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IBM Conference on Services
Wednesday, November 17, 2004
IBM Almaden Research Center
Service Innovations for the 21st Century
November 17-18, 2004

Global Innovation Outlook

Needless to say, Almaden has wi-fi, so I'll be updating this blog throughout the event.

Mark Dean, VP in charge of the Almaden Research Center (500 researchers working atop a hill in the middle of a beautiful, immense park south of San Jose). Focus today is service innovations. If we don't find a better way to implement services, we're going to run out of people. Mark is looking for greater simplicity in systems and computing. (If his mom can't run it, it's too complicated, and she can't remember to press the Start key to cut off her laptop.) IBM in general, and Jim Spohrer in particular, is founding the discipline of Service Systems, much as it developed Computer Science as an academic discipline 1950-73.

Ironically for a meeting on this topic, we arrived early, as requested, only to be told that we'd have to wait 15 minutes in the lobby while registration was set up.

Jim Spohrer shows that 70% of the U.S. labor force is in business and the rest of the world is just a time-delayed echo of the U.S. case. IBM needs to figure out how to lead innovation in services. Innovation is, in fact, IBM's business. Technology alone is not enough to drive this.
  • Service Science. Current R&D group is multidisciplinary: capital management, computer science, O.R., MIS, MBA, Game Theory, Experimental Ecoomics, Insdustrial Engineering, AI, Computationsal Organization Theory, etc.
  • IBM has 180K services people.
Mike Radnor, Northwestern, heads up a consortium of companies (MATI) that have focused on how to improve the process of technology management for the past eight years. MATI has recognized service innovation as one of its highest priorities.

Take-aways sought.
  • Strengthen services innovation community
  • Maximize breakout interchanges
  • Focus on "where from here" steps at end

The Future

Solutions - the Intersection of Business and Innovation
Gerry Mooney, IBM, Corporate Strategy

Market Realities.
  • Rudest awakening of uncertainty since the Depression
  • As Larry Ellison said, "The is the recovery. Enjoy it."
  • IT spend is down (companies are doing more with less; stuff is cheap)
  • Legacy of IT boom and bust, overpromising
  • "IT Doesn't Matter"
  • Customers demanding more alignment between business results and IT investments
Five histrical cycles
innovation (eruption, frenzy), crash, deployment (synergy, maturity)

Customers (and IBM) want solutions. Hardware alone a commodity business. Migration is tough. Being adaptive is the key to migration. Deloitte Research on 650 global companies finds that #1 preoccupation of CEOs is New Product and Services Launch. (#2 is Economic Turnaround.)

Rethnkiing the Enterprise
  • 5% profit
  • 45% retained business processes
  • 45% outsourced business processes*
  • 5% spend is on IT
*redeploy resources to core

Gerry used a speaking technique I plan to steal. He began with self-deprecation, saying he didn't know why he, of all people, had been invited to speak. This really wasn't his area. Then he blew our sox off with an astute, convincing presentation. Lower audience expectations and then exceed them. I'd seen something similar in service delivery the night before. JetBlue had signs posted at JFK that this was to be a foodless flight. Then they pass out taro chips (blue, of course) and biscotti. Later, you get cheese and crackers. Like Gerry's talk, it's a pleasant surprise. Service metrics will need to factor in client expectations.

IBM must start thinking about process-specific companies: FedEx, ACS, Exult, Amazon associates, State Street. Not so important as IT (Accenture, EDS, M'soft, HP, Sun Dell, Cap Gemini) and ISVs (PeopleSoft, SAP, Siebel, mro, Sungard). The innovators are willing to give away the infrastructure in order to generate revenues from services. Think of Amazon; they take 7% for supplying a world-class platform.

A solution is an offering that combines technology and high-value services to solve a client's business problem. Soutions spend continues to gain momentm and is estimated to represent nearly 72% of the overall IT market by 2007. CAGR of services is 12%; for products, it's -1.4%

Uh-oh. Longer sales cycles, value-based pricing, realignment of the entrie organization, solution providers...

Process-driven innovation and Offering-driven innovation. (Is this different from managing core and outsourcing the rest?)

Question from the crowd: What's SMB? (Small and medium business). People won't be asking that one a year from now. * * * I'm sitting in the second row; the first is reserved for speakers.

Need value creation, value capture, value delivery

Software as a business model. Customer market pull is driving the SaaS (Services as Software) market.

The goal is to create integrated apps available online that provide "resturant-in-a-box" functionality

It's hard for me to imagine the breadth of stuff a senior strategy guy for IBM must deal with. We sat together at dinner, and I asked Gerry how much time he devoted to learning; he told me 80%. And how did he go about it? Meeting with other people is his primary mode of learning.


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