IBMs Six Principles for Successful Enterprise IT Transformation

by Darryl K. Taft

IBM has been on a journey to transform its business since 2003. In the last four years, the company has delivered more than $5 billion in productivity improvements, with an additional $8 billion in savings anticipated by 2015. But not all of this is about cost cutting. By investing in new capabilities and technologies, such as business analytics and cloud computing, Big Blue is focused on growth. The following six principles are guiding IBM as it implements its latest, “smarter” phase of business transformation.

Linda Sanford, IBM’s senior vice president of Enterprise Transformation, is the driving force behind IBM’s enterprise transformation. Sanford was handpicked by IBM President and CEO Samuel Palmisano to lead the transformation. Over the last four years, Sanford’s team has driven nearly $5 billion in productivity improvements at IBM, driving out the equivalent in costs. And Sanford has committed to deliver another $8 billion in improvements by 2015.

IBM engages its workforce through “jams” and social software. This exchange of ideas enabled the company to capture the imagination of its workforce and re-establish the core of its culture and brand for the 21st century. IBM WorldJam produced 35 ideas that led to more than $500 million in savings and a new structure to bring decision-making closer to the client.

IBM established key decision-making bodies to guide critical transformation and IT initiatives, taking a disciplined approach to determine what new initiatives to fund based on review of business cases. Through active, integrated oversight, the company achieved strong alignment of its strategy with transformation goals and put consistent metrics in place to measure the business value of transformation investments.

IBM is turning raw data into competitive insight across its business. For example, the IBM Resource Analytics Hub provides up-to-the-minute access to a repository of information on IBM’s services workforce and current staffing requirements. The Hub has helped Global Business Services improve its measure of unassigned resources, or bench, from 8 percent to 3 percent. The productivity of IBM’s consultants improved 18 percent from 2005 to 2009, enabling IBM to more aggressively pursue its growth objectives.

End-to-end process improvements have been pivotal to IBM’s success at global integration of its operations. During the past several years, IBM has developed hundreds of professionals with business process skills in Lean Sigma and other methodologies. By standardizing and automating work across key global processes, IBM delivered $500 million in productivity improvements in 2009 and put itself in a strong position to support its growth initiatives worldwide.

IBM applies new technologies to accelerate its transformation and keep employees engaged in the effort. The company’s intranet, the On Demand Workplace, has been transformed into one of the most robust social networking platforms in the industry. Social software—blogs, wikis, live chat, communities, even virtual worlds—are now an integral characteristic of IBM’s corporate culture. IBM’s leadership in collaborative innovation has helped keep it No. 1 in the number of new U.S. patents for 17 consecutive years. The company has also been an enthusiastic adopter of cloud technology as a cost-effective platform for development, research, storage and other uses. The development/test cloud has accelerated the test environment setup process from one week to 1 to 2 hours.

IBM has an ongoing focus on developing 21st century global leaders as an essential element in its transformation success. The company recently refreshed a core set of competencies for all IBMers to provide guidance on skills development and set the aspirational direction for all employees. The overall goal: develop and sustain a workforce that is equipped to capture new revenue in growth markets.