© 2010 ibm corporation leveraging partnerships in the cloud computing/smart technology era jay...

© 2010 IBM Corporation

Leveraging Partnerships in the Cloud

Computing/Smart Technology Era

Jay Ennesser Presentation to

Society for Information Management

January 20, 2010


Agenda

Leveraging Partnerships in the Cloud Computing/Smart Technology Era

• ALLIANCES: Powerful Growth And Earnings Engine For Global CompaniesALLIANCES: Powerful Growth And Earnings Engine For Global Companies

• The CIO Study – Impact on all of usThe CIO Study – Impact on all of us

• Cloud Computing Driving Collaboration & CoopetitionCloud Computing Driving Collaboration & Coopetition • From Radical Innovation to Radical Collaboration – The From Radical Innovation to Radical Collaboration – The

Global Business ModelGlobal Business Model

• Let’s Build A Smarter PlanetLet’s Build A Smarter Planet

• FuturesFutures

• Top Trends in 2010Top Trends in 2010

• Five Areas of Impact Starting in 2010Five Areas of Impact Starting in 2010


ALLIANCES:ALLIANCES:

Powerful GrowthPowerful GrowthAnd EarningsAnd Earnings

Engine ForEngine ForGlobalGlobal

CompaniesCompanies

ALLIANCE COREALLIANCE CORE

LicensesLicenses

PartialPartialAcquisitionsAcquisitions(Controlling)(Controlling)

Partial Partial AcquisitionsAcquisitions

(Non-Controlling)(Non-Controlling)JointJointVenturesVentures

SharedSharedResourcesResources


Corporate Alliances Defined

An organizational construct wherein “partners” are willing – in fact, motivated – to act in concert and share core competencies.

Most true alliances result, to some degree, in the virtual (albeit limited) integration of the parties through contracts that define rights and responsibilities over specific time.

Other alliances result in actual integration, but usually delayed and in stages.

An organizational construct wherein “partners” are willing – in fact, motivated – to act in concert and share core competencies.

Most true alliances result, to some degree, in the virtual (albeit limited) integration of the parties through contracts that define rights and responsibilities over specific time.

Other alliances result in actual integration, but usually delayed and in stages.


Corporate Alliances

Licensing(Non-Equity)

Contractual

Alliances Come In A Variety Of Forms

Continuum Of Transaction TypesContinuum Of Transaction TypesContinuum Of Transaction TypesContinuum Of Transaction Types

Traditional M&AOutsourcing

100%Acquisitions

PartialAcquisitionsControlling

>50%

Increasing Degree of Integration

SharedResources and Competencies(Non-Equity)

PartialAcquisitions

Non-Controlling

<=50%

JointVentures

Collaborative

ContractServices


SAP

Unisys

OracleNova

SAPOracleUnisys

MS

Oracle SAP

Unisys

Peachtree

MacolaTRADEex

DGMS

Nova IsPeopleSoft

SAPGERS Retail

DG

GERS Retail

Peachtree

Unisys

DG

Sabre

Brit TelecomSAP

MSSabre

FileNET SAP

MS

PwCCambridge

BSGMS

MCI/W

IndusWalker

TanDataMCI/W

SAP

Sabre

MCI/W

BSG

SAP

InfoBuilders

PeopleSoft

StarbursOracle

PeopleSoftJD Edwards

Info Access

Supply Chain Sol’ns

Symix

Info Builders

Symix

OracleJD Edwards SAP

Oracle

JD Edwards

PeopleSoft

SAP

Deloitte (Mgt Solutions)

ARISArthur Andersen

PRT GrpRaymond James

Levi, Ray & ShoupRainier Tech

SARCOM

EggrockErnst & Young

Deloitte

HP Intel

AMEXOpen MarketSterling VISA

Verifone FedEx

Intel

Staples

PwC

HP

Intel

MS AMEX

ImageX.comOracle

CTP

MSAMEXADP

Oracle

MS

AMEX

ADP

Oracle

ADP

HPiCat

Open Market

HP

HP

BAAN SAP

Oracle

BAAN

SAP

OracleBAAN

SAP Oracle

MSMarketFirst

Commerce 1

MS

MS

ExtricityTop Tier

Oracle

PeopleSoft Oracle

PeopleSoft

OraclePeopleSoft

Client

Harbinger

Commerce 1

SterlingClarus Ariba

Concur

AT&T

GEIS

SAP

BAANNetscape

CompetitorCompetitorLearning & InnovationLearning & InnovationCore Component SupplierCore Component SupplierImplementation ServicesImplementation ServicesResellersResellersIndustry InfluencersIndustry Influencers

ROLESROLES

Source: Source: Booz•Allen & Hamilton

Example: e-Procurement Sector Demonstrates Use of Constellation


CONTENTCONTENTCONTENTCONTENT

Turner Turner BroadcastingBroadcasting

Atari Atari GamesGames

Crystal Crystal DynamicsDynamics

TCITCI

SERVICE CREATIONSERVICE CREATIONSERVICE CREATIONSERVICE CREATION

TCI/TCI/Liberty Liberty MediaMedia

Sega Sega ChannelChannel

SpiegelSpiegelCatalog 1Catalog 1

TCITCI

QVCQVC

SegaSega

ComcastComcast

END USER DEVICES AND END USER DEVICES AND APPLICATIONSAPPLICATIONS

END USER DEVICES AND END USER DEVICES AND APPLICATIONSAPPLICATIONS

Silicon Silicon GraphicsGraphics

AppleAppleIBMIBM

ToshibaToshiba

IlachuIlachu

300300

Atari Corp.Atari Corp.Electronic Electronic

ArtsArts

MatsushitMatsushitaa

AT&TAT&T

LOCAL LOCAL SERVICE SERVICE

PROVISIONPROVISION

LOCAL LOCAL SERVICE SERVICE

PROVISIONPROVISION

SOFTWARE DEVELOPERSSOFTWARE DEVELOPERSSOFTWARE DEVELOPERSSOFTWARE DEVELOPERS

MicrosoftMicrosoft AccoladeAccolade

HyperboleHyperbole CompuservCompuserv

Digital Digital SolutionsSolutions

Time Time WarneWarne

rr

Time Time WarneWarne

rr

Central

Software

Hardware

Distribution

Joint VenturesJoint Ventures

LOCAL SWITCHING AND LOCAL SWITCHING AND TRANSPORTTRANSPORT

LOCAL SWITCHING AND LOCAL SWITCHING AND TRANSPORTTRANSPORT

CoxCox

ComcasComcasttCont. Cont.

CablevisioCablevisionn

TCITCI CoxCoxComcasComcas

ttCont. Cont.

CablevisioCablevisionn

GEGENew New

househouse

TCITCI

US WESTUS WEST

TCGTCG QualcomQualcommm

PrimestaPrimestarr

Source: Source: Booz•Allen & Hamilton/Alliance Analyst

Example: Time Warner Deals with Multiple Portfolio Gaps


Global Access toInformation & Technology

Playing Field is Everywhere

Few Boundaries

Information Sharing & Rapid

Communication

Immediate CustomerInteraction & Response

Real-Time Commerce& Cycle Time Reduction

Innovation and R&DCompression

GlobalizationGlobalizationRequirementsRequirements

CompetencyCompetencyNecessitiesNecessities

Forces Forces Driving Driving

AlliancesAlliances

Forces Forces Driving Driving

AlliancesAlliances

Limited ManagementResources

Limited ManagementResources

Limited CapitalLimited CapitalResourcesResources

Limited CapitalLimited CapitalResourcesResources

Globalization and Competency Forces Driving Alliances


Basis For Alliance More Than Capital

Share riskShare risk Share riskShare risk

Build economies of scaleBuild economies of scale Build economies of scaleBuild economies of scale

Enter new market segmentEnter new market segment Enter new market segmentEnter new market segment

Expand geographicallyExpand geographically Expand geographicallyExpand geographically

Obtain technologyObtain technology Obtain technologyObtain technology

Have funding constraintsHave funding constraints Have funding constraintsHave funding constraints

Need management skillsNeed management skills Need management skillsNeed management skills

Raise value-added hurdlesRaise value-added hurdles Raise value-added hurdlesRaise value-added hurdles

Overcome entry barriersOvercome entry barriers Overcome entry barriersOvercome entry barriers

Create brand and credibilityCreate brand and credibility Create brand and credibilityCreate brand and credibility

Avoid “betting the company” on a single strategy or tacticAvoid “betting the company” on a single strategy or tacticAvoid “betting the company” on a single strategy or tacticAvoid “betting the company” on a single strategy or tactic

Confront large and ever-increasing up-front development costsConfront large and ever-increasing up-front development costsConfront large and ever-increasing up-front development costsConfront large and ever-increasing up-front development costs

Need an infusion of top-quality managementNeed an infusion of top-quality managementNeed an infusion of top-quality managementNeed an infusion of top-quality management

Limited number of acquisition candidates; high cost of entryLimited number of acquisition candidates; high cost of entryLimited number of acquisition candidates; high cost of entryLimited number of acquisition candidates; high cost of entry

Prohibitive cost in resources and time to create brandProhibitive cost in resources and time to create brandProhibitive cost in resources and time to create brandProhibitive cost in resources and time to create brand

Too difficult and costly to penetrate a foreign market aloneToo difficult and costly to penetrate a foreign market aloneToo difficult and costly to penetrate a foreign market aloneToo difficult and costly to penetrate a foreign market alone

Face critical technology gaps and cannot not afford time and/orFace critical technology gaps and cannot not afford time and/or resources to buildresources to buildFace critical technology gaps and cannot not afford time and/orFace critical technology gaps and cannot not afford time and/or resources to buildresources to build

Industry has high fixed costs and needs greater scale to Industry has high fixed costs and needs greater scale to compete effectivelycompete effectively

Gain access to new value-added skills to raise barriers to Gain access to new value-added skills to raise barriers to competitioncompetition

Lack a thorough understanding of customers, applications Lack a thorough understanding of customers, applications and/or distribution infrastructureand/or distribution infrastructure

Alliance Drivers Descriptions


TransferringTransferringAssetsAssets

OtherOtherIssuesIssues

Management Management OperationsOperations

Alliance Alliance FormForm

AllianceAllianceGovernanceGovernance

Capitalization Capitalization and Voting Rightsand Voting Rights

Control andControl andAdministrationAdministration

Terms andTerms andTerminationTermination

ConfidentialityConfidentialityand Non-Competitionand Non-Competition

Tax andTax andAccountingAccounting

ALLIANCE PYRAMIDALLIANCE PYRAMID

Alliance Building BlocksAlliance Building Blocks


Example: The Entertainment Keiretsu

Primestar

BSkyB

Primestar

Sky Latin America

Fox Kids Worldwide

Fox/Liberty Sports

Cablevision

Madison Square Garden

@ Home MSBET

Sunshine Network

HSN

QVC

Sunshine Network

Teleport

Sprint PCS

Primestar Joint agreement to

develop Internet content

E! Entertainment

ESPN Star Sports (Asia)

Sunshine Network

A&E

HBO Ole

HBO BrasilPrimestar

Channel (V)

Primestar

MSNBC

Sunshine Network

Star TV (Asia)Cablevision

E! Entertainment

Cablevision


Starwave

Music Choice

Sunshine Network

Primestar

Joint venture:cable service

in Texas

Sky(New

Zealand)

Court TV

Primestar

PrimestarCourt TV

E! Entertainment

Primestar

Court TV

TCI owns 10% of Time Warner

NEWS CORPORATION

COMCAST APPLE STEVE JOBS

TIME WARNER

TCI

GE/NBC

MICROSOFT


DISNEY/ABC

BSkyB(with QVC in the U.K.)

Fox Sports Américas

PAUL ALLEN

Source: Source: Booz•Allen & Hamilton


IBM Institute for Business Value

Implications for C-Suite


The IBM Global CIO study is part of our ongoing C-suite study series

2005 CHRO Study 2006 CEO Study2004 CEO Study

2009 CSCO Study2008 CEO Study

2008 CFO Study

2007 CHRO Study


2009 CIO Study


The study represents different-sized organizationsin 78 countries and 19 industries

In the largest known sample of face-to-face interviews, we spoke with over 2,500 CIOs to understand their goals and challenges

Our analysis used 2004-2007 Profit before Tax (PBT) growth, relative to peers in their industries, to associate organizations with one of three growth levels: High, Medium or Low. For organizations where this information was not available, we used statistical correlation to assign levels, based on closest overall similarity of answers.

In this presentation, we primarily refer to CIOs who work in organizations with high PBT growth as “High-growth CIOs” and to those working in organizations with low PBT growth as “Low-growth CIOs.”

Geography Organization SizeSector

Public18%

Distribution24%

Financial Services

21%

Industrial24%

Others2%Communications

11%



Our analysis provided insights into how CIOs can make the biggest impact on behalf of the entire organization

CIOs spend an impressive 55% of their time on activities that spur innovation and help the business

– Generating buy-in for innovative plans

– Implementing new technologies

– Managing non-technological issues

Successful CIOs are much more actively engaged in

– Setting strategy

– Enabling flexibility and change

– Solving business problems

CIOs are increasingly recognized as full-fledged members of the senior executive team

However, CIOs universally acknowledge that some of their most important objectives sometimes seem to clash



Successful CIOs blend three pairs of roles that seem contradictory, but are actually complementary

AblePragmatist

SavvyValue Creator

RelentlessCost Cutter

CollaborativeBusiness Leader

InspiringIT Manager

MakingInnovation real

Raising the ROI of IT

Expandingbusiness impact

InsightfulVisionary

By integrating these three pairs of roles, the CIO makes innovation real, raises the ROI of IT and expands business impact



The Insightful Visionary explores how technology drives innovation, and the Able Pragmatist enables innovative plans

Truly integrates business and IT to innovate

Proactively reaches out to the business to co-create and champion innovation

Has a clear view of the top technological priorities that will enhance competitiveness

Insightful Visionary

Does practical things to help enable the business and corporate vision, as business leaders expect

Widely uses collaboration and partnering technologies to get work done

Uses third-party business and technology services to allow to focus on the top priorities

Able Pragmatist ”Innovation should be based on practical technology that can deliver business objectives within reasonable time and cost, which can be absorbed by the business.”

Life insurance CIO, India



The Savvy Value Creator devises solutions to fit customers’ needs, while the Relentless Cost Cutter is vigilant about trimming expenses

Proactively crafts data into information

Prepares for end-customers that will continuously explore new channels

“Knows” that end-customers expect no less than world class integration and transparency

Savvy Value Creator

Aims for completely standardized, low-cost business processes

Foresees a centralized infrastructure

Focuses relentlessly on taking costs out of ongoing technology environment

Relentless Cost Cutter “Customer interaction and collaboration are the foundation of our business model.”

Anders H. Johansson,

CIO, Handelsbanken



The Collaborative Business Leader knows the business and partners well, while the Inspiring IT Manager sharpens IT expertise

Participates in strategy teams

Presents the strategy jointly with team members on the senior management team

Is often invited to meetings or even sits permanently on the most senior management team

Actively promotes business and technology innovation through creation of IT centers of Excellence

Manages IT agenda to allow for multitude of new and inspiring initiatives

“IT is now seen as a key enabler to business goals and mission, and is engaged in delivering business strategy. Managing with defined goals and intent makes it easier for IT to align to business needs.”

CIO, Elders Rural

Services, Australia


Collaborative Business Leader

Inspiring IT Manager


Achieving real results through real partnerships

Chief Executive OfficerPrepare the organization to compete in an unpredictable future

Chief Financial OfficerSeek clear financial perspective while managing risk

Chief Marketing & Sales OfficerOptimize relationships with customers through more flexible and faster technology

Chief Human Resource OfficerAim for a more strategic and collaborative HR function

Chief Supply Chain OfficerBuild a smarter supply chain to manage complex information flows

As the CIO Study indicates, the voice of the CIO is indeed being heard in new ways, as CIOs are increasingly recognized as members of the senior executive team. In addition, successful CIOs are more actively engaged in collaboration with their colleagues across the C-Suite.

To attain the organization’s most important goals, CIOs and the C-Suite can partner to:


Cloud Computing Driving Collaboration &

Coopetition


IT infrastructure is reaching a breaking point.

85% idleIn distributed computing environments, up to 85% of computing capacity sits idle.

Consumer product and retail industries lose about $40 billion annually, or 3.5 percent of their sales, due to supply chain inefficiencies.

33% of consumers notified of a security breach will terminate their relationship with the company they perceive as responsible.

33% $40 billion

Explosion of information driving 54% growth in storage shipments every year.

1.5x 70¢ per $170% on average is spent on maintaining current IT infrastructures versus adding new capabilities.


Infrastructure needs to become more dynamic …

= Cost VIRTUALIZATION +STANDARDIZATION AUTOMATION+ Flexibility

… to free budget for new investment and speed deployment of new capabilities.


Global Cloud Collaboration & Coopetition

Silicon ValleyCalifornia

WuxiChina

DublinIreland

JohannesburgSouth Africa

HanoiVietnam

BangaloreIndia

São PauloBrazil

SeoulS. Korea

BeijingChina Tokyo

JapanRaleighNorth Carolina

DohaQatar


From Radical Innovation to Radical From Radical Innovation to Radical

Collaboration – The Global Business Collaboration – The Global Business

ModelModel


Moore’s Law: doubling of chip integration every 12-18 months

Moore’s Law – Economics Made SimpleMoore’s Law – Economics Made Simple


Source: VLSI Research inc.

Chip Making R&D Versus Revenues

(Worldwide in $M)

With Permission, VLSI inc.

Is There a Sustainable Business Model?Is There a Sustainable Business Model?

The industry trend as of today: R&D Expenses far outpace revenues

2004-2020 Projected CAGR

Revenues ~ 6.5%

R&D ~ 12.2%

This is NOT sustainable, and will/must NOT happen.

Fiscal reality is driving industry towards consolidation around Innovation Networks.

2004 - 2010 CAGR

R&DExpenses

12.2%

RevenueGrowth

6.5%

2004 - 2010 CAGR

R&DExpenses

12.2%

RevenueGrowth

6.5%


Global Semiconductor Technology Collaboration & InnovationGlobal Semiconductor Technology Collaboration & Innovation

There is a global recognition of challenges facing semiconductor industry, having already driven a its dramatic consolidation

AMDFreescale

IntelIBM Albany STM Toshiba

Toshiba-Sony JV

TSMC

Infineon

SELETE, ASET

IMEC

Chartered

IBM & SUNY PartnersCEA-LETI PartnersMajor Consortia-IMEC&SEMATECH

SEMATECH Toppan

=> Pre-competitive cooperation => Pre-competitive cooperation

NXP

SamsungNEC

Current


The Business Paradigm - CoopetitionThe Business Paradigm - Coopetition

Coopetition via Radical Collaboration is an Imperative

– Pooled Assets

• Physical Capital

• Intellectual “Capital”

– What’s Radical?

• IBM, Chartered and Samsung (competitors in Foundry)

• IBM, STM and Freescale (competitors in PowerPC)

• TEL, AMAT, Hitachi HiTech (competitors in semi tooling)

• Materials supplier ecosystem development

– Outcome

• Pre-Competitive collaboration successfully drives otherwise unachievable excellence in semiconductor technology

– The Usual Challenge

• Engineers have a natural tendency to HATE this idea

Create an open, one team approach to technology development


Playstation 3Playstation 3

The Challenge:

• Super Computer Performance

• Low End Consumer Price

• Software Security

• High Volume Manufacturing

The Solution:

• IBM PowerPC Architecture

• Industry Leading Security IP

• Custom Silicon Design Services

• Flexible business model

• Silicon-on-Insulator Technology

• Manufacturing Platform

The Result:

• Next generation gaming experience

• Secure platform protects games software revenue stream

XBOX 360XBOX 360

RevolutionRevolution

Alliances Live or Die Based Upon Global TrustAlliances Live or Die Based Upon Global TrustExample; The Gaming Industry Example; The Gaming Industry


Let’s Build A Smarter Planet


Transition to a Smarter Planet

Our world is becoming

INSTRUMENTED

Our world is becoming

INTERCONNECTED

Virtually all things, processes and ways of working are becoming

INTELLIGENT


As the world gets smarter, demands on IT will grow.

Smart traffic systems

Smart water management

Smart energy grids

Smart healthcare

Smart food systems

Intelligent oil field technologies

Smart regions

Smart weather

Smart countries

Smart supply chains

Smart cities

Smart retail


Today, more than ever, organizations are under pressure to leverage a wealth of information to make more intelligent choices.

VOLUME OF DIGITAL DATAWith the proliferation of end-user devices, sensors and actuators, the nature of data is changing. Data volumes and network bandwidth are expected to grow tenfold in the next three years.

VARIETY OF INFORMATIONWith the expansion of information comes large variances in the complexion of available data—very noisy with lots of errors and no opportunity to cleanse it in a world of real-time decision-making.

VELOCITY OF DECISION-MAKINGThe market demands that businesses optimize decisions, take action based

on good information and utilize advanced predictive capabilities—all with speed and efficiency.

SHIFT IN WHAT WE ANALYZEEnterprises need a broader, systems-based approach to the information they examine and optimize. Stream computing and event processing capabilities are enabling the analysis of massive volumes.


The Future?


Top Predictions/Trends for 2010• IT Market returns to growth in 2010 - India & China leads recovery

- (AMR) Forecast Global Enterprise Application Revenue growth 5% in 2010 (vs. -5% in 2009) - (AMR) survey shows 22% of clients expect software spending in their company to show the greatest increase in 2Q10 - (IDC) More than half of IT Growth in 2010 will come from Emerging Markets – India 13%, China 9%, Brazil 8%, Russia 8% - (IDC) By year end, BRIC will represent 10%+ of Global IT Spending - In 2010, companies rebuild investments in ERP applications, with growth accelerating into 2011 - In Japan, two Bright Spots of Early Pick-up from Finance Users and Hardware Replacement

• Smart Industry Transformation

- (IDC) Many industries will come out of the recession with transformation agendas - (IDC) over 20M smart meters will be deployed by year end. Key investments in networks, meter data management and

distribution/automation management - (IDC) 25% of US Citizens will have an electronic medical record by year end; 60% by 2016. Broad based investment in

Infrastructure Services, Hardware and Software - In 2010, solution hot spots for Japan include Smart Health Solutions (5% growth) and Smart Government

Social Services (3.4% growth) (Source IBM MI - 2H09 GSV)

• Advanced / Real Time Business Analytics - Business Analytics & Optimization is the next big investment area for clients – similar to ERP or CRM in the past

- $132B opportunity with 7.8% CGR (Source: 2H09 New Intelligence Market Opportunity - 2009 GMV2H09) - 2010 BI solutions market opportunity in Japan is estimated to reach $9.1B (Source IBM MI)

• Growing impact of Cloud Computing - Cloud spending expected to reach $126B in 2012 with a 28% CAGR (Source: IBM MI, IDC, CIO magazine, BCG analysis- (Forrester) SaaS based applications will enable business executives to address application functionality, scalability and

deployment needs more rapidly

- Cloud Computing market opportunity in Japan is estimated to exceed $5B in 2010 (Source IBM MI)


Top Five in Five Predictions

•Cities will have healthier immune systems•Given their population density, IBM says cities will remain hotbeds of communicable diseases. •However, the emergence of a “health Internet” will give city officials, hospitals, schools and workplaces the ability to better detect, track, prepare for and prevent infections. •IBM predicts this system will share anonymous medical information contained in electronic health records to provide information for public health officials to know when, where and how diseases are spreading and even which neighborhoods will be affected next.

•City buildings will sense and respond like living organisms•The trend towards “smart buildings” has already started and IBM says the trend will only gather pace with technology used to manage building systems such as heat, water, sewage, electricity, etc

•Cars and buses will run on empty•This one is a pretty safe bet too. •The switch from fossil fuel powered vehicles is already underway and, although there are a few potential energy sources including hydrogen and various biofuels vying for consideration. •IBM predicts that improved battery technology will be the technology to power the next generation of eco-friendly vehicles.

•Smarter systems will quench cities’ thirst for water and save energy•To deal with the estimate that demand for water is expected to increase sixfold in the next 50 years cities will install smarter water systems to reduce water waste by up to 50 percent. •Smart sewer systems will also be installed that not only prevent run-off pollution in rivers and lakes, but purify water to make it drinkable

•Cities will respond to a crisis – even before receiving an emergency phone call•We are simply saying that analyzing the right information at the right time will help prevent emergencies, such as crime and disasters.•IBM says it is already helping law enforcement agencies analyze information that will allow public servants to take proactive measures to head off crime


In Summary

The Alliance era has started

Alliances are successful on a global scale

Allying with competitors is a reality

Next wave in alliances is between breakout & large firms

Breakout firms are often at a disadvantage in forming an alliance with skilled alliance firms

ASAP - Association for Strategic Alliance Professionals http://www.strategic-alliances.org/

© 2010 ibm corporation leveraging partnerships in the cloud computing/smart technology era jay...

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