IBMStrategicOutsourcinglfl

,Main Slide Title,Level One,Level Two,Level Three,Level Four,Level Five,*,IBM Global Services-Strategic Outsourcing,2003 IBM,Corporation,IBM Strategic Outsourcing,IBM Global Services-Strategic Outsourcing,IBM Strategic Outsourcing,2003 IBM Corporation,IBM Strategic Outsourcing,Emily Wright,Business Consulting Services,1,The Market Environment,Strategic Outsourcing,IBMs Capabilities,On Demand,Agenda,2,Slow 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 ways,IT is being tasked to enable business process efficiency,IT 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 cuts,Source:2003 SO Market Insights study of 300 senior executives,Mercer Management Consulting,Companies are taking actions to improve their bottom line rather than waiting for“the recovery”to solve problems,In a weak global economy,companies face uncertainty about their economic and strategic future,3,Todays Economy is Forcing Companies to Address Complex Needs to Enhance Shareholder Value,Shareholder Value,Management Needs,Real-time decision support analytics and tools,Operating model flexibility,Financial Needs,Reduce and control operating costs,Improve cash flow,Improve return on capital,Strategic Needs,Improved core business focus,Transformed business design,Additional dollars invested in higher-value projects,4,Strategic 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 Value,Why outsource?To increase shareholder value.,5,Cost Revenue Customer,Efficiency Growth Satisfaction,Source:2003 SO Market Insights study,Mercer Management Consulting -300 interviews with senior executives,Senior Executive Priorities,6,Substantial market growth over last five years;growth anticipated at 9%through 2007.IBM is a market share leader.,Source:GMV 2H03,The Marketplace,The Marketplace,Market Opportunity,Market Opportunity,Customers,Top two business priorities-cost efficiency,and revenue growth,Services-savvy customers;increasing 3rd,party involvement,Sophisticated marketplace(customers,suppliers),CIOs playing a strong role in outsourcing,decision making,Increasing interest in On Demand,Growing interest/expectation of a collaborative,relationship,Deals,Price pressure offshore acceptance,Competition is fierce,More complex deal structures,SO is a Mainstream IT Solution,7,SO as percentage of IBM revenue,19%,SO as percentage of IBM PTI,28%,Other IBM,SO,SO as percentage of IBM employees,21%,Strategic Outsourcing represents a major source of revenue and profit for IBM,8,The strategic(transformational)and constraint(necessary evil)segments are becoming less prevalent.,Customers are tending to view IT as a support or enabler,9,Percent of the Fortune X that Outsourced from 1997-2002,60%of Fortune 100 firms have their outsourcing business strategies in place,Source:IDC Contracts Database 1997-2002,80%,64%,60%,36%,23%,Fortune 10,Fortune 25,Fortune 100,Fortune 500,Fortune 1000,Outsourcing has become a common business strategy,10,Strategic Outsourcing:What is the Value for the Customer?,Cost reduction,Ability to focus on core competencies,Increase availability of specific skills and resources,Improve stability,effectiveness and service levels of IT,Enable rapid business change/expansion,Obtain access to advanced technologies&research,and to,industry,business and technology experts,Predictable expense management,Gain contractually committed service levels,Flexibility to transition to the next generation of infrastructure and applications,Build a long term strategic relationship.for competitive advantage,Increase shareholder value,11,Understand your core competencies in light of your business strategy,Determine what portions of your portfolio to outsource,IBM 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 outsourcing,Select an outsourcing provider who will build a strong relationship with your company,IBM takes a relationship approach th