From Reengineering To ReInvention:IBM 's Journey To Become An On Demand Business

       From Reengineering to Reinvention:The IBMto enable IBM and its Business Partners to provide
journey to becoming an On Demand Business.better solutions and to be more responsive to
 clients.IBM also has demonstrated success in
Introductiondeveloping industry specific solutions that help clients
 After a highly visible fall from the heights ofsolve their business and IT problems, large and small.
information technology leadership in the early 1990s,To provide high-value business benefits, IBM fuses
IBM is healthy and growing again. The new millenniumservices with industry and technology expertise to
has brought record revenue and established IBM ascraft solutions that meet particular business needs and
the leader in servers, middleware, businesshelp companies to achieve their objectives. Recently,
transformation and outsourcing services, andIBM enhanced its solutions capability, with its continuing
momentum continues to build. Of course, atechnology investments and acquisitions of consulting
transformation of this magnitude doesn’t happenexpertise,furthering its trusted advisor relationships with
overnight. It entails nothing less than a reinvention of theclients. By teaming with leading independent software
company, and it makes for a compelling story—avendors (ISVs) to supply integrated solutions, providing
story that is still unfolding.differentiated insightsthrough research and by
 This transformation is not an event, but aintegrating its hardware, software and services, IBM
journey—one that is taking place in the midst ofhas the breadth of capabilities to support a client
greater turbulence and volatility than businesses havethrough business process and model redesign
faced in more than half a century.application/infrastructure design and solution
Although IBM’s story is in many ways unique, itimplementation.
mirrors the aspirations and challenges faced by manyThe results have been significant. By working closely
leaders of businesses and institutions today. They arewith clients and moving toward seamless and timely
grappling with how to manage their organizationsaccess to arrange of insights and hands-on capabilities
through what feels like a very important—perhapsthrough its consulting services and Business Partners,
even historic—inflection point.IBM has been able to offer solutions that are both
Once every 40 to 60 years over the past threeresponsive and flexible to meet the needs of its clients.
centuries, society has witnessed a great surge of The Web site has long been recognized as a leading
business innovation, sparked by technologicale-commerce environment. It is the focal point of
advances, which ushers in a revolution of an era.IBM’s sales interaction with enterprise and small
 There have been five such surges in modern historybusiness clients, partners ,original equipment
Each of them follows a predictable pattern with twomanufacturer (OEM) partners and consumers. To
distinct periods of 20 to 30 years: The first is themaximize responsiveness, IBM combines a rich online
period of installation, going from initial exploration,environment with global sales center operations to
exuberance and speculation; to a bubble, an economiccreate a fully integrated Tele Web sales, service and
meltdown, its correction and a market adjustment. Thesupport channel. In 2004, recorded 284.4 million net
second is the period of deployment, during which newWeb visits and more than 15.2 million sales calls. The
ways of doing business are explored andsite provides this capability in 83 countries and
implemented—and broad-based wealth and valuemanages online transactions in 31 currencies. In
are createdNovember 2004, IBM launched a complete redesign of
 its public Web site. The One IBM Web Experience
  NEW SURGE: RIPPLING EFFECTprovides aunified Web environment that delivers
 As world markets entered the most recent stage ofrelevant information to a variety of constituents. The
sustained innovation, it’s fair to say that IBMteam is piloting innovative technologies to continue to
traveled a rough road. It’s no secret: the companyimprove the quality of clientinteractions—from simple
began this journey out of necessity—and wasfeatures, like Call Me or Text Chat capabilities, to an
struggling to survive. Reengineering efforts at that timeinstant messaging feature that alerts clients when their
were driven by the need to simplify the enormousinside sales representatives are online. Is it working?
complexity—and attendant costs—thatFifty-seven percent of clients worldwide say they
accompanied IBM’s decentralization in the earlyprefer to do business via the Tele Web channel. More
1990s. As did most other companies, IBM leveragedthan 65 percent of all client interactions are now
the Internet and global connectivity tosimplify access toWeb-based, leaving more than 4,000 specialists in 39
information and enable simple, Web-basedsales centers free to respond to more complex
transactions. The company took steps to integratequeries. At the other end of the client experience
processes both within the business and among alifecycle, providing technical after-sales support, is My
group of core clients, partners and suppliers. That wasSupport Portal, which provides clients with a unified
a huge effort—and yet by late 2002 it was clearview of up-to-date technical information tailored to their
that the real journey had just begun. While IBM reapedindividual needs. When clients log on to My Support
enormous efficiency gains, it had yet to challengePortal, the system automatically pullstheir profile from a
long-accepted practices, processes and organizationalregistration database and instantly presents them with
structures that limited its—and most othera page of relevant information based on their last
companies’—options in the face of globalization,session and/or previously identified interests. Clients
industry consolidation and disruptive technologies.canobtain answers on their own, empowering them to
  A MODIFICATION TO THE NEW WORLD solve problems and enhancing their productivity. By
The answer lay in a new computing model and in astreamlining support processes, My Support Portal
new business architecture. On Demand Business, andcontributed to a US$757 million 2004 cost avoidance
IBM committed itself to becoming not simply a caseassociated with IBM’s technical eSupport initiatives,
study, but a living laboratory for On Demand Business.while increasing overall client satisfaction. Another
The company identified key businessimportant dimension of IBM’s reinvention of the
characteristics—horizontally integrated, flexible andway it sells and serves clients is the IBM Business
responsive—and the IT infrastructure needed toPartner program. To improve its flexibility and
produce its enterprise transformation—integrated,coverage of key markets like SMB,IBM relies on
open, virtualized and autonomic. IBM focused onBusiness Partners as the primary channel for bringing
tackling the complex issues surrounding significantIBM technology solutions to small and midmarket clients.
changes to essential business processes,In return, IBM delivers support and incentives to better
organizational culture and IT infrastructure, and workedenable Business Partners to profit from all aspects of
to find new ways to access, deploy and financethe smalland medium business opportunity. IBM
solutions. Most importantly, IBM committed to use itsBusiness Partners also bring value-added solutions and
own experience to deliver more value to its clients.services to IBM’s largest clients. In order to enable
  Business Partners to deliver the integrated solutions its
Putting IBM’s journey to On Demand Business inclients need, IBM developed a seamless, extensive
perspectivesuite of collaborative tools that enables the company
 IBM’s shift to On Demand Business is not unique.and its Business Partners to work securely across
The company conducts an annual worldwide trackingtime and distance to coordinate tasks, discuss issues,
study with 6,000 organizations (30,000 interviews overtrack actions and make better decisions—faster. In
the past five years). Through this study, IBM identifiedaddition, IBM has initiated a set of business to business
three major stages that an organization moves(B2B) capabilities to enable automation of sales
through as it transforms its operations through the usetransaction processes between Business Partner and
of the Internet and network-based technologies. EachIBM systems. IBM may receive Business Partnerorders
stage has different characteristics, challenges andrequests, directly pass them to the appropriate internal
benefits.applications to be fulfilled and return the appropriate
? Access—Businesses have IT-related capabilitiesresponse information back to the Business
that tend to be limited to supporting single businessPartner—completely touchless .
units with little or no integration between them. A simpleA single solution architecture supports IBM’s
Web presence or basic e-commerce would qualify aXML-based B2B customer and Business Partner
business for this stage of adoption. The challenges?connections, based onE2open’s multi company
 Fears about security. About financial risks. About theprocess management solution. The XML messages
quality of vendor support available. About meetingare implemented using the Rosetta Net open
demand.standards. IBM and its Business Partners can now be
? Integration—Businesses have begun to breakseamlessly integrated, handling transactions 24x7. Each
down barriers by integrating and automating businessof these initiatives is designed to enable IBM and its
processes, models and applications, and supportingBusiness Partners to provide better solutions and to be
infrastructure across their business units, moving themmore responsive to clients.IBM also has demonstrated
in the direction of end-to-end integration, a critical stepsuccess in developing industry specificsolutions that
to becoming an On Demand Business. Eventually suchhelp clients solve their business and IT problems, large
businesses include their ecosystem in their integrationand small. To provide high-value business benefits, IBM
efforts, by including their suppliers, customers and otherfuses services with industry and technology expertise
business partners. Those processes are still relativelyto craft solutions that meet particular business needs
static and inflexible, however, because they tend toand help companies to achieve their objectives.
build on and automate existing relationships. TheRecently, IBM enhanced its solutions capability, with its
benefit? Increased speed and quality, as much of thecontinuing technology investments and acquisitions of
manual processing is eliminated. The challenges?consulting expertise, furthering its trusted advisor
Integration of disparate processes and systems builtrelationships with clients. Byteaming with leading
by different teams.independent software vendors (ISVs) to supply
? On Demand Business—The ability to dynamicallyintegrated solutions, providing differentiated insights
manage and reconfigure processes and relationshipsthrough research and by integrating its hardware,
begins to emerge as a company becomes an Onsoftwareand services, IBM has the breadth of
Demand Business. Relationships can be formed andcapabilities to support a client through business process
dissolved on the fly, according to business need andand model redesign, application/infrastructure design
external conditions. Processes and IT systemsand solution implementation. The results have been
become increasingly modular to supportsignificant. By working closely with clients and moving
reconfiguration, both internally and externally. All of thistoward seamless and timely access to arrange of
enhances the flexibility and resilience of a business,insights and hands-on capabilities through its consulting
while giving it the ability to focus more tightly on itsservices and Business  partners, IBM has been able
core, differentiating capabilities. For IBM, it also meantto offer solutions that are both responsive and flexible
moving to financial reporting that is balanced betweento meet theneeds of its clients. Although far from
client and industry as well as products and services.done, IBM is making solid progress. Client and Business
The biggest challenge? Fostering a collaborativePartner satisfaction numbers continue to rise. For
culture and breakingexample, according to a recent North American study
Down the business and cultural barriers betweenfrom VAR Business, IBM’s commitment to business
internal and external teams, and then reaching outpartners took center stage in the VAR Business
seamlessly to embrace customers, suppliers andAnnual Report Card (ARC).
business partners, and differentiate value.The study ranked IBM as the overall winner or tied in
 business partner satisfaction in eight major categories
Reengineering: the making of a healthy business:that included software, systems, personal computing
 and network storage.
 In 1993, under the guidance of then IBM Chairman  
and CEO Lou Gerstner, the company began itsInformation Technology Enabled Fundamental
turnaround from a near-death experience. And a bigTransformation
part of that was the strategic initiative to reengineer The way IBM sells to and serves clients, the way it
IBM’ score processes. A loose confederation ofmanages its supply chain and the way the company
independent business units had created an unwieldyworks internally have all seen profound improvements,
management structure, redundant operationsmade possible by technology.
 and disconnected information systems. In 1993, theBut far from promoting technology for technology’s
company experienced a US$8.1 billion loss, and thesake, IBM’s IT strategy is built around a view of
stock price was at a 20-year low. Although he wasusing technology to achieve business objectives—as
under pressure to break up the company, Gerstnera way to support and acceleratethe On Demand
decided that the sum of IBM was more valuable thanBusiness transformation. IBM looks at IT through two
its parts, and he recognized that IBM had to change todifferent lenses—how IT can be used to run the
meet its clients’ needs or the company wouldbusiness and how IT can be used to transform the
cease to be relevant. To realize this value, however,business. By making more effective use of the dollars
IBM’s leadership team had to tackle some veryspent to operate the business, IBM frees up money to
tough issues. They started by focusing on a few coreinvest in transforming it. IBM’s spending on what
functions—customer relationship managementmight be termed “maintenance IT” has declined
(CRM), product development, procurement andsteadily since 1999, while its spending on
logistics. Between 1996 and 1998, IBM reducedtransformation- enabling IT has increased by 54
redundant costs associated with decentralization and,percent. In addition to devoting a higher percent of its
as a result, achieved US$5billion in cost avoidance andIT budget to transformation and keepingflat or lowering
savings. Between 1999 and 2002, IBM’s priorityits overall costs, IBM is satisfying a growing internal
shifted to integrating elements of these processes todemand for services. For example, since 2003
create a more horizontal flow of work across thenetwork usage has risen by 38 percent, client seats by
business. So rather than optimizing processes bysix percent and audio conference volume by 16
business unit or within functional domains—likepercent.
billing—the company focused on creating processesWorldwide threats have heightened security
that would make working with IBM a better experiencerequirements and risks to IBM information. Its strategic
for its clients, IBM Business Partners and suppliers.direction here is clear: continue to increase security and
During this phase, IBM gained more than US$7 billion inenhance the resilience of its
new efficiencies.Operating  environment. This is a problem shared by
 all businesses. IBM knows this, because it monitors
Reinvention: the making of an On Demand Businessnetwork security for businesses and governments in
By 2002, with a solid foundation in place, Recognizing134 countries. A 2004 IBM report shows that attacks
that the IT industry was splitting betweenon networks surged 17 percent—in one month. And
Commodity- like and high-value businesses, focus IBMstopping these attacks takes more than rigorous
on high value: innovation, creating unique value, newsecurity policies alone. The IBM Global Services
technology and new business insights and models.“account team collaborates with their client, the IBM CIO
Early on, we focused on reducing cost andorganization, to ensure service integrity and
expense,” says Sanford. “We had to in order toinfrastructure availability, in part by automating and
survive. But today, our focushas shifted frommonitoring processes and using network security
reengineering to reinventing ourselves. We continue toanalysis software to detect and close security
deliver cost and expense improvements, but nowvulnerabilities on more than 1,800 Internet servers and
we’re tackling a more complex17,000 internal network servers in real time. IBM is
agenda—focusing on growthand innovation asmigrating to a comprehensive identity-management
powerful ways to manage and measure oursolution and a single sign-on access authorization
progress.”solution for employees to access a wide range of
 To realize this agenda, IBM has shifted its focus tointernal business.
integrated, unique client solutions supported by businessFundamental to IBM’s own On Demand Business
and technology innovation; identified businessstrategy is a deep and abiding commitment to open
processes that would require radical transformation;industry standards. Its internal deployment of open
and analyzed technologies and business practices thatindustry standards-based technologiesnot only reflects
would foster improvement to business performance.its principles, but also provides proof of the value that
Based on insights from clients and a wide range ofstandards bring. As of year-end 2004, there were
internal and external experts, the company identifiedmore than 2,900 servers running on the Linux®
and nurtured more than 20 emerging businessplatform within IBM’s corporate infrastructure, up
opportunities that had the potential to becomefrom nearly 1,300 in 2002. With Linux technology, IBM
multibillion dollar businesses in three to five years. Ofhas more flexibility, better system performance, lower
these, life sciences, digital media, businesscosts and a secure operating environment for many
transformation outsourcing and pervasive computingmission-critical applications on its infrastructure, spanning
have already become over US$1 billion businesses forcustomer order support, chip manufacturing,
IBM, and the rest are growing by an average of 40sponsorship Web events and antivirus and anti spam
percent, year over year. The acquisition ofsolutions. Integrationis made easier, and new capabilities
PricewaterhouseCoopers Consulting was aligned withare deployed faster.IBM also has moved more than
a US$1 billion investment, through IBM Research, to100,000 users to Voice over IP (VoIP)
deepen On Demand Business insights for clients, and ittelecommunications.
served to launch new business capabilities  
  Better Use Of IT Resources
Transforming the way business is done 
 IBM’s first priority was to improve the way it sellsFor IBM, performance improvements initially require
to and serves clients. Second was the company’smoving workloads to fewer, higher performing servers
supply chain. Third was the way work gets done insideand storage devices. IBM is continuing to consolidate
IBM. Improvements within each of these areasand thereforesimplify its server and storage
were—and still are—fueled by operationalinfrastructure, especially in its deployment of IBM
innovation and advances in technology that not onlyLotus® Workplace™ Messaging™ (IBM Lotus
can be leveraged by IBM, but also delivered to clients.Sametime®) and IBM Lotus Notes® software, the
Reinventing the way IBM sells to and serves clientsbackbone of its employee communications and
and partners First and foremost, IBM listened to thecollaboration environment. Since 2000, the company
needs of its clients and Business Partners. They said ithas reduced the number of IBM Lotus Domino® mail
was difficult to do business with IBM. For example,servers from 1,200 to 240. Not only has this
clients said that they wanted to be able to findconsolidation reduced its costs, it has also resulted in
information quickly and easily so they could makehigher availability and performance. By year-end 2004,
informed purchasing decisions and get the appropriatemore than 320,000 Lotus Notes users were on
support from IBM with a minimal investment of time.clustered servers— ensuring systems are available
Business Partners told the company that it needed towhen employees need them. In fact, availability for
be moreNotes users on clustered servers averaged 99.97
Efficient in processing their orders—so they could, inpercent in 2004. IBM also is consolidating storage and
turn, better serve their clients. The resulting objectiveprocessing power to enable efficient sharing and rapid
was very straightforward: fast, easy access toscaling, and has already consolidated 31 separate
IBM’s products and business expertise. This makesinternal networks to a single internal network. But
it simple for clients and partners to engage with IBM inconsolidation is only one piece of the utilization equation.
every way, from finding product and pricing informationVirtualization is another. Virtualization improves the
to IBM’s contracts, terms and conditions, toutilization of human resources, IT and information
ordering, reconciliation of invoices and ongoing support,assets by allowing IBM to pool resources, accessing
to providing and supporting solutions that meetand managing them by effect and need, rather than
clients’ needs. IBM has a number of major initiativesby physical location. IBM is leveraging the virtualization
under way in this arena, including:capabilities built into IBM servers and storage systems,
? Using to transform the way client interactions areand its expertise in managing those capabilities, to
manageddramatically increase the flexibility and utilization of its
? Working with partners to drive On Demand Businessinfrastructure, reduce costs and improve availability and
solutions and to increase IBM’s presence in thescalability. IBM is moving toward eliminating
small and medium business (SMB) marketplaceapplication-specific dedicated servers and storage.
? Streamlining the process of development, salesInstead, applications will acquireresources on demand
support, proposal and delivery.from a virtualized infrastructure pool.
 IBM committed itself to becoming a living laboratory     
for On Demand Business— horizontally integrated, SIGNIFICANT CHANGES
flexible and responsive—and focused on tackling the 
complex issues surrounding significant changes toMore than 65 percent of all client interactions are now
essential business processes, organizational culture andWeb-based, leaving more than 4,000
IT infrastructure.Specialists in 39 sales centers free to respond to more
 In November 2004, IBM launched a completecomplex queries.
redesign of its public Web site. The One IBM Web On Demand Workplace boosts employee
Experience provides a unified Web environment thatsatisfaction and cost savings
delivers relevant information to a variety of• 81% of IBM employees access the On Demand
constituents. The team is piloting innovativeWorkplace daily.
technologies to continue to improve the quality of client• 50% of IBM’s employee training is delivered
interactions—from simple features, like Call Me orthrough On Demand Workplace.
Text Chatcapabilities, to an instant messaging feature• 9 out of 10 employees enroll for health benefits
that alerts clients when their inside salesvia On Demand Workplace.
representatives are online. Is it working? Fifty-seven• An estimated 30 minutes per employee are
percent of clients worldwide say they prefer to dosaved each month as a result of the ability to  
business via the TeleWeb channel. More than 65quickly locate and engage colleagues who have the
percent of all client interactions are now Web-based,needed expertise
leaving more than 4,000 specialists in 39 sales centers• Since 2003, IBM has realized more than US$680
free to respond to more complex queries. At the othermillion in savings as a result of Web-enabling
end of the client experience lifecycle, providingprocesses to the On Demand Workplace.
technical after-sales support, is My Support Portal,- In late 2004, the first global, role-based port let on the
which provides clients with a unified view of up-to-dateOn Demand Workplace was launched.
technical information tailored to their individual needs.- The new port let, called Learning@IBM, provides
When clients log on to My Support Portal, the systememployees with personalized learning
automatically pulls their profile from a registrationrecommendations based on the roles and interests
database and instantly presents them with a page ofthey specify in their On Demand Workplace profile
relevant information based on their last session and/or- Using IBM’s Blue Pages, employees have
previously identified interests. Clients can obtainsearchable access to a vast array of information
answers on their own, empowering them to solveabout their colleagues—everything from skills and
problems and enhancing their productivity. Byexpertise to interests to client relationships.
streamlining support processes, My Support Portal 
contributed to a US$757 million 2004 cost avoidance 
associated with IBM’s technical e Support initiatives,ENVIRONMENTAL ISSUES
while increasing overall client satisfaction. Another 
important dimension of IBM’s reinvention of theThe environmentally safe disposal of computing assets
way it sells and serves clients is the IBM Businesshas become a very real issue in today’s world.
Partner program.Servers, desktops, laptops, printers—every day,
To improve its flexibility and coverage of key marketsthousands of reusable assets hit
like SMB, IBM relies on Business Partners as theSolectron’s docks around the world. And the clock
primary channel for bringing IBM technology solutions tois ticking. For many of these recovered assets,
small and midmarketclients. In return, IBM deliversthere’s already demand—another organization
support and incentives to better enable Businessthat is willing to buy them, extending their
Partners toprofit from all aspects of the small andUseful life dramatically. Asset recovery is one of
medium business opportunity. IBM BusinessSolectron’s core businesses, and it’s a critical
Partnersalso bring value-added solutions and servicesservice that IBM is committed to providing to its clients.
to IBM’s largest clients. In order to enable BusinessIBM Global Asset Recovery Services has worked
Partners to deliver the integrated solutions its clientswith companies like Solectron to deliver the IT
need, IBM developed a seamless,extensive suite ofindustry’s first seamless, worldwide, end-to-end
collaborative tools that enables the company and itssolution encompassing the acquisition, remanufacturing
Business Partners to work securely across time andand final disposition of used equipment.
distance to coordinate tasks, discuss issues, trackENDING NOTE
actions and make better decisions—faster. In addition,  The ability to offer fresh insights and to prove that
IBM has initiated a set of business to business (B2B)the impact of change will far outweigh the
capabilities to enable automation of sales transactioninvestment—these are two big reasons this journey
processes between Business Partner and IBMis so important to IBM. IBM is passionateabout tackling
systems. IBM may receive Business Partner ordersthe tough business, cultural and IT issues critical to
requests, directly pass them to the appropriate internalbusiness success in the 21st century. The company is
applications to be fulfilled and return the appropriateusing its hands-on expertise and insights to shape its
responseinformation back to the Businessproducts,
Partner—completely touch less. A single solutionOfferings  and solutions. IBM is committed to sharing
architecture supports IBM’s XML-based B2Bwhat it has learned, so that others can benefit from its
customer and Business Partner connections, based onexperience. And it is devoted to collaborating across
E2open’s multi company process managementits extended ecosystemto develop new insights,
solution. The XML messages are implemented usingdisciplines and methodologies that deliver outstanding
the Rosetta Net open standards. IBM and its Businessbusiness value to its clients.
Partners can now be seamlesslyintegrated, handling 
transactions 24x7. Each of these initiatives is designedThe journey continues………………..