Business Transformation and IT Finance Transformation & IT FEI Summit Carlos Passi Asst Controller,...

Business Transformation and IT

Finance Transformation & IT

FEI Summit

Carlos PassiAsst Controller, Business Transformation


© Copyright IBM Corporation 20092

Agenda

IBM Finance Transformation

Leveraging Technologies & Tools Global Integration Risk Management Business Analytics IT Infrastructure (Virtualization & Cloud)

Evolution of IBM Finance



• Country focused• High labor count• Disparate systems• Administrative focus

PEOPLE (ORG)Global CoE’s / Outsource

Agile & Value FocusedProductive & Collaborative

Eff

ectiv

ene

ss

Efficiency

(1)Finance E/R >3%1 Cost of Finance as a % of Revenue

(1)Finance E/R <2%

(1)Finance E/R Goal <1%

(1)Finance E/R 1.4%

‘94 ‘08‘00‘96 ‘98 ‘02 ‘04 ‘06

PEOPLE (ORG)Unit, Application & Geo Specific

Slow & Task FocusedCountry Centric & Isolated

Continuous progress marked with significant milestones

(1)Finance E/R 1.5%

• Conducted Hackett benchmarking study – Finance E/R 2x competition

• Created Global Finance Process Owners• Focus on core accounting transaction systems

(Transaction foundation)• Implemented common processes (WWCOA) &

global systems

• Undertook several enterprise initiatives: Y2K / Euro conversion / VM migration / Web exploitation

• Focus on reduction of WW application portfolio (theoretical minimum)

• Conducted second Hackett study to reset benchmarks

• Horizontal integration of processes (SAP Assets, Payables, Procurement)

• Improve collaboration/access for internal customers (ODW)

• Focus on core competencies / Outsource transaction processes (BTO AP/FA)

• Ubiquitous self service access to financial information (Portal, FIUI)

• Global Centers of Excellence: Planning / Financial systems / Acct / Treasury

• WW Finance transformation in Planning, Services, Cash Management, Tax, Business Controls, A/R, Capital Tracking, Access Management

• Cognos BI & Planning Systems

Acc

ess

| In

teg

ratio

n |

Inn

ova

tion

PROCESSComplex & Disparate

Local InitiativesTransactional / Reporting

Characteristics (Starting Points)High Cost & Disjointed

TECHNOLOGYLegacy / Interfaced

Proprietary / Monolithic Disintegrated Portfolio

Characteristics (Best of Breed)

PROCESSSimplified & StandardizedEnterprise/Horiz Initiatives

Decision Support / Analysis

TECHNOLOGYOpen & Standard / SOAOnDemand / Self-ServeSmall Strategic Portfolio

Low Cost & Integrated

Over the past decade, Finance has leveraged new IT technologies to transform the organization, driving simplification, productivity & effectiveness.

The Journey…



Data

Stan

dards (WW

CO

A), C

urrency, Produ

ct Ma

ps

Enterprise Layer

Enterprise business transaction applications and corporate data facilities

Finance Transaction Layer

Ledger, Fixed Assets, A/R, A/P, Intercompany, Pricing, Costing, Treasury

Financial Enrichment Layer

Financial Warehousing,

Planning

Decision Support

Consolidation, Reporting &

AnalysisSingle World Wide Consolidation System, Cognos BI Tools, CFO Portal

P R O

C E

S S

L

A Y

E R

S

APPLI

CA

TIO

NS /

SO

LUTIO

NS

Common World Wide Planning System, Consolidated & Geographic Finance Information Warehouses

Common Ledger, F/A, A/P, A/R, Interco (WW Run-Once Solutions)

Finance as a Service (SOA) e.g. SABRIX, WWPRT

The Stack…



STRATEGIC OPERATIONAL

SYSTEMS

FIW-CCORPORATE

AccountingConsolidation Lotus Notes

Databases

Lotus Notes Databases

JAPAN

FIW-MCAP FIW-MC

NA/LA

FIW-MCE/ME/A

LEDGERLEDGER

EDGE

WebServer

EMEAAP

FIUIExecutiveDashboard

APEX

Actuals

Americas

LEDGER

CFO Portal

Our processes and information technology are centered around trusted sources of data



INCREASE VALUE

MANAGE RISK

REDUCE COST

Finance leverages and exploits new technologies to drive value, manage risk and reduce cost

& Consolidation

NewTechnologies

& Tools

Business Analytics

ITInfrastructure

Global Integration

Risk Management

Blue HarmonyBlue Harmony

COGNOS Integration

Research (STAR)

COGNOS Integration

Research (STAR)

Continuous Control Monitoring (CCM)

Continuous Control Monitoring (CCM)

Virtualization

Cloud Computing

Virtualization

Cloud Computing



Blue Harmony (Enterprise Transformation Initiative) Implementing common SAP platform across 3 major processes

• Leverage global resources through common processes

• Adopt standards for seamless intra and inter-organization operation

• Provide adequate control through compliance and governance

• Improve productivity and efficiency to expand margin and grow EPS

• Better information• Better decisions• Better executions

Blue Harmony enables IBM’s GIE strategy as it simplifies operations in 3 major processes and helps to reach earning-per-share targets

Global SimplificationGlobal SimplificationGIE StrategyGIE Strategy2006 EPS

Historical revenue growth

Margin Expansion

Share repurchase

Acquisition and growth initiatives

Retirement-related

$6.06

$0.75

$1.00

2006 EPS

Historical revenue growth

Margin Expansion

Share repurchase

Acquisition and growth initiatives

Retirement-related

$6.06

$0.75

$1.00

$11.002010 EPS

Margin Expansion

Potential Benefits for IBM Productivity efficiencies from FIN, OTC

and OTO Enhance solution selling capabilities,

improved customer satisfaction and retention

Improve DSO and other capital measures Simplify IBM’s Applications landscape by

retiring ~1000-systems

Finance

Opportunity to Order

Order to Cash

Finance

Opportunity to Order

Order to Cash



CCM (Continuous Control Monitoring)Managing risks in key business processes

■ Uses IBM Complex Event Processing (CEP) technology to extract information from internal business applications and analyze the data against predefined criteria

■ Monitors high risk transactions in key business processes that are administered in an automated environment to deter and detect circumvention of controls

ALERT ACTIVITY RULE RULE DESCRIPTION

SOX RELATED

CONTROL Y/N

UNIVERSE OF

TRANSACTIONSALERTS

GENERATED

ALERTS GENERATED

YTDTOTAL VALID

TOTAL OPEN

1Multiple concessions (2 or more) to the same customer number where the aggregate total value of the concessions is equal to or is greater than defined clip level. Individual concessions equal to or greater than clip level in USD are excluded.

Y - KCFR 106 0 0 0 0 0

2Multiple concessions (2 or more) to the same enterprise number where the aggregate total value of the concessions is equal to or is greater than the defined clip level. Individual concessions equal to or greater than clip level in USD are excluded.

Y - KCFR 106 0 0 0 0 0

3

Multiple concession write-offs (2 or more) for a customer number where the aggregate total value of the concessions is equal to or is greater than defined clip level. Individual concessions equal to or greater than clip level in USD are excluded. Additionally, the credit codes are PA, RR and SA.

Y - KCFR 106 0 0 0 0 0

4Invoices valued at a defined USD clip level or more where the customer number has one of the following credit codes: PA, RR and SA.

Y - Headlight 294 85 190 0 85

5Collection activity in CDMS (Common Dispute /Debt Management System) that is not documented for invoices exceeding the USD clip level with invoice dates that are 15 days old (from current date).

Y - KCO # 501.0 79 29 120 0 29

6Collection activity in CDMS (Common Dispute /Debt Management System) that is not documented for invoices exceeding the USD clip level with invoice dates that are 30 days old (from current date).

Y - KCO # 501.0 249 58 194 0 58

MAIN > ARGENTINA

Current implementations & sampling of rules include:

Accounts Receivable (WW focus, 37 countries, 48 rules)

• Customer / Enterprise concessions exceeding a country limit and/or customer credit rating

• Deviated Refunds (sent to IB address or changed customer address)

• Invoices for low credit rated customers

• Aged (30+ days) collection activity that is not documented for large valued invoices

Business Partners (6 countries and 67 rules)

• Multiple/excessive discounts applied to same BP

• Processed payment doesn’t match approved disbursement amount

• Purchase returned but credit not applied timely

General Procurement (1 country and 5 rules)

• Orders open for 180 days without activity

• Adherence to required to vendor source selection and fair value (SS/FV) analysis

Screen Shot from CCM (Activity Alert):



COGNOS IntegrationIncreasing the value of finance through business analytics

FMS (Field Management System) CommissionsFMS (Field Management System) Commissions One of IBM’s largest suite of applications supporting the incentives

process Allow sellers to track quota attainment and perform sales reporting

at a customer level FMS enables the implementation of key business strategies:

30 days to pay; Monthly commission payments Ledger-based measurements Line-of-sight measurements for employees Increased incentive value to employee Timely management information to executive team Improved discipline and controls in the process Reduced resource stacking; Reduced manual workload

FMS (Field Management System) CommissionsFMS (Field Management System) Commissions One of IBM’s largest suite of applications supporting the incentives

process Allow sellers to track quota attainment and perform sales reporting

at a customer level FMS enables the implementation of key business strategies:

30 days to pay; Monthly commission payments Ledger-based measurements Line-of-sight measurements for employees Increased incentive value to employee Timely management information to executive team Improved discipline and controls in the process Reduced resource stacking; Reduced manual workload

Leverage Cognos products to solution new business requirements; and opportunities to transform and simplify processes.

Potential to fundamentally change how IBM Finance will support the business and add greater value.

IntegrationIntegration

Project Technology

New Capabilities

Backlog Reconciliation BI

FMS Commissions BI

BaRT (Backlog Run-Out Tool) TM1 & BI DB2

CIO Scorecard Phase I BI

Wall Street Systems BI & WSS

Marquis Application Replacement

FIUI BI

WW Spend TM1 & DB2

Phased 3rd Party Replacement

Cognos EP Planning

Investigations Measurements BI

WW Spending HarmonizationWW Spending Harmonization Drives WW standardization of spending analysis and reporting Replaces multiple local spending Apex cubes with one common

WW cube using Cognos TM1 platform Potential benefits to IBM:

Better control of spending and quicker decision making Support career growth for finance professionals Common source of information for better business controls and

simplified access control

WW Spending HarmonizationWW Spending Harmonization Drives WW standardization of spending analysis and reporting Replaces multiple local spending Apex cubes with one common

WW cube using Cognos TM1 platform Potential benefits to IBM:

Better control of spending and quicker decision making Support career growth for finance professionals Common source of information for better business controls and

simplified access control



STAR (Statistical Tracking & Assessment of Revenue)Consistent metric-driven model for performance estimation

wk 13End of Quarter

wk1 wk2 wk3 wk4 wk5 wk6 Today

METHODOLOGY

LEADS-ONLY

PILLAR

LEADS-AND-LOAD

PILLAR

LOAD-ONLY

PILLAR

Firm LOAD- ONLY

PILLAR

Orders

Opportunity data from EIW (i.e., Siebel)

Each opportunity detail is modeled

Revenue data to calibrate parameters

Quarterly transactional revenue

Load data

Provides value of closed deals ready to ship

Compute Probability of Winning and Expected

Yield of each opportunity using detailed EIW data

Predict, based on history, the Future

Yield due to opportunities not yet

in the pipeline

FINAL OPTIMIZED ASSESSMENTan optimal weighted average of the four

pillars for each geo/region, and brand

WEEKLY PILLAR WEIGHTING MODELComputes historically optimal weights

for each pillar, by week, geo/region, and brand

Assessment Precision Comparison

STAR Model:

Consistent metric-based method (statistical model based on historical data)

Link tracking measures to performance

Accurate in early weeks, low volatility over weeks

Re-focus human effort from estimating outcomes to decision-support activities

Dev

elo

ped

by

IBM

Res

earc

h

Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Wk 8 Wk 9 Wk 10 Wk 11 Wk 12 Wk 13

De

lta to

Act

ua

lI-view STAR1 STAR2



Today, Finance IT activities align with the Dynamic Infrastructure and makes use of virtual hosting

Key Technologies (unordered)

• Service oriented architecture• End-to-end service mgmt• Comprehensive virtualization• Ensembles & scalable servers• Converged networks• Cloud computing services

• Software as a service• Information as a service• IT appliances• Real-time data streams• Mobile client services• Virtual worlds

Top IT Requirements (all are vital)

• Agility – rapid deployment, self-service, …

• Resiliency – availability, disaster recovery, …

• Security – trusted computing, surveillance, …

• Greenness – energy efficiency, low impact, …

• Low Cost – TCO (HW, SW, labor, facilities, …)

Evolution of IT Infrastructure – IT Simplification



• Substantial savings: energy, software and system support costs

• zLinux target: 80% energy, 85% floor space

• Inventory hygiene, including application to server mapping

• Dramatically faster provisioning

• Improved security and resiliency

• Quality – simple, stable, available

• Decision-Making: Integrating Enterprise and business unit view

• Mindset/culture of distributed vs. mainframe

• Workload selection -- multidimensional nature

• Incomplete/dated inventory records

• Detailed date for internal business case

• Integrating project/ program priorities

Next Steps:

Evolution of business intelligence to

Cloud Computing

Expected Benefits of Virtualization Large Scale Migration Challenges

Virtualization benefits are significant



Delivering Business Intelligence through Cloud Computing

Cloud computing provides dynamically scalable and virtualized computing resources as a self service.

Tenants can subscribe to this service focusing on capability instead of infrastructure.

Infrastructure and capabilities are standardized and provisioned through automation.

Business model allows tenants to pay for usage, fixed cost vs variable cost

WHAT IS CLOUD COMPUTING?

WHAT WILL THIS BRING?

• Saves $23M over 5 years (on System z Linux)

Infrastructure savings – provisioning a common service

Operations expense – reducing BI infrastructure

Talent restructuring – common BI tooling landscape

• Supports a massive install base of +200K knowledge workers

• Provides delivery of a widely used, common service within the IBM enterprise

• Centralizes the delivery of BI services using economy of scale to deliver value to all adopters, regardless of size

• Enables faster time to value for adopters and allows users to consume services at a rate and pace to match their investment

• Creates a standard BI process that prevents an infrastructure build per project investment



Overview for a private Business Intelligence (BI) Cloud offering

■ In 1Q09, the 3rd most popular search term on Gartner.com was business intelligence

■ Despite the difficult economic conditions, in 2008 the growth in BI platform sales was at 20%

Strategy is a tops down approach that starts with business services to capture tactical ROI and market interest:

■ Leverage existing GA products & services to jumpstart sales for private clouds

■ Use the CIO account to drive product requirements and a marketing showcase

■ Consolidate and virtualize BI silos across an enterprise for large cost savings/avoidance

■ Grow cloud at the rate and pace of the market

…while offering a stake in the ground for expansion into clod delivered data centric consolidation and cloud services.

Business intelligence

Master data management /

integration

Content / data management

14

The vision



Transformation Roadmap for BI Cloud

Phase 1: 3 - 6 mo Phase 2: 6mo - 12mo Phase 3: > 12mo

Bring Cloud to the User■Consolidate & centralize BI■Leverage data as-is■Standardize boarding

processes & services■ Identify the processes for

automation■ Identify services for catalog

Expand the Cloud ■Create a standard services

catalog■Automate the boarding process■Provide auditing■Automate billing and rating

capability■ Integration w/CHQ cloud

transformation team ■Notes integration pilot*

Expansion into data■ETL services■Offering data warehouse

services■Semi-structured /

unstructured data access■Evolution into IMCC

platform offerings

4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10Finance ITIntegrated Supply ChainFMSHRSales TransformationSWGGTS

Blue Harmony (Pilot/Development) In Discussion

BICC EnvironmentNon BICC Environment

The BICC is the underlying foundation for the entire transformation in IBM

‚

Boarding schedule for IBM tenants

Target is 120,000 IBM tenants by 1H2010



Eff

ecti

ven

ess

Basics

Enterprise Integration

Standard / Common Process Automation Functional Best Practices Financial Reporting

Shared Services Web Enablement Core Competency Decision Support

Process Outsourcing / Global COEs

Technology Exploitation Rationalized ERP Information On Demand

Globalization

>3%

<2%

<1%

E/R

1994 20021998

The evolution of Finance at IBM

Business Analytics

COGNOS STAR model

Infrastructure

Virtualization Cloud

Computing

Risk Managemen

t

Continous Control Monitoring

Global Integration

Blue Harmony



Finance Transformation in IBM – The Journey

■ Transformation has been an Evolutionary process…

Moving from a Country Based Model to a Global model Standardizing Data and Systems Reengineering Common Global Processes Implementing and Promoting Self-Service Consolidating Core Functions into Shared Services Globalizing Centers of Excellence

It is Hard…



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Business Transformation and IT Finance Transformation & IT FEI Summit Carlos Passi Asst Controller,...

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