Develop trust and personal responsibility in all relationships
Vision Statement Shift Business focus to data, cloud and engagement services
Spread innovations through IBM and all of it’s subsidiaries
Open business relationship and collaborate innovation
Value Proposition IBM creates value for its customers by offering business enterprise applications
and solutions. By partnering with IBM, value is created for the client with unmatched experience in the technology industry, a proven reputation for innovation and a guarantee of an open partnership with a trusted company.
Goals Product/Market Focus
Goals Focus on Innovation that matters
Maximize earnings per share
Create lasting and trusted business relationships
Be a leader in cloud computing software.
Product Focus / Market Focus - Broad
Industry performance Vs. Firm Performance
Industry Performance Industry has been growing at a constant rate
Improving economic conditions have allowed industry to expand
IBM IBM’s revenue has steadily declined over the past several years
IBM’s debt to equity ratio is higher than the industry average
Significant free cash flows allowing company to quickly repay debt
Industry performance Vs. Firm Performance
Organizational Health
IBM over the last 3 years has experienced a decline in operational performance.
IBM has also experienced a decline in organizational health due to policies such as mandatory layoffs each year
IBM is in Quadrant 2 for the past 3 years and currently. Firm is likely to move to Quadrant 4 if conditions do not improve.
Quadrant 2Complacent OrganizationX= Past and Current State
Quadrant 1 Desired State
Quadrant 4 CrisisY= Possible Future State
Quadrant 3Troubled Organization
Firm Capabilities
Customer Capabilities Ability to attract and retain customers
Operational Capabilities Access to capital
Ability to service worldwide
Service in 170 countries
Innovation Capabilities Ability to implement new products
WATSON
Alignment between Environment and Strategy
Good Fits Demand for service DOC with global market focus
Services are demanded all over the world, and IBM can provide it to them.
Economic conditions DOC with market focus
Regardless of economic conditions, IBM’s enterprise data software will be required.
Gaps Outsourcing skills with skilled workforce KSF
IBM’s strategy to outsource work doesn’t match the skilled workforce KSF
Marketing versus competition with marketing KSF
IBM isn’t marketing their product well to match up with the KSF for marketing
Rapid Technology revolution DOC with innovation speed
IBM isn’t innovating the market like they used to
Alignment between IBM’s Strategy and Organizational Capabilities Good Fits
Access to capital capability with small business acquisition strategy
IBM is able to purchase smaller firms due its large revenues.
Gaps Marketing with vision statement and strategy
IBM’s vision to spread innovation that matters is hindered by their inability to market themselves.
Innovation capabilities with current acquisition strategy
IBM has the ability to create and innovate but is purchasing other companies innovations instead.
Innovation capability with IBM’s bulky management structure
Slow to introduce products that are already on the market.
Key Problems/Issues faced Firm
Marketing Public perception of IBM is that they are an outdated, old company
Innovation No longer thought of as a company that is a leader in innovation
Bulky management Company slow to react to changes in environment because of excess
management layers
Declining Revenue Several years of declining revenue
Projection of Future Performance
IBM’s market performance will likely experience little to no growth over the next several years
Changes will be required in the future to prevent further decline and to close strategic gaps
Proposal 1
Focus of closing Marketing and Innovation Gaps. Commitment to innovation
Create an innovation department & focus on R&D
Bring Back Outsourced
Invest less in buying other companies, invest more IBM
Marketing Campaign for brand image
Huge marketing campaign that focuses on history and futuristic products
Update Website
22nd century logo
Proposal 2
Focuses on closing speed of adapting and marketing gaps Revamp Operating Structure
Diversify Board of Directors
Reduce layers of management
Examine operating procedures for efficiently
Market current and Upcoming Products
Remind public what IBM stands for
Market WATSON
Partner with industry leaders
Selected Proposal
Proposal One! More feasible to do. Doesn’t require cutting, or restructuring,
management
Changes to Current Organizational Capabilities
Operational Capabilities 1. Reduce outsourced operations by bringing operations in-
house
2. Invest more in research and development
Changes to Current Organizational Capabilities
Customer Capabilities 1. Update marketing campaign to attract and retain more
customers
2. Update website and logo to build better brand image and recognition
Changes to Current Organizational Capabilities
Innovation Capabilities 1. Create innovation department.
2. Acquire less technology companies and focus on IBM’s original innovations.
Departments Affected by the change
Marketing department
Innovation department
Human Resources department
Income Statement with New Strategy
Cash Flows, NPV, & Sensitivity Analysis
Financials
Cost $12.3 B Subtracted $608 M from Acquisitions Cost
Added $300 M 1st year to R&D for Innovations Dept
Costs decrease after 1st year to $150 M
$458 M Savings per Year in Years 2-5
Revenue Growth Rate 2015 -7.3%, 2016 4%, 2017-2018 15%
NPV $31.5 B
Q&A
Thank you for your time and hope you accept our partnership