© 2011 IBM Corporation

Running an information-services business within a large corporation

March 2011

© 2011 IBM Corporation

IBM Market Insights

Our job is to help IBM grow.

We start by aligning our work with the company’s priorities.

We build new assets and expertise where needed.

We prioritize and execute our work as one team.

Our unique insight and tools give business leaders the confidence to take the actions required to drive growth for IBM.

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Our Knowledge Services team serves a large portion of IBM employees worldwide.

Sales Scientific & engineering

Marketing

IBM Knowledge Services

Competitive how-to-win

Company information

Lead generation tools

Product comparisons

Technical journals

Computer science

Physics

Engineering

Market sizing & forecasts

Global news & research

Brokerage research

IT analyst services

Industry sources

Emerging markets

Three main targets:

Marketing

Sales

Scientists & engineers

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Knowledge Services – how do we deliver these insights to IBM?

Self-Help Tools – find the information yourself 24 x 7

MI Knowledge Center – send your information requests to our Knowledge Center analysts

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MI Self-Help Tools for 24X7 Service

bluemine provides a single entry point to conduct a high-level search across multiple internal and external sources

COMP is IBM's premier competitive resource – access valuable toolkits to beat IBM’s competition

KnowledgeGate brings together external sources (news, scientific & technical, and market research) where users can conduct in-depth searches across these sources

Market Insights website can be used to browse research produced by IBM's MI organization and to learn more about the MI discipline

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MI Knowledge Center supports over 20,000 individual requests a year

Knowledge Center Relationship Managers are aligned by MI client teams and have in-depth knowledge of the IBM business needs and secondary research sources.

MI Knowledge Center for synthesized client, industry, and competitive-related research

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How Do We Measure Value?

Growth in page hits and downloads

Growth in unique users

Expansion into new geographic regions

Embedding content into different workflows

Usage by business units

Cost savings delivered through centralized purchases

Improved efficiency to find information

Customer satisfaction

Successful Self-Funding Model

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Our Self-Funding Model Is the Basis for All Services We Deliver

Every year we start from the premise that we have no budget

The self-funding model includes:Research requests to our Knowledge CenterDocument delivery (mostly for scientific-engineering content)Search costs on internal systems where we deliver external content

The self-funding model is designed to fully recover costs of:ContentIT systems, maintenance and developmentPeople

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How do we build our budget*?

Electronic delivery

COMP Knowledge

Gate

Knowledge Center

2011 Total

Microbilling funding 1,000 12,000 5,000 1,500 19,500

Client flow-through funding

15,000 0 1,700 300 17,000

Total funds 16,000 12,000 6,700 1,800 36,500

Funding YTY +10% +8% -3% -20% -5%

Total projected content program spend

15,000 11,000 6,100 900 33,000

Spending YTY +6% +20 -4% -8 +5%

Net Surplus (Deficit) 0 1,000 600 900 3,500

Infrastructure and IT - - - - 3,200

2011 Net Surplus (Deficit) - - - - 300

* Budget numbers are illustrative

© 2011 IBM Corporation

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How Do We Price Services?

Pricing methodology is based on some key principles:

accurate forecast of demand and recovery (based on historical usage and trends, and customer demand)

product prices that aim for breakeven point

flexibility to manage as a portfolio of services as needed

Pricing options we use:

price per each research request

subscription cost for single-user seats to expensive IT analyst research

annual subscription cost for use of an application with enterprise access to content

single search/session costs for sci-tech content, i.e. IEEE

‘free’ access to enterprise services and/or reports purchased elsewhere in IBM

pass-through expenses from internal clients for vendors with which we have relationship

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How do we bill?

Collect and verify usage/billing data from each of the applications/services

Assemble into billing tables

Pass verified billing data with individual charges rolled up to departmental billing codes via US and international financial systems.

To accomplish this we have our own Financial Control Desk that manages these processes and transactions

We have passed rigorous financial process and certification requirements to allow us to operate and enter financial data that affects IBM’s bottom line

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Key Considerations for Implementing a Self-Funding Model

1. Keep it simple.

2. If users value the services, let them vote with their dollars and be willing to pay a fair price for what they use.

3. A microbilling model can minimize large budget targets and direct expenses to where they are consumed.

4. If starting from scratch, it will take a substantial effort to get line Management, Finance, and IT behind you.

5. You’ll need resources to build, run, and maintain an accurate billing and financial system.

6. In IBM there were significant financial certification hurdles to allow us to pass data to our corporate ledger.

7. The model has been very beneficial, as our proof point, to continue to deliver our value services to IBM in such a cost-driven environment.