“the emergence of a global integrated enterprise”
TRANSCRIPT
The 2009
Outsourcing World Summit®
“The Emergence of a Global
Integrated Enterprise”
Bill Payne
Vice President Strategy and Development
IBM Business Process Services
The 2009
Outsourcing World Summit®
Bill Payne, VP IBM
Bill Payne is Vice President of Strategy and
Development in Managed Business Process
Services (MBPS) in IBM. The role encompasses
the development of the business strategy and
service development for MBPS in Europe,
including IBM’s drive to offshore Business Process
outsourcing. In the last three years, Bill has
spearheaded the development and delivery of
MBPS services in procurement, finance and
accounting, and HR. Bill has also led major deals
from inception through to delivery and has been
responsible for the management of IBM’s recent
acquisitions and development of new targets.
The Story
The Story
What’s Driving This Emergence?
The Globally Integrated Enterprise
Three Prism View
Innovation
Service Delivery
Domestic Opportunity
The Next 10 Years
Copyright © 2009 IAOP. All Rights Reserved.
Copyright © 2009 IAOP. All Rights Reserved.
In the 1990s, IBM was fast becoming marginalised in the marketplace and
needed to regain customer and shareholder confidence
Company-wide business process reengineering was performed as we
renewed our focus and dedication to our clients’ wants & needs
These past and ongoing actions have helped form the basis for IBM’s 21st
century business design – The Globally Integrated Enterprise
1984 1992 2004 2005 2006
IBM’s journey to become a Globally Integrated Enterprise
encompasses our ongoing business transformation
The Story
The Story
What’s Driving this Emergence?
The Globally Integrated Enterprise
Three Prism View
Innovation
Service Delivery
Domestic Opportunity
The Next 10 Years
Copyright © 2009 IAOP. All Rights Reserved.
Copyright © 2009 IAOP. All Rights Reserved.
The Globally Integrated Enterprise will replace the
multinational corporation for competing in the Flat World
International Corporation Multinational CorporationGlobally Integrated Enterprise
19th Century 1914 (World War I) 1914 (World War I) 2000 2000 beyond
Independent enterprises emerged
and explored overseas markets
Imported raw material and exported
manufactured products through
international trade routes
All operations handled at HQ
Vertically integrated operation
Wide-spread protective trade laws
closed trade routes of the past
Replicated HQ org. & functions at
regional centers
Manufactured and sold within
local/regional boundaries
Mini-companies covering regions
Local/regionally centered operation
Free trade, overseas investment, IT
revolution, open standards of technology
& processes
Focused on optimizing operations beyond
country boundaries
Shift from ‘what to make’ to ‘how to make’
Open Network
Horizontally, globally integrated operation
Copyright © 2009 IAOP. All Rights Reserved.
The Globally Integrated Enterprise represents a business
design for the 21ST century
Globally Integrated Enterprise
Global Infrastructure
Global Resources Global Production
“A Globally Integrated Enterprise shapes its strategy, management and operations in a truly global way. It locates operations and functions
anywhere in the world based on the right cost, the right skills, and the right business environment. And it integrates those operations
horizontally and globally.”
Copyright © 2009 IAOP. All Rights Reserved.
Technology and business landscape changes are driving
the requirements for global integration
Enabling Culture and Legislation
Global Infrastructure
Global Resources Global Production
Technology Landscape Changes Business Landscape Changes
Localized Global Infrastructure Local Resources Global Resourcing
Proprietary Open Proprietary Innovation Open Innovation
Custom IP Asset-based Simple Value Chain Componentization
Copyright © 2009 IAOP. All Rights Reserved.
To become globally integrated, requires aligned strategic,
operational, and IT infrastructure transformation efforts, all
guided by a shared set of global company values
Strategic
Transformation
Transformation
Transformation
Operational
IT Infrastructure
Strategy
Business
Processes
& People
Enabling Technology
&
IT Infrastructure
linkage
linkage
Copyright © 2009 IAOP. All Rights Reserved.
The Sourcing Argument: The Old models are the best….
used in a modern way
Good At
Bad At
Outsource
Something
SourceMake it Better
Somewhere
On
EARTH
1990’s Thinking Noughties Thinking ?
Copyright © 2009 IAOP. All Rights Reserved.
A Universe of Modular Business Services Allows Even Small
Businesses and Start-ups to Become Globally Integrated
Service Your
Customers
Setup Your
Resources
Build Your
Product
Reach Your
Customers
Support Your
Business
The Story
The Story
What’s Driving This Emergence?
The Globally Integrated Enterprise
Three Prism View
Innovation
Service Delivery
Domestic Opportunity
The Next 10 Years
Copyright © 2009 IAOP. All Rights Reserved.
Copyright © 2009 IAOP. All Rights Reserved.
We look at emerging markets through three distinct prisms
Global Innovation
Hubs
Global Service Delivery
Domestic Opportunity
Copyright © 2009 IAOP. All Rights Reserved.
Selecting the right point of delivery is key…
Category Definitions
Financial Structure
Compensation
Infrastructure costs
Tax & regulatory costs
People & Skills Availability
Relevant experience
Size & availability of workforce
Education
Language skills
Attrition risk
Business Environment
Country stability risk
Country infrastructure
Cultural adaptability
Security of IP
Environmental
• People Skills & Availability
• Financial Skills Availability
• Language Skills
• Size of Labor Force
• Unemployment Rate
• Salary + employer social costs
• Country Infrastructure
• Flexibility of Labor
• Government Support
• Political Environment
• Economic Freedom
• Corruption
• Currency Stability
• Data Privacy
• Financial Structure
• Business Environment
Copyright © 2009 IAOP. All Rights Reserved.
In field after field, low-cost global talent is reshaping global
business
Source: McKinsey “Emerging Global Labor Market” 2005
* Less than or equal to 7 years of work experience; supply does not consider limited talent accessibility and domestic labor demand
** The LCI values for other countries are estimated
Location Cost Index Weighting emphasizes Cost above other measures including: domestic market, environment, vendor landscape, risk profile and quality of infrastructure
Other Latin America
Countries**
IndiaChina
Ph
ilip
pin
es
Oth
er
low
-wag
e A
sia
n c
ou
ntr
ies**Malaysia
Brazil
Mexico
Hungary Czech Republic
Can
ad
a
US Ru
ssia
Oth
er
Easte
rn E
uro
pean
Co
un
trie
s**
Mid
-wag
e A
sia
n C
ou
ntr
ies**
South Africa
Ireland
UK
Germ
an
y
Jap
an
Po
lan
d
3.8
3.4
3.0
2.2
1.8
1.0
2.6
1.4
Relative Cost and Supply of Young Professional Engineers*- 2008
Demand: 596k
Size of Suitable Labor Pool (k)0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200
Relative Cost
Copyright © 2009 IAOP. All Rights Reserved.
Outsourcing today involves a broad spectrum of talent
Dental Care
Eye Care
Heart Care
Heart Surgery
Cosmetic Treatment
Nephrology
Psychiatry
Urology
India Medical Packages
Position Type Supply (K)
Support Staff 5,000
Generalist Young Prof. 3,245
Finance/ Accounting 2,184
Analyst Young Prof. 1,799
Nurses 1,089
Engineering Young Prof. 946
Doctors 742
Life Science Young
Prof.
333
Full Time EquivalentsYoung Prof. – Young Professional, less than or equal to 7 years of work experience
Assumes constant suitability rates from 2003 to 2008, aggregated low-wage supply from 28 Companies
Source: McKinsey “Emerging Global Labor Market” 2005
Likely Low-Wage Suitable Labor Supply (2008)
Copyright © 2009 IAOP. All Rights Reserved.
For example, in moving work to where it can be done best, we
deployed eleven support functions as global shared services
11 Globally Integrated Support Functions @ IBM
11 Shared Service Support
Functions
Governmental Programs
Business Transformation
& Information Technology
Marketing
Human Resources
Legal
Integrated Supply Chain
Contracts & Negotiations
Communications
Global Real Estate Operations
Global Sales Operations
Finance
Copyright © 2009 IAOP. All Rights Reserved.
And we globally integrated in order to participate in the
world’s growth markets and improve our productivity
Brazil – with primary
sites in Hortolandia,
Sao Paulo and Rio de
Janeiro
China – with primary
sites Shanghai, Dalien
and ShenZhen
India – with primary sites
Bangalore, Pune, Delhi,
Kolkata, Hyderabad and
Chennai
Focus on four emerging countries as key to our growth and global sourcing strategy
IBM Continues to extend its reach into high-growth markets around the world, In 2006, the company
grew in,
Russia – with primary
sites Moscow and St
Petersberg
IBM Established 1917 IBM established 1951 IBM Established 1939 IBM Established 1974
The Story
The Story
What’s Driving This Emergence?
The Globally Integrated Enterprise
Three Prism View
Innovation
Service Delivery
Domestic Opportunity
The Next 10 Years
Copyright © 2009 IAOP. All Rights Reserved.
Copyright © 2009 IAOP. All Rights Reserved.
There continues to be vigorous societal debate over
globalization
“Economic theory does
not say that everyone will
win from globalization,
but only that the net
gains will be positive,
and that the winners can
therefore compensate the
losers and still come out
ahead”
Has globalization made
the world grow faster?
Has poverty declined at a
faster pace during
globalization?
Who gained from
globalization?
A market economy is the
only arrangement
capable of generating
sustained increases in
prosperity, and the world
needs more, and better,
globalization
“…free trade doesn’t
promote growth in either
developed or developing
countries, but simply
shifts well-paying
American jobs to Third
World sweatshops.”
Copyright © 2009 IAOP. All Rights Reserved.
While companies continue to push ahead to capitalize on
global integration
• 75% actively enter new
markets in pursuit of new
customers and scarce
talent
• 86% plan fundamental
changes in capabilities
that distinguish leading
organizations –
knowledge and asset mix
• 85% of CEOs plan to
partner to globally
integrate – more than half
plan to do so extensively
* total % of CEOs who answered between left hand side 3 to 0 (0 = both sides equally important)Source: IBM Global CEO Study 2008, n = 872, n=860, n=880
37%Defend
your core
Actively enter
new markets 37%
3 0 3
75 %*
20%43%
32%
3 0 3
86
Deeply change
mix of capabilities,
knowledge and assets
Maintain
current mix
%*
32% 11%57%
35%Partner
extensively
Do
everything
in-house
3 0 3
85%*
35% 10%55%
Copyright © 2009 IAOP. All Rights Reserved.
Questions to consider for becoming a Globally Integrated
Enterprise
Globalization
Internet
Open Standards
Changing Demographics
Deregulation Commoditization
» Where am I today?
» What are my target markets and value proposition?
» What capabilities do I need?
» What operating model will work for me?
» How can we get there?
