Shared Services Special
May 29, 2012

Fostering growth and productivity through innovation, change and IT

In 2000, IBM entered a new decade anticipating several strategic shifts. We were convinced that the world was changing and we positioned ourselves to take advantage of those changes. Global shared services is one enterprise productivity measure we chose to employ on a worldwide basis – operating with a consistent set of processes, controls, and systems and a cultural norm of continuous productivity improvement.

Our overall strategy was three-pronged:

•    Changes in technology: Based on a new technology model and paradigm, we shifted to open technology and higher value spaces like analytics and cloud computing and away from commodity spaces like the PC business;
•    Changes in client demand: We transformed our offerings and management systems to deliver what clients want: integration and innovation; and
•    Changes in the world: We embraced global integration and the resulting opportunities in growth markets. We defined the idea of being a Globally Integrated Enterprise and led the world in making it real at IBM.

Growth would be achieved through leadership in growth markets, mergers and acquisitions, client value focus and state-of-the-art sales enablement. Culture change would be driven through transformational leadership, a values-based culture and collaborative innovation. Productivity would be driven by business process excellence, IT enablement and global shared services.

As a company with more than 400,000 employees spread across 170 countries, massive decentralization had already been addressed. We had gone from 128 CIOs to 1. From 70 advertising agencies to 1. We had moved from country to global brand profit and loss statements.

We shifted to high-value solutions, moving from vertical functional processes to common global processes. We moved to a values-based culture, lowering the center of gravity for decision making and focusing on becoming the premier globally integrated enterprise.

To construct the foundation for our shared services transformation, we reviewed opportunities for virtualization and consolidation of the infrastructure. Through a keen focus on server sprawl, consolidation, pooling of resources and integration we consolidated over 5,700 servers, reduced software licenses by 93 percent and floor space by 47,000 square feet. Physical network connections were reduced by 55 percent and we realized 20,000 MWH in energy savings. Our application portfolio went from 15,000 applications in 1997 to about 4,500 today. Storage virtualization, thin provisioning and pooling helped increase storage utilization from 50 to 90 percent.

We’ve seen good cost savings from these initiatives: over the course of IBM’s transformation, our supply chain has driven billions in cost savings. Finance E/R has been reduced from 3 to 1 percent, and Real Estate has improved E/R by 50 percent.  

Our journey of continuous improvement will expand as shared services is expected to contribute to $8 billion more in productivity gains by 2015.

To achieve these goals, our Finance team will continue their Center of Excellence strategy by increasing the level of financial planning work performed in these centres by 25 percent.

Using the maturity framework we created to assess our shared service processes, we hope to increase the percentage of our processes that are globalized to 80 percent by 2015.

Our Real Estate Operations Team has also been developing the use of advanced analytics for predictive maintenance and improvements in energy consumption within buildings. We will apply these techniques to our internal infrastructure to further reduce energy usage by 18 percent over the next 5 years.

Many of these improvements will continue to be driven through shared services. We are also applying our proven transformation principles to integrate operations across the company, addressing areas outside of shared services.

As we matured the shared services model, it became clear that we could unlock additional productivity gains by taking a more end-to-end view across our entire.  

To support this effort, we’ve built a common analytical framework to facilitate ongoing productivity opportunity identification. The framework establishes a consistent set of processes, measures, systems and governance to help radically simplify processes, identify workload drivers and eliminate or globally source non-core work. The mantra is radical simplification – standardizing, automating or eliminating work that currently adds complexity and makes integration difficult.

This work will include applying new capabilities and technologies such as business analytics and cloud computing to help reinvent business processes and drive innovation in the pursuit of these goals. With the emergence of analytics and the cloud computing era, businesses are on the cusp of even more monumental changes in both business and IT landscapes – certainly the most dramatic shifts since the dawn of early computing in the 1980s. We have been investing in these areas to help us reach the next stage of our transformation journey.

For example, the introduction of a development and test cloud has reduced server set-up times from five days to one hour, facilitating faster time to market in many cases. In 2010, we also introduced web conferencing via the cloud and this model managed 85 percent of all our web conferencing needs in 2010. Over 140 million meeting minutes were logged between January and April 2011.  

So where do you go from here? How do you achieve your own success in shared services? For a successful shared services journey, there are common themes in our story for all organizations to rally around.

Continue to pioneer new ways of doing things and continually transforming for growth: Stick with a disciplined approach to the design, management and delivery of IT services for your organization and its workforce. Evaluate the risks associated with sophisticated technologies necessary for competitive advantage. Make sure that you have the combination of people with the right blend of technology and business skills.

Collaborate beyond what is currently imagined: Get everyone talking, via new channels, on new schedules and with new tools. Teach and enable your entire organization to connect as often and as effectively as possible with their own most important stakeholders.

Live simplification as a daily goal: Establish a culture of refusing to let complexity be a burden. Be relentless in the pursuit of easier ways to get work done. Solicit and act upon ideas to eliminate bureaucracy and inefficiencies, both internally and across the value chain.

Embrace the power of analytics: Educate yourself, your team and your organization about extracting meaning from unstructured data sources, predictive intelligence, social network analysis and sentiment mining. In HR, we are using analytics to identify the best staff for open positions on projects using a matching engine and “reading” and analyzing unstructured information in job postings and resumes, reducing cost of under-utilized resources and enabling us to provide better, client-focused value more quickly.

In manufacturing, we’re using deep analytics to improve chip yields, detect problems early on and optimize performance across complex manufacturing processes – enabling both savings and growth. This has resulted in $32 million

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