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© 2010 IBM Corporation
Zaheer Travadi – Sr. Strategy & Transformation Consultant | Program Manager – WW STG Run Rate Marketing
Module 6 Services Innovation1. Enterprise pressures and the need for services innovation
© 2010 IBM Corporation2 IBM-SPJIMR – ACPS 2010
The opportunity in Service Transformation is 3-10x larger than many CXO’s understand
Shared Services
Traditional Optimization
Pe
rce
nta
ge
of
Eco
no
mic
Op
po
rtu
nit
y
IntegratedOptimization
Performance Improvement Opportunity
Service Growth
Innovation
Service Model Innovation
Service Planning & Product Design Integration
Entitlement
Call Center/Field Deployment Integration
Service Innovation
Opportunity
Centralization and Standardization
Common Infrastructure
Policies and Controls
Business Process Redesign
Optimization and Commodity Outsourcing
Service Transformation Strategy
Opportunity Assessment
Strategy Alignment
Product to Service Strategy and Enablement
New Offering Definition and Market Testing
Service Sales Transformation
Traditional View of Service
Opportunity
Source: IBM Analysis
Analysis of Service Innovation Opportunity
Key Activities By Type of Service Innovation
© 2010 IBM Corporation3 IBM-SPJIMR – ACPS 2010
Historically, investment in services processes have been a low priority
Analysis of Customer Spend By Business ProcessAs % of Total Spend
0%
2%
4%
5%
6%
7%
23%
23%
29%
0% 5% 10% 15% 20% 25% 30% 35%
Training
Services
Finance & Accounting
Human Resources
Product Design/Engineering
Data Processing/Management
Sales & Marketing
Other
Supply Chain Management
Bu
sin
ess
Pro
cess
% of 2003 Customer Spend By Business Process
Source: IBM AnalysisNotes: Many of the business process categories here are sums of business sub-processes:
Supply Chain Management includes Planning, Sourcing, Procurement, Product Lifecycle Management and Logistics.Other includes horizontal processes that cross business processes.Data Processing/Management includes Billing, Card Processing, Claims Processing, Loans Servicing, Payment Processing, Policy Holder Services, Data and Management.Human Resources includes Benefits, Payroll and Staffing.Finance & Accounting includes Accounting/Accounts Payables/Receivables, Cash Management and Finance.Sales & Marketing, Product Design/Engineering, Services and Training are not broken down into sub-processes.
According to a 2006 survey by the Aberdeen Group, 72% of C-level
respondents rated post-sales service as “Very Important.” However, 43% of the
same sample devoted less than 10% of the IT budget to this function
© 2010 IBM Corporation4 IBM-SPJIMR – ACPS 2010
But services is now becoming a higher priority for many chief executives
“Services will continue to be a growth engine, but even there we see differentiation.”
Sam Palmisano, Chairman and CEO of IBM
“We ceded ground on customer service and support in the transactional space in the U.S. This year we expect to spend over $100 million to regain our leadership position, and our entire organization is focused on becoming number one in customer experience and satisfaction worldwide.”
Kevin Rollins, CEO of Dell
Technology
“A new focus is on our services business – everything from deployment services to maintenance to professional services…we would like, in the next few years, to see services as 30% of our revenue
Bill O'Shea, EVP of corporate strategy, Lucent Technologies
“The strategy to expand our Systems business through increased sales of professional services is proving successful…the recurring nature of this business will make our revenue base more stable”
Kurt Hellström, President and CEO, Ericsson
Communications
"Service is a significant growth opportunity for the company and the establishment of Maytag Services is expected to move the organizational mission from being solely a provider for Maytag Appliances to that of a growth-oriented services business.“
Ralph Hake, Chairman and CEO of Maytag (prior to Whirlpool acquisition)Whitegoods
72%
24%
4%
Very or Extremely Important
Important
Somew hat or Not Important
Source: Aberdeen Group
C-Level Executives’ Responses: rating the
importance of post-sales service
© 2010 IBM Corporation5 IBM-SPJIMR – ACPS 2010
Many manufacturers do not offer any products or services to capture the customer’s spending in the aftermarket
Depending on the industry, the product opportunity throughout its lifecycle can be as much as 10x the original purchase price
Service drives new revenue
End-user experience & satisfaction, a common senior management concern, is heavily influenced by service-related attributes
The emergence of new Internet collaboration tools, such as blogs & YouTube, can magnify a single negative incident millions of times
Product differentiation is increasingly difficult to achieve on technology or features basis
Value-added services can influence the customer’s product choice by providing more value, convenience and ease of use
A company’s true cost of quality is often higher than estimated and can have a significant impact on slim operating margins
There is a significant gap between industry leaders and laggards
Cost of quality is becoming more transparent to competitors and investors
Description
Service drives customer satisfaction
Service is strategic differentiator
Service impacts shareholder value
ExamplesValue Drivers
Several value drivers are making service more significant
Home Depot acquired flooring companies – key to their quick services growth from $1.3 billion in 2000 to $2 billion in 2002
Contributing to Dell’s stock decline of more than 25% was the fact that customers were dissatisfied with overseas call centers
Best Buy bought Geek Squad to quickly offer in-home electronics services
GM’s OnStar in-vehicle GPS communication system provides a touch point with customers, to be leveraged in future product and service offerings
© 2010 IBM Corporation6 IBM-SPJIMR – ACPS 2010
Product downtime Response time Repair cycle time Value/Cost
Repair cycle timeEnd-User Satisfaction Drivers
Manufacturers can be fully accountable for uptime and usability of products
Service an integral part of total solutions
Enhanced service experience gives an opportunity to up-sell and cross-sell additional products, software or services
Low support costs & high profitability Enhanced end-user experience to ensure
loyalty Quality guarantee
Service Value Proposition
Aircraft Engines Heavy Machinery Industrial Equipment Telecom Switching Equipment
Cars Consumer Durables Medical Devices Copiers/Business Servers
Personal Computers Consumer Electronics
Typical Products
Long Lifecycle
(7+ years)
Medium Lifecycle
(3-7 years)
Short Lifecycle
(0-2 years)
The after-market can be as much as 10x the product purchase price, depending on the service lifecycle of the product
Services Spend as Multiple of
Product Purchase Price
10x
Product Lifespan 20 yrs
Short Lifecycle
Services = 1-2x Product Purchase Price
Medium Lifecycle
Services = 2-5x Product Purchase Price
Long Lifecycle
Services = 5-10x Product Purchase Price
Potential Aftermarket Based on Service Lifecycle
© 2010 IBM Corporation7 IBM-SPJIMR – ACPS 2010
Product support via the web
Paid product support after the purchase
Ability of the retailer to provide service
Warranty coverage
Free product support after the purchase
Product support via toll free number
Return policy
Financing at purchase
Programming capabilities
Delivery service
Ease to redeem warranty
Compatibility with the Internet or other products
Ease of set up
Customer satisfaction, a common senior management concern, are heavily influenced by service-related attributes
Importance of Key Service Attributes To Overall Customer Satisfaction
Source: IBM Survey & Analysis
Research suggests that after a negative customer call center
experience, 86% of customers are unlikely to buy again and
83% of customers are unlikely to recommend the company to others
Source: Factiva.
© 2010 IBM Corporation8 IBM-SPJIMR – ACPS 2010
The emergence of new Internet collaboration tools, such as blogs & YouTube, can magnify a single negative incident millions of times
Dell’s customer satisfaction fell from 79 to 74 in the year following these developments – the steepest decline in the industry
Dell’s own internal “likely to repurchase” scores showed a dramatic decline
These issues, along with other problems, have contributed to a 25% decline in the stock price since the beginning of the year
“[Last year the] team was managing cost instead of managing service and quality. It’s totally the wrong answer. Stop managing for cost. Manage for a great experience.”
Michael Dell, Chairman Dell Computer Corp.
Magnified publicity: this one incident reached millions of others when Vincent posted the audio recording on his blog and was interviewed on the Today show (5 million viewers)
Numerous newspaper and Internet articles appeared, including a wikipedia article
62,827 hits accumulated two days after the recording was posted on YouTube
AOL agreed to pay a fine of $1.25 million to New York State and revise their customer service practices
The Result?
Dell began handling calls from corporate customers of their Optiplex desktop and Latitude laptops in overseas call centers
Dell received numerous complaints about the level of service provided by these call centers
In June 2006, AOL consumer Vincent Ferrari tried to cancel his 5-year-old AOL account and recorded his conversation with the AOL representative
It took 45 minutes to cancel his account because the AOL rep kept trying to sell Vincent other services, despite his repeated pleas to cancel
In New York State, 300 AOL customers logged complaints about the difficulty of canceling their service. An investigation revealed that customer retention agents were measured by minimum retention percentages and incented by rewards for retaining customers who called to cancel their accounts
What Happened?
Source: Fortune Magazine, Dell SEC filings, and http://www.the-dma.org/cgi/dispnewsstand?article=3604
© 2010 IBM Corporation9 IBM-SPJIMR – ACPS 2010
Leaders recognize that real changes in service are both possible and profitable
Case Study
Provided service engineers with a 360° view of customer information
6% productivity increase
8% reduction in operating costs
On track to save $100m over ten years
Results
Adopt a customer-centric approach across the entire service value chain
Reduce costs through process improvements in planning and scheduling, service delivery, parts management, and contract administration and billing
Increase profitability
Transformation Objectives
Inadequate visibility to all aspects of the data across the service value chain
Too costly
Make better use of services organization, but constraints of increasing staff or assets existed
Transformation
Drivers
A leading provider of office technologies needed to drive growth in its services organization, but did not have the
budget to increase headcount or investment in this division
Case Study
Launched a separate services division
Projected first year incremental revenue $200-$300m
Longer-term objective is a $1.0 billion business within 5 years
Results
Develop a service-based business to provide value to customers through risk sharing, access to key skills and technology, lower cost and more predictable time to market
Establish a value-based pricing model leveraging the firm’s existing capabilities and intellectual property
Transformation Objectives
Flat market growth
Two major potential growth market segments (computers and communications) were faltering
Growth opportunities unavailable without a fundamental shift in the business model to improve the value proposition to customers
Transformation
Drivers
A microelectronics supplier needed to redefine its business model and value proposition to customers in order to drive
services growth
Source: IBM engagement experience
© 2010 IBM Corporation10 IBM-SPJIMR – ACPS 2010
Previous efforts to transform service have often been hampered by problems
Service Innovation Barriers
4%
16%
23%
27%
35%
38%
49%
49%
57%
60%
73%
0% 10% 20% 30% 40% 50% 60% 70% 80%
None of the above
Identifying our target customers
Trying to change customer behavior
Gaining executive commitment
Designing usable interfaces for customers
Understanding the needs of our customers
Measuring customer experience
Defining our customer experience strategy
Trying to change employee behavior
Implementing technology
Getting alignment across organizations
Ob
sta
cle
s t
o I
mp
rov
ing
Cu
sto
me
r E
xp
eri
en
ce
% of RespondentsSource: Forrester Research
“I have worked in services companies and product companies. I will state unequivocally that services businesses are much more difficult to manage…the skills required in managing services processes are very different …the business model is
different. The economics are entirely different.” Lou Gerstner
Former Chairman and CEO of IBM“Who Says Elephants Can’t Dance”
© 2010 IBM Corporation11 IBM-SPJIMR – ACPS 2010
Functional executives owning pieces of the service chain are not typically aligned with common goals
Sales and marketing executives who have a vested interest in the customer experience typically feel service improvement goals are at odds with their core mission of satisfying the customer
Organization Alignment/ Change Management
Many companies have neglected the service chain, leaving old stand-alone business applications to support after-sales and services businesses
Until recently there were few options to implement an integrated service management system as there were no reliable vendors providing tools that worked across the entire service chain
Technology Infrastructure
The fragmented nature of many service operations organizations prevents disciplined performance management
The highly variable nature of demand flows in after-sales prevents insightful analysis
Operational Transparency
A lack of service accounting standards have prevented the understanding of the true cost of warranty or service profitability
Service costs are reported across several other functions which do not have direct control of the underlying cost structure
Financial Transparency
Service investment is often prioritized lower than what are considered “core” processes
A suitable business case framework often does not accompany service investment analysis
Investment Priorities
Senior executives have a limited understanding of after-sales impact and potential on enterprise results
Senior executives under appreciate service process complexity
CXO Awareness
We believe that limited progress in service transformation is due to a handful of fundamental barriers
Top Barriers to Service Transformation Progress
© 2010 IBM Corporation12 IBM-SPJIMR – ACPS 2010
ReadinessWhat’s Changed?Barriers
Service as a CXO issue helps facilitate enterprise change Identification of appropriate organizational structure and governance model
helps facilitate the change challenge
Organization Alignment/ Change Management
Investment by major ERP vendors have helped bring the maturity of “service suites” to a point of being a viable consideration
The service value chain has attracted additional investment from specialty players (by industry)
Technology Infrastructure
Integrating the service chain operations Identification of new cross service chain and customer centric metrics
Operational Transparency
FASB accounting rules facilitate common approach to claims accounting Cost of quality managerial accounting models help with managing service as a
business issue
Financial Transparency
Increased transparency into financials opportunity Decreased risk in delivering value from service transformation Service change efforts more aligned to core strategy and customer
experience investment initiatives
Investment Priorities
New accounting standards bring service cost into more performance discussions with analyst and press
Consultancies and industry analyst increasing identifying potential of service to core strategy and operational performance
CXO Awareness
However, most of these barriers have now been resolved, or have been reduced to manageable levels
High
Medium Low
Companies can now follow a Service Innovation approach with confidence
© 2010 IBM Corporation13 IBM-SPJIMR – ACPS 2010
IBM Global CEO Study 2006, multiple answers permittedIBM Global CEO Study 2010, point allocations
revenue
growth
cost
reduction
asset
utilization
risk
management
products/services/markets
operations(processes)
businessmodel
they must achieve... and want to innovate their...
2006
2010
20% 40% 60% 80% 100%20% 40% 60% 80% 100%
In IBM’s interviews with hundreds of CEOs, they said:
Enterprise pressures and opportunities
© 2010 IBM Corporation14 IBM-SPJIMR – ACPS 2010
commoditization pressures
new/increased competition
global market opportunities
adjacent market opportunities
global volatility & disruption
competing business models
Enterprise pressures and opportunities
65%13%
22%
CEOs: Extent of fundamentalchange needed over next two years
A lot
Moderate
Little or no
IBM Global CEO Study 2006
© 2010 IBM Corporation15 IBM-SPJIMR – ACPS 2010
What could you do if all What could you do if all objectsobjects were were intelligent…intelligent…
…and connected?
© 2010 IBM Corporation16 IBM-SPJIMR – ACPS 2010
It’s time to take advantage of….
smart objects
the connectedness of everything
supercomputing for everyone
information put to work
collaboration & co-creation
the marketplace for expertise
the virtual corporation
© 2010 IBM Corporation17 IBM-SPJIMR – ACPS 2010
products
services
business processes
business models
management and culture
policy and society
35%CEOs/Leaders
24%Functional
Mgrs
14%Division
Mgrs
27%No Owner
CEOs’ View:Primary Responsibility for
Innovation Leadership
It’s time to innovate
IBM Global CEO Study 2006
© 2010 IBM Corporation18 IBM-SPJIMR – ACPS 2010
How are you capitalizing on the new tools of innovation — and combinations of those tools — to differentiate your products?
And how are your competitors doing so?
Are your products smart? Do they talk to each other?
How do they provide you additional data about your customers’ purchase, use and disposal of your products?
products
HONDA has become the first car manufacturer to equip vehicles in the United States and Canada with an in-car navigation system that uses an advanced speech recognition interface and text-to-speech capabilities. The system allows drivers to simply say city and street names in their natural voice to receive turn-by-turn voice guidance to their destination.
MAYO CLINIC physicians, physicists and engineers developed a new MRI coil that improved hand and wrist imaging. Each one was originally hand built, but IBM engineers collaborated with Mayo to turn the MRI coil into a manufacturable product, while preserving its industry-leading imaging capability.
<< Back to Chart #6
© 2010 IBM Corporation19 IBM-SPJIMR – ACPS 2010
How can new business and technical capabilities deliver higher value toyour customers?
What can personalization, real-time analytics, self-service, and network-enabled services do to differentiateyour company?
Is your customer care as responsive and as cost-efficient as it could be?
services
BOULANGER, a French electronics retailer, needed to distribute new information daily about products and offers to its stores and consumers. It can now update Internet, store, and catalog systems simultaneously, making it easy to create cross-selling and up-selling opportunities.
Energy company OXXIO will work with IBM to provide their customers with a digital meter that can be read remotely. Consumers linked to the Oxxio network will not need to send in meter readings manually. This innovative "smart meter" will help consumers save energy by managing usage at home and decrease the risk of late or inaccurate invoices.
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© 2010 IBM Corporation20 IBM-SPJIMR – ACPS 2010
How can you conceive of, implement, integrate and manage your processes for competitive differentiation?
Is your supply chain the most productive and efficient in the industry?
Does your CRM system produce the highest customer satisfaction?
Is your product development achieving the best time-to-market?
Are your finance and accounting costs the most effective?
business processes
JABIL CIRCUIT has a 55,000+ workforce in over 40 facilities around the world. Acquiring additional plants required the integration of disparate processes. Building a core set of processes for its plants yielded 60% reduction in integration time and increased flexibility in implementation sequencing.
AAA CAROLINAS had to expand its business, lower costs and improve customer service to compete in a national market. The AAA affiliate embraced an IBM-based service-oriented architecture solution that enables it to cross-reference customer data and create cross-promotional marketing campaigns. This helped result in a 60% customer acquisition and retention spike.
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© 2010 IBM Corporation21 IBM-SPJIMR – ACPS 2010
How can you use innovation tools and collaborative approaches to overturn the conventional wisdom?
How can you combine those tools and new ways of thinking to increase productivity, generate revenue, approach customers, and leverage your partners’ scale and expertise?
How do we make you the disruptive force in your industry?
business models
PARCELHOUSE, a logistics solution provider, was growing fast and its systems couldn’t support growth. They deployed e-business hosting for a flexible platform with pay-per-use cost structure resulting in a 200% user increase without raising costs -- 80% cheaper than in-house.
DELTA FLUID PRODUCTS, which makes valves and fittings for gas lines and other critical environments, wanted to be the first in the industry to provide same-day delivery. IBM and Business Partner Frontline helped make that a reality by fitting the UK company with an enterprise-wide ERP system that has helped the client get a 20% reduction in inventory, a 30% increase in inventory turnover, and faster customer service.
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© 2010 IBM Corporation22 IBM-SPJIMR – ACPS 2010
What’s getting in the way of truly differentiating your company?
Are there legacy behaviors, unnecessary financial models, and organizational structures that can be reengineered?
How can we use your partnerships, new models and practices, and IBM’s assets – and our own experience – to help change the way your company works?
management & culture
VÄGVERKET, Sweden's National Road Administration, expects to reduce traffic, increase accessibility, improve the environment, and raise funds for other initiatives through a new road-usage solution that charges a small fee for driving in central Stockholm.
NORTEL and IBM established a joint development center to design and develop a next-generation suite of communication products and services for the global needs of our joint customers. This has resulted in new levels of R&D collaboration, reduced R&D costs, and the ability to quickly introduce a broader range of products.
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© 2010 IBM Corporation23 IBM-SPJIMR – ACPS 2010
What potential exists in partnerships with other companies, governments, and nonprofits to create breakthrough innovation?
How are schools preparing the next generation of your employees? How are regulations and policies enabling open collaboration and shared intellectual capital?
How can we innovate together?
policy & society
IBM has joined AUTOSAR, a consortium of automotive companies and technology firms devoted to standardizing a platform for in-vehicle, electrical/electronics and software systems. As a Premium Member, IBM is working with AUTOSAR to create and to implement open standards in vehicles.
The NATIONAL DIGITAL MEDICAL ARCHIVE stores digital images in a single, accessible database, which doctors and researchers use to find patterns in the images from mammographies. Those patterns can lead to accelerated treatment and prevention strategies in the fight against breast cancer. Individual patients can contribute to the project, access and manage their own records, and share them with the doctors they choose.
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© 2010 IBM Corporation24 IBM-SPJIMR – ACPS 2010
Appendix
© 2010 IBM Corporation25 IBM-SPJIMR – ACPS 2010
Enterprise pressures and opportunities
Consumer Electronics Association/Research Alert, Aug 5, 2005; Airline company Web sites, “Aviation Capacity” ATA, US Bureau of Labor Statistics, as reported by IBM Institute for Business Value: Specialized Enterprise
New market entrants creategreater competition... ...even as revenue
per customerhistorically erodes
Num
ber
of n
ew a
irlin
e en
tran
ts
Rea
l (in
flatio
n-ad
just
ed)
pass
enge
r yi
eld
• Products:When consumer electronics products stop working, owners are almost as likely to buy replacements (39%) as they are to get them repaired (44%)
• Services:Airline industry
new/increased competitionadjacent market opportunitiesglobal volatility & disruptioncompeting business modelsglobal market opportunitiescommoditization pressures
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© 2010 IBM Corporation26 IBM-SPJIMR – ACPS 2010
Enterprise pressures and opportunities
Percent of consumers switching brands at purchase due to online information
Access to online information negatively affects brand loyalty as consumers switch brands at purchase...
...compounded by their willingness to purchase products from nontraditional providers.
UK Germany France Italy
American Interactive Consumer Survey, 2002, Dieringer Research Group. 4,000 survey respondents, all from U.S., combination of online and clicks and mortar shoppers, as reported by IBM Institute for Business Value, The Specialized Enterprise
commoditization pressuresadjacent market opportunitiesglobal volatility & disruptioncompeting business modelsglobal market opportunitiesnew/increased competition
Car
s
Mus
ic
Mov
ies
Bro
kers
Gam
es
Airl
ines
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© 2010 IBM Corporation27 IBM-SPJIMR – ACPS 2010
Enterprise pressures and opportunities
billions
Total world exports1948-2004
• Developed economies’ trade with emerging countries is
growing 2X as fast as their trade with one another
•Over ½ of the total exports
of America, the euro countries and Japan now go to emerging economies
• The EU now exports 2X as much to emerging economies as it does to America and Japan combined
commoditization pressuresnew/increased competitionadjacent market opportunitiesglobal volatility & disruptioncompeting business modelsglobal market opportunities
The World Trade Organization; The Economist, Jan 21, 2006
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© 2010 IBM Corporation28 IBM-SPJIMR – ACPS 2010
Enterprise pressures and opportunities
commoditization pressuresnew/increased competitionglobal volatility & disruptioncompeting business modelsglobal market opportunities
Macromedia/Research Alert, Aug 5, 2005; Sprint/Research Alert, Feb 3, 2006; Strategy Analytics/Research Alert, Nov 4, 2005
Example: Mobile Phones
• In addition to making and receiving calls, the most popular mobile phone activities among U.S. owners are using the calendar and address book (42%), downloading or playing games (33%), and downloading ringtones (32%).
• In fact, more than half (56%) of mobile phone subscribers rely on their phones’ nonphone features, such as camera, clock, calendar, messaging, music...and as substitute flashlights to see in dark places.
• And one in eight mobile phone users (12%) would pay $10 per month for unlimited TV access via their phones.
adjacent market opportunities
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© 2010 IBM Corporation29 IBM-SPJIMR – ACPS 2010
Enterprise pressures and opportunities
commoditization pressuresnew/increased competitioncompeting business modelsglobal market opportunities
International Monetary Fund, World Economic Outlook database, Sept 2005; Centre for Research on the Epidemiology of Disasters/ISDR
adjacent market opportunitiesglobal volatility & disruption
Global reported economicdamages from disasters
Average spot oil price
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
US$/barrel
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
US$*
*noncurrent value
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© 2010 IBM Corporation30 IBM-SPJIMR – ACPS 2010
Enterprise pressures and opportunities
commoditization pressuresnew/increased competitionglobal market opportunitiesadjacent market opportunitiesglobal volatility & disruptioncompeting business models
45%
Somewhatlikely 38%
Quitelikely
17%
Not atall likely
Of CEOs already focused on business model innovation...
... 83% think it likely that changes in a competitor’s business model will change their industry
Likelihood that changes in a competitor’s business model could result in a radical change to the entire landscape of the industry. (percent of business model innovators; values rounded)
IBM Global CEO Study 2006
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© 2010 IBM Corporation31 IBM-SPJIMR – ACPS 2010
the connectedness of everythingsupercomputing for everyoneinformation put to workcollaboration & co-creationthe marketplace for expertisethe virtual corporationsmart objects
logicmemory hard disk storage
While the number of transistors per square inch on integrated circuits doubles roughly every 18 months(Moore’s Law)...
...more storage can be purchased each year for the same price.
Semiconductor Industry Assoc.; Seagate (as reported by IBM Institute for Business Value: The Specialized Enterprise); Pricewatch
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© 2010 IBM Corporation32 IBM-SPJIMR – ACPS 2010
smart objects
computing no longer just from computers• Already more than half of the world’s chip supply ends up in consumer-electronic gear.
processing, visualization, simulation power• The chip in a musical birthday card has more computing power than the computers used on the
first flight to the moon.
“pervasive computing” actually becomes pervasive • In 2001, there were 60 million transistors produced for every man, woman and child on earth. In
2010, the amount of transistors per person will likely be 1 billion.
• RFID costs are dropping as production volumes rise; when they reach 5¢ per tag (down from the current 25¢ per tag), many think they’ll become truly pervasive.
• About 1.3 billion RFID tags were produced in 2005. This number is expected to rise to at least 30 billion by 2010.
Semiconductor Industry Assoc./Barron’s, Nov 14, 2005; The (Bergen) Record, Apr 21, 2005; Semiconductor Industry Assoc/Science & Technology, Oct 2003; IDTechEx, Apr 10,2005;
Mobile Radio Technology, Jan 1 2006; Investor’s Business Daily, Feb 21, 2006
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© 2010 IBM Corporation33 IBM-SPJIMR – ACPS 2010
supercomputing for everyoneinformation put to workcollaboration & co-creationthe marketplace for expertisethe virtual corporationsmart objectsthe connectedness of everything
Internet World Stats
0.4% of world population
15.7% of world population
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© 2010 IBM Corporation34 IBM-SPJIMR – ACPS 2010
the connectedness of everything
a billion people• By late 2006, China (currently #2) will surpass the United States (#1) in the number of broadband
subscribers
• By early 2007, Slovenia (#20) will likely surpass the United States (#19) in the percentage of households with broadband connections
a trillion things• Four leading types of “things” will increasingly account for the number of devices and objects
connected to the Internet: tagging things (radio frequency identification) feeling things (sensors) thinking things (smart technologies) shrinking things (nanotechnology)
• 100% annual growth rate of number of object-to-object connections
• 49% annual growth rate of market value for object-to-object communications
• Estimated worldwide market value of object-to-object communications in 2010: $270 billion
Telecompaper/The Bandwidth Report, Jan 2006; ITU (UN)/Financial Times, Nov 18, 2005; Electronics Weekly, May 11, 2005; Alexander Resources, Jun 21, 2005
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© 2010 IBM Corporation35 IBM-SPJIMR – ACPS 2010
information put to workcollaboration & co-creationthe marketplace for expertisethe virtual corporationsmart objectsthe connectedness of everythingsupercomputing for everyone
Global forecast of grid computing spending, 2003-2008
$ B
illi
on
s
IBM Institute for Business Value, The Specialized Enterprise
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© 2010 IBM Corporation36 IBM-SPJIMR – ACPS 2010
supercomputing for everyone
faster, more powerful• More than 70% of the world’s most powerful supercomputers were installed in 2005
• By 2010, supercomputers could be capable of 10 quadrillion calculations per second
more affordable• On demand supercomputing today costs approximately 50¢ per hour for CPU time.
• Virtualization has been estimated to offer a 24% saving on storage hardware, 16% lowersoftware costs and a 19% saving on network administration.
more ways to access• Mainframes• Grids• On demand• Aggregated servers
Top500, Nov 1005; CIO Today, Jul 26, 2005; IBM/IDG CIO; Enterprise Strategy Group/Reuters, Dec 10, 2004
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© 2010 IBM Corporation37 IBM-SPJIMR – ACPS 2010
collaboration & co-creationthe marketplace for expertisethe virtual corporationsmart objectsthe connectedness of everythingsupercomputing for everyoneinformation put to work
EIM Customer Data Integration
EIM & Master Data Management
EIM Technology: Analytics
EIM & Compliance
EIM Technology: ETL
Strategic Metadata Management
EIM & Enterprise Architecture
EIM Organization
EIM Technology: XML
EIM Governance
Enterprise Information ManagementMaturity Level and Self-Assessment for All Regions
Rating (scale of 1 to 7)”Gartner Study on EIM Highlights Early Adopter Trends and Issues,”
by David Newman, Feb 7, 2006
4.40 4.50 4.60 4.70 4.80 4.90 5.00 5.10 5.20
4.95
4.78
4.84
4.86
4.83
5.10
5.05
4.82
4.68
4.78
XML = Extensible Markup LanguageETL = Extract, Transformation and Load
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© 2010 IBM Corporation38 IBM-SPJIMR – ACPS 2010
information put to work
more information than ever before• E-mail volume:
• 2000: 5.1 billion messages a day
• 2005: 135.6 billion messages a day
• The world’s largest commercial databases are now measured in the hundreds of terabytes.
more information integrated more easily• By the year 2010, the codified information base of the world is expected to double every 11 hours.
easier to analyze and better results• Many experts believe business intelligence capabilities will become a standard, core business
application for all organizations in a three- to five-year window.
• Already, the U.S. government’s Fire Program Analysis system looks at weather patterns and historical data, such as the location and intensity of forest fires, to predict and prepare five government agencies for the next season’s blazes.
ABC News, Nov 17, 2005; InformationWeek, Jan 9, 2006; Nick Bontis and Jac Fitz-enz (2002). "Intellectual Capital ROI:A causal map of human capital antecedents and consequents," Journal of Intellectual Capital; Hans Hultgren, Daniels College of Business/Computerworld, Sept 19, 2005; Fire Program Analysis
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© 2010 IBM Corporation39 IBM-SPJIMR – ACPS 2010
the marketplace for expertisethe virtual corporationsmart objectsthe connectedness of everythingsupercomputing for everyoneinformation put to workcollaboration & co-creation
Business partners
Customers
Consultants
Competitors
Associations, trade groups, conference boards
Academia Internet, blogs, bulletin boards
Think tanks
Other
R&D (internal)
Sales or service units
Employees (general population)
IBM Institute for Business Value, CEO Study 2006
5% 15% 25% 35% 45%45% 35% 25% 15% 5%
CEOs: Sources of new ideas and innovation
“We have...today a lot more capability and innovation inthe [competitive] marketplace...than we [could] try to create on our own.”
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© 2010 IBM Corporation40 IBM-SPJIMR – ACPS 2010
collaboration & co-creation
between, with and among companies, experts, communities, customers• By 2009, wikis are predicted to become mainstream collaboration tools in at least half of all
companies.
between individuals• A new blog gets created every second.
• 50 million Americans -- 30% of U.S. Internet users -- visited blog sites in the first three months of 2005 alone.
• 70% of Internet users use instant messaging, and nearly 4 in 10 send as many or more IMsas e-mails.
more kinds of things to collaborate on• Procter & Gamble has set itself a goal of getting half its new product ideas from outside the
company by 2010.
• By 2010, 1 of 4 online music sales will be driven by recommendation technology, or “taste-sharing applications.”
Technorati/Law Technology News, Dec 1, 2005; Comscore, Aug 8, 2005; America Online/Research Alert, Jan 6, 2006;IBM CEO Study 2006; Gartner/BusinessWeek, Nov 28, 2005; BusinessWeek,Mar 21, 2005;Gartner & Berkman Center for Internet and Society/Christian Science Monitor, Feb 16, 2006
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© 2010 IBM Corporation41 IBM-SPJIMR – ACPS 2010
• E-learning grew 80 percent in 2005 and is predicted to continue growing at an annual compound rate of 40% to 50%.
• 75 percent of CEOs believe that employee education is a critical success factor. People’s skills are now considered more important than technology, globalization and regulatory concerns.
and more important than ever
from more places• In 2004, India produced more than 350,000 world-class engineers, and China graduated 600,000.
• By 2010, 90% of Ph.D. physical scientists and engineers may come from Asia.
more skills available• The market segment for HR-related expertise alone is thought to be as much as $80 billion by
2008.
Yankee Group/HRMagazine, Jul 1, 2004; Los Angeles Times, Oct 14, 2005; RE Smalley, Rice Univ/Bloomberg News, Dec 9, 2005; Bersin & Assoc./Training, Sept 1, 2005; IBM CEO Study 2004
the virtual corporationsmart objectsthe connectedness of everythingsupercomputing for everyoneinformation put to workcollaboration & co-creationthe marketplace for expertise
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© 2010 IBM Corporation42 IBM-SPJIMR – ACPS 2010
smart objectsthe connectedness of everythingsupercomputing for everyoneinformation put to workcollaboration & co-creationthe marketplace for expertisethe virtual corporation
$ B
illi
on
s
CAGR102%
Web-services-basedprofessional servicesforecast
IBM Institute for Business Value, The Specialized Enterprise
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© 2010 IBM Corporation43 IBM-SPJIMR – ACPS 2010
the virtual corporation
once hype, now reality• Worldwide spending on business process outsourcing is expected to grow from $382.5 billion in
2004 to $641.2 billion in 2009. Processes like procurement and training are expected to grow by double digits annually.
• Already, 41 percent of world’s 2000 largest firms have deployed SOA (service-oriented architectures) — expected to rise to 62 percent in 2006.
business broken into component pieces• The average bank uses 60 to 90 defined business components every day in the course of
business.• The market for business information management software and expertise is considered to be
currently valued at $36 billion, and could be worth $69 billion by 2009.
deeper integration with enterprise• It’s predicted that, by 2008, 80% of development projects will be based on SOA.
IDC/InfoWorld, Feb 27, 2006; “Topic Overview: Service-Oriented Architecture,” Forrester Research, December 2005; IBM “Building an Edge,” Vol 5, No. 8;Moore & Cabot Capital Markets-IBM/Dow Jones, Feb 16, 2006; Gartner/Wireless News, Jun 7, 2005
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