IBM Journey towards the Future

Giovanni LinziGeneral Manager Sales IBM Italy

Master in Economics and Political Science – Universita’ degli Studi di Milano

agenda

About me ........

2011 IBM Annual Report snapshots

IBM Transformation Journey

IBM 2015 Roadmap

About me ….

1980 …………………….

1997 EMEA T&T Services Executive

1998 EMEA GM T&T Industry - London

1999 WW GM CGP Industry - Paris

2000 EMEA Business Innovation Services VP, Distribution Sector - Paris

2001 Region South Business Consulting Services VP - Milan

2004 Region South System and Technology Group VP

2007 Managing Director Unicredit Group Integrated Account

2010 General Manager Sales IBM Italy

Born in 1955

Joined IBM in 1980

The Global CEO Study 2010: Standouts (*) capitalize on complexity in three ways

The fourth biennial CEO study, building on insights and findings over the last 6 years

1,541 CEO face to face interviews

(*) Standouts means Company with significant economic performance in the short term and in the medium long term

2011 IBM Annual Report

2011 IBM Annual Report

IBM operations in more than 170 countries

Integration of major global enteprice functions allowed more than 6B$ in enterprise productivity savings in 5 years

2011 IBM Annual Report

Primary drivers for growth

Gross profit margins expansion, as result of shift to higher value segments

Improved productivity across the Enterprise

2011 IBM Annual Report

2011 IBM Annual Report

Reinventing the Reinventing the modern corporationmodern corporation

Pioneering the science Pioneering the science of informationof information

Making the world Making the world work betterwork better

How to capture the opportunity of

enterprise computing

How to build a new kind of organisation and sustain it over time

How to apply technology to transform companies,

industries, societies

IBM Transformation Journey - 100 years of IBM

Phase OneGerstner era (’93 thru 2002)

• Keeping company together & stabilizing business

• Bringing massive decentralization under control (e.g., 128 CIOs to 1; 70 ad agencies to 1)

• From country to global brand P&L statements

• Move to integrated solutions

• Dramatic growth in services

“I think the greatest challenge facing the company is … to adapt our strategy, structure and culture to a world of constant change. I can’t promise this journey will be easy or fast… the steps we will take will be bold strides.”

Lou Gerstner, 1993

Fo

cu

s A

rea

s

IBM Transformation Journey: we started several years ago…

1993 1995 1997 1999 2001 2003 2005 2007 20112009

Phase TwoPalmisano era (‘03 thru present)

…an ongoing journey•Shift to high-value solutions•Move to Values-based culture•Lowering center of gravity for decision-

making•Becoming premier globally integrated

enterprise•Maintain focus and execute in a radically

shifting market•A Smarter Planet

“The crisis in our financial markets has jolted us awake to the realities and dangers of highly complex global systems. But in truth, the first decade of the 21st century has been a series of wake-up calls with a single subject: the reality of global integration.”

Sam Palmisano, Nov. 6, 2008

Fo

cu

s A

rea

s

1993 1995 1997 1999 2001 2003 2005 2007 20112009

Phase ThreeRometty era (starting in 2012)

The shift to a Globally Integrated Enterprise

Shared Services reduced spending by $4B over the last four years

Supply chain averaging $3-5B in savings every year for the last six years

Each Shared Service driving ongoing efficiency & effectiveness:

– Finance E/R reduced from 3% to 1%

– Real Estate improved E/R by 50%

– HR HC Ratio to Employee: improved from 1:122 to 1:169

GIE: Global Shared Services as internal efficiency improvement and external offering

Sharing and Partnering

Globally Integrating

Making Things Smarter

2002

2006

2010

Established consistent set of processes, measures, systems and governance

•Established global function owners accountable for meeting productivity goals

Pursue opportunities to:• Instrument• Interconnect• Make intelligent

“We no longer have to replicate IBM from floor to ceiling in every country. We are optimizing key operations in the right places in the world – eliminating redundancies and excess overhead – and integrating those operations horizontally and globally. …This is

about doing the right tasks, with the right skills, in the right places.” - Sam Palmisano, May 20, 2005 Analyst Meeting

IBM has driven continuous improvement through structured approaches, shared GIE principles, governance and cross Shared Service measurement of process maturity

Major Employee Sites

Customer Fulfillment

Manufacturing

Employee Service Centers

IBM Research Centers

IBM Internal Data Centers

IBM became a Globally Integrated Enterprise, leveraging its scale to capture new growth.

We shifted our operating model to become a Globally Integrated Enterprise that optimizes its supply chain, production and demand management to capture new opportunities.

A Globally Integrated Enterprise is an open, modular organization that is integrated into the fabric of the networked economy and operates under a business model that makes economic sense in the new

global landscape.

Systems & Technology Group

(STG)

Global Business Services (GBS)

Software Group (SWG)

Global Technology Services (GTS)

Sales & Distribution (S&D)

Business Units

Globally Integrated Shared Services

Geographies

North America

Northeast Europe

Southwest Europe

Japan

Sectors

IBM Organization At a Glance IBM Leadership Governance

Strategy TeamStrategy Team

IBM’s strategic direction and emerging business opportunities

Technology TeamTechnology Team

Near- and long-term emerging technologies, technical developments and issues

Integration and Values Team (I&VT)Integrate IBM’s enterprise-wide capabilities, and align and communicate strategies and

values

Performance TeamAccountable for business performance &

results. Develop cross-unit strategies.

Distribution

Industrial

Financial Services

Communications

Public

General BusinessGrowth Markets

Operating TeamOperating Team

Day-to-day marketplace execution

HR Real Estate IT Finance Legal Marketing/Comm

Sales Operations

Integrated Supply Chain

IBM organization and Governance – Strategy to Execute

18

Remixed our portfolio toward services, software, and integrated solutions…

Business Model, Operating Model and Workforce Transformation

Exited commoditized businesses:– PCs– Hard disk drives– Printing Systems

Strengthened position in:– Business Consulting– Service-Oriented Architecture– Information on demand– Virtualization– Open, modular systems

Acquired over 60 companies in last 5 years – to complement and scale our portfolio of products and

offerings

Shift in geographic mix… 2010 revenue:

– 23% Asia Pacific – 34% Europe, Middle East, Africa– 43% Americas

Strong Performance in 2010…

IBM 2010 financial roadmap

Historical Revenue Growth

Margin Expansion

Share Repurchases

Retirement-Related

Future Acquisitions & Growth Initiatives

2006

2010

Contributing to margin expansion by globally integrating:

$6.06

$0.75

$1.00

EPS

Service Delivery

Support Functions

Supply Chain

$11.00

IBM 2010 EPS Roadmap

IBM 2010 EPS Roadmap

IBM’s Roadmap to 2015

Business Model, Operating Model and Workforce Transformation

•Shift to faster growing business mix

•Leverage on acquisitions

Contribute to margin expansion byglobally integrating:•Service Delivery•Support Functions•Supply Chain

• Software contributes about half of our segment profit

• Growth initiatives deliver $20B in revenue growth

• Growth markets revenue approaches 30% of IBM total

• Enterprise productivity delivers $8B in gross savings

• IBM generates $100B in free cash flow, returning 70% to shareholders

IBM’s Roadmap to 2015

Business Model, Operating Model and Workforce Transformation

Shift to faster growing business mix

Leverage on acquisitions

Contribute to margin expansion by

globally integrating:•Service Delivery

•Support Functions•Supply Chain

• Smarter PlanetSmarter Planet: Approximately 400 recent client engagements illustrate reach

• Business AnalyticsBusiness Analytics: Grows to ~$16B business by 2015 –

• Cloud: Grows to ~$7B business of which ~$3B is incremental

• Growth Markets: contributes ~50% of IBM’s growth over the roadmap

IBM values

Dedication to every client’s success

Innovation that matters – for our company and for the world

Trust and personal responsibility in all relationships

Business and

Managem

ent

Science and

Engineering

Econom

ics and Social

Sciences

Math and O

perations R

esearch

Com

puter Science &

Info. S

ystems

Industrial and System

s E

ngineering

Business

Anthropology

Organizational C

hange &

Learning

T-Shaped competences

People and competences have to be aligned with IBM focus on client

There is the need of T-shaped persons (deeper and wider competences)

Today, IBM is helping our clients to change the way the world literally works – and to make the planet not just smaller and “flatter,” but smarter. IBM is applying its expertise, global scope and creativity to build the backbone of 21st century industries and public institutions.

Our world is becoming

INSTRUMENTEDOur world is becoming

INTERCONNECTEDVirtually all processes and ways of working are becoming

INTELLIGENT

Leading the transition to a smarter planet

General Manager Sales, Italy

giovanni_linzi@it.ibm.com

Complexity as the “New Normal”

Volatility, uncertainty and risk

Continued cost pressures

New regulatory regimes

New Stress on global inter-dependencies

Industry restructuring and consolidation

Markets & business models change

Technology

Complexity as the “New Normal”

Volatility, uncertainty and risk

Continued cost pressures

New regulatory regimes

New Stress on global inter-dependencies

Industry restructuring and consolidation

Markets & business models change

Technology

In 2001, there were 60 million transistors for every human on the planet ...

… today there are 1 billion transistors per human…

… each costing 1/10 millionth of a cent.

Complexity as the “New Normal”

Volatility, uncertainty and risk

Continued cost pressures

New regulatory regimes

New Stress on global inter-dependencies

Industry restructuring and consolidation

Markets & business models change

Technology

There are 4 billion mobile phone subscribers worldwide…

That’s more than one phone for every two people on the planet

Complexity as the “New Normal”

Volatility, uncertainty and risk

Continued cost pressures

New regulatory regimes

New Stress on global inter-dependencies

Industry restructuring and consolidation

Markets & business models change

Technology In 2005 there were 1.3 billion RFID tags in circulation…

… today there are 33 billion.

Complexity as the “New Normal”

2 billion people will be on the Web by 2011 ...

… and a trillion connected objects – cars, appliances, cameras, roadways, pipelines – comprising the "Internet of Things."

Volatility, uncertainty and risk

Continued cost pressures

New regulatory regimes

New Stress on global inter-dependencies

Industry restructuring and consolidation

Markets & business models change

Technology

Our world is becoming

INSTRUMENTED

Our world is becoming

INTERCONNECTED

Virtually all things, processes and waysof working are becoming

INTELLIGENT

Our vision is to bring a new level of smart to how the world works — how every person, business, organization, government, natural system, and man-made system interacts.

Each interaction represents a chance to do something better, more efficiently, more productively.

But more than that, as the systems of the planet become smart, we have a chance to open up meaningful new possibilities for progress.

Smarter Planet

The World is Getting Smarter: because it must

40-70 percent of the electrical energy is lost due to inefficiencies in the grid.

In one small business district in Los Angeles alone, cars burned 47,000 gallons of gasoline just looking for parking.

Consumer products and retail industries lose about $40 billion annually due to inefficient supply chains.

In a world where 820 million people are undernourished, $48 billion worth of the food is thrown away each year in the US.

Our healthcare “system ” can’t link from diagnosis to drug discovery, providers, insurers, employers and patients.

Financial markets spread risk but can’t track it; this has led to undermined confidence and uncertainty.

Building a smarter planet together

Smart trafficsystems

Smart water mgmt

Smart energygrids

Smarthealthcare

Smart foodsystems

Intelligentoil field

technologies

Smart regions

Smart weather

Smart countries

Smart supply chains

Smart cities

Smart retail