IBM is Verifying the Power of Transformation

Today, the “Blue Giant” is not a company that started its business as a timer and meat mixer, but a world-renowned consulting service giant. So, how did IBM do this today? Every change and transformation of the blue giant IBM will attract the attention of the industry, because it will drive social progress no matter whether it is a big step or a small step. From e-commerce to on-demand response, from on-demand response to Wisdom of the Earth … In 2008, IBM’s revenue was 103.6 billion US dollars, a slight increase of 5% over the previous year, while its profit was 12.3 billion US dollars, an increase of 18% over the previous year, and its gross profit reached 44%. In the ranking of the 500 most profitable large enterprises in the United States, IBM rose from 14th to 8th in the previous year.

Palmisano became CEO six years ago and spent 50 billion US dollars on Mergers and acquisitions and R&D with only one purpose: IBM began to transform its services. At the beginning of IBM’s transformation, neither the outside world nor ordinary IBM employees could fully understand the core of services, but today it is clear that IBM’s services are being developed around “Wisdom of the Earth”. In order to make Wisdom of the Earth land in China better, IBM set up “IBM China Analysis and Decision Innovation Center” in Beijing on August 3, 2009. Its main function is, as part of its global network of analytical decision-making innovation centers, to solve the growing demand for advanced analytical capabilities in the global market, especially in China, and to use data to help customers build intelligent business systems to further improve business decisions. In IBM’s newly established office of China’s Innovation Center for Analytical Decision-making, IT Times reporters and Reuters reporters held a dialogue with IBM Global Business Services President Fan Kean. With silver hair, Fan Kean is a wise manager who has worked for IBM for 32 years. When he was in charge of IBM’s Asia Pacific region, he had lived in Shanghai for one year and had a deep understanding of the Chinese market.

The change originated from the customer   
IBM began to transform to service more than ten years ago, and finally today the industry understands that the ultimate goal of IBM’s service transformation is “Wisdom of the Earth”. As a manager who has served IBM for 32 years, how do you think about IBM’s transformation? Van Keren: For IBM, change is the only principle that remains unchanged. IBM’s core capability is the ability to change. In 2011, IBM has a history of 100 years, but who would have thought that such a century-old shop started out in the low-tech timer and meat churn business? Later, IBM also made a series of other changes, such as a period of time to do the scorecard and clock card business, then also did the personal computer business … From IBM’s history, change is the same truth. IT TIME: If IBM wants to change the world, it must first change itself. How did IBM change itself? How much money did IBM spend on acquisitions during the transition? Fan Kean: Every change of IBM is due to the change of customer demand, which in turn urges itself to make changes. In the past five years in inside, IBM has been transforming mainly around services, solutions and service software. At present, 80% of IBM’s revenue and 90% of its profits come from software and services. In the past five or six years, IBM has acquired 60 companies at a cost of 20 billion US dollars. In 2002, IBM acquired the consulting department of PricewaterhouseCoopers and acquired strong consulting capability. CONGOS was acquired last year, and now IBM is also acquiring an analysis software company ……   

What changes has the continuous Mergers and acquisitions brought to IBM? Van Kean: IBM has increased its capabilities in software, services and solutions through a series of Mergers and acquisitions. Without these capabilities, it is impossible to realize “Wisdom of the Earth”. Only with these capabilities can IBM put forward the concept of “Wisdom of the Earth”. Now, IBM wants to use its unique ability to solve the complex problems faced by customers, enterprises, society and government. This is also IBM’s business model. Consultancy Service Market Attractive “IT Times”: Consultancy Service is well done in Europe and America, but not particularly well done in China. The income of IBM’s service department and consulting department in the Chinese market is relatively weak compared with IBM’s overall income. What do you think of the Chinese market? Fan Kean: I especially love the Chinese market. I think China’s IT market is actually developing in an unconventional way. The current economic environment is facing great pressure on enterprises and the government, but there are more opportunities for the consulting industry. At present, many companies need to increase their productivity, compete globally and become world-class enterprises. At this time, they need to increase their demand for consulting services. They need IBM to help them provide some real-time services and services for transformation projects. Therefore, I hold a positive and optimistic attitude towards China’s service industry market. The Chinese government is supporting the development of China’s software service industry, which is a good opportunity for IBM. Now IBM is serving customers in China and around the world.   

Now an analysis and decision-making innovation center has been set up in China. What positive effect does this have on IBM? What kind of help can Chinese enterprises get? Besides supporting Chinese customers, does the analysis and decision-making innovation center also support other customers? Fan Kean: IBM established the China Analysis and Decision Innovation Center mainly to meet the needs of customers. In the future, the center will grow from 300 to 600. To provide more value to the Chinese government and customers, and to create more opportunities by using “Wisdom of the Earth”. At this stage, the primary mission of IBM’s Analytical Decision Innovation Center is to support Chinese customers. Moreover, IBM has six innovation centers in the world, which will be linked and shared. If customers need it, they can also be served by these innovation centers.   

What kind of help can IBM offer Chinese customers with its “Wisdom of the Earth” strategy? Van Kean: “Wisdom of the Earth” is actually digitizing the real world. For “Wisdom of the Earth”, one of the main ideas is the wisdom of the city. More and more cities in China have become big cities now. How can we seize the opportunity to become intelligent cities? Smart cities need to establish social systems in many aspects, such as public services, energy, electricity and transportation, to form smart systems together, so as to improve people’s living standards. At present, 50% of the global population lives in the city of inside, 70% by 2050, and this number will increase to 6 billion by 2050. If you live in a smart city, people’s living standard will be greatly improved. However, there will be 100 new cities in China between now and 2050, which will face great pressure. Through the intelligent city system provided by IBM, every aspect of the city can be improved and the quality of life of people can be greatly improved. Wisdom of the Earth Confronts Challenges “IT Times”: Now, how does IBM apply the concept of “Wisdom of the Earth” to every industry? Fan Kean: “Wisdom of the Earth” represents change from the most basic and root level. For the government and enterprises, IBM thinks they will all turn to Wisdom of the Earth. The first reason is that both the government and enterprises are committed to change. For example, the smart power grid has been used by many enterprises and the power industry for 50 years. They have to change. Second, the process of digitizing the real world is a very complicated system engineering when implementing new technologies and applying new technologies. In this process, we need software capabilities and integration capabilities, without which we will encounter many obstacles. IBM has the ability to help companies, enterprises and governments understand, implement and integrate their existing assets. Third, the implementation of smart cities, smart electricity, smart transportation … requires the joint efforts of various departments. For enterprises and the government, they must break the isolated island between themselves and enterprises, implement new technologies and accept new methods through joint operations. Now it seems that technology is not a problem. What is needed is to be able to understand these technologies, implement them and integrate them.   

What challenges will IBM face in implementing “Wisdom of the Earth”? Fan Kean: The problems faced mainly come from the aspects of culture, governance and acceptance of changes, as well as cross-sectoral implementation. In these processes, IBM’s consulting department will do much.   IBM Consulting has 3,000 employees who are responsible for consulting on strategy, change management, governance and helping customers transform. And in this 3,000-person strategy and transformation team, there is a small team dedicated to providing services for IBM’s own transformation. We have learned a lot of useful knowledge here, and then we apply it to other customers.