Mark Hennessy speaks candidly on transforming the IT organization at IBM, fostering a culture of innovation, managing IT during the financial crisis, maximizing the value of social networking tools, and taking advantage of an imminent technological game-changer. How are you, as a CIO, responding to the current difficult financial situation on an immediate and longer term basis?
HENNESSY: We are being very deliberate about what the returns are going to be from the investments we're making and what the business cases are behind those investments. We're also trying to shorten the time to value for those investments; we're working on projects that have quicker returns, more hard-dollar benefits, as opposed to multi year projects. And we're also trying to shape projects so that they're smaller, so that they can be turned into value for the IBM company quicker. We're also trying to make our application development and our transformation programs more agile and more tightly integrated with the business units, so we really understand what value needs to be created quickly and what the return on that is going to be. While we're doing all of those things, we're still driving down the cost of our run and our maintenance activities as quickly as we possibly can.
How is the IT landscape at IBM changing?
HENNESSY: We've gone through an IT transformation over the past five to ten years, going from 128 CIOs down to one. We're focussing on ways to drive more efficiency, such as centralisation in terms of reducing the number of data centres, sunsetting legacy applications, working with partners much more closely, and optimising our global resourcing. At the same time, we're ensuring that we have a tight relationship with the business units. We're making sure we have a balance between the operational excellence that we're looking for as well as the business value that we're trying to drive, and we're creating that balance with a set of standards, with an architecture, with a governance model, and by building a skilled team -- all of those things that go into an IT transformation.
How far have you progressed with the IT transformation?
HENNESSY: From a centralisation standpoint, we've made a lot of progress, consolidating 155 data centres down to five strategic centres around the world. From an application sunsetting standpoint we've gone from 16,000 down to about 4,700. I still think 4,700 is too many and we've got work underway to bring that number down. We've done a very good job in terms of working closely with partners. As an example, we have one global network now as opposed to sourcing our network from lots of different places or driving it internally. We've also made some fundamental steps forward in things like Voice over IP. Canada is a great example of that -- one hundred percent of IBM Canada's communications is over Voice over IP.
And we've optimised our global delivery; we now have multiple locations around the world that have certain skills that we need, and we've figured out how to optimise both service delivery and application services. So much of the transformation is complete, and as a proof point, over the past five years, even though our revenue and our number of employees has been increasing, our IT cost has come down by 26 percent. Clearly, our transformational activities are bearing fruit. We've done an awful lot but there's still a lot more to do. We're going to carry on with our IT transformation for one reason -- to continue to drive down our costs so we can invest in other areas.
Can you talk about some of the projects you have under way?
HENNESSY: We're now in the middle of a very large virtualisation project. About a year ago I challenged a team to take about 25 percent of our infrastructure, about 3,900 servers, and consolidate them down into 30, and that project is going very well. For us the best approach has been to consolidate those Intel and UNIX servers onto a Z platform running Linux. There are lots of other kinds of virtualisation initiatives that we have going on, but for that particular program that was really the right approach for us. We also have a lot of work going on around application development and driving for a much faster return on investment, reducing the time to value through agile methodology and rational tools and looking at an outcome-based model as opposed to utilisation models.
IBM is transforming itself from a set of multinational companies such as IBM Canada and IBM Japan, into a globally integrated enterprise. How is the IT organisation helping in that transition?
HENNESSY: We're doing it through a number of different initiatives but I think the primary one is a focus on business process. Just like we've had a very specific focus on meeting the unique requirements of our major business units, we now also have a very clear focus on understanding the key processes of our business, inventorying how we go about those processes around the world, finding the best approach, simplifying that process, and then applying the proper tools. We'd like very much to simplify the process before we add the tools; otherwise we're just automating chaos, so that's a key focus for us, particularly as we integrate the enterprise.
Is that process analysis largely driven out of IT?
HENNESSY: Yes. We have process leaders that are in the business units and we work very closely with them. One of our key functions is providing that business transformation and business process leadership to the business units, to actually drive that simplification before we do the automation.
What's IBM doing to foster a culture of innovation across the enterprise?
HENNESSY: CIOs today are positioned very well to address this issue for a couple of different reasons. First of all, they're one of the few executives that see the enterprise from end-to-end, across all business units, across all geographies. They see the data flows, they see the interactions, and so they have a very good perspective on the enterprise itself. Secondly, they have access to a lot of these exciting new tools and technologies around social networking, Web 2.0, etcetera. We are working hard to try and use those tools and that knowledge to drive innovation. We have four generations of IBMers -- traditionalists, baby boomers, Gen X, and Gen Y -- and they're spread out all over the world. We need to try and figure out how to use these tools to drive relationship-building, and then collaboration, and then innovation across all of our employees, regardless of what business, geography or generation they're in.
We've started to implement lots of different tools to do this, such as blogs and wikis. We have about 18,000 blogs up and running now, and over half of our population -- about 200,000 people -- are using Wikis as an ongoing part of their business. We also have online collaboration forums where people can go into an online team room and introduce topics that others in the organisation can talk about, or managers can come in and sponsor a work effort that anyone can collaborate on. Communities have now started to build around topics that groups of people are interested in.
We've also been using the Jam technology for over 10 years now. In 2003 we used an online jam, as a company, to help us re-engineer and rewrite our company values. People from all over the world had the opportunity to participate in that three day event, and feel as though they were part of that process. We even have a Facebook-like social networking tool called Beehive and our senior execs use that as a way to flatten the organisation and learn more about the people in their organisations wherever they be around the world -- what's on their minds, what's on their clients' minds. They really have an opportunity to virtually walk around their branch or their office or their organisation to find out what's going on.
How are you fostering technology innovation?
HENNESSY: From out of the CIO's organisation, we have what we call a Technology Adoption program, which is kind of a sandbox that we've built where people can try new tools and new processes. They can then provide feedback to the developers and help shape the new products and processes, ensuring that they're as valuable as possible, whether the intention is to take those new tools to the market or to use them internally.
What are you doing to help optimize the value of the social networking tools you're using?
HENNESSY: I find it very important to try and understand the value of each of these different tools, and I do that in a number of ways. How many ideas are created by a particular tool? How many get sponsored by somebody that has a budget? How many are collaborated on? How many actually make it to market? What revenue is generated by those ideas? I have a set of tools now that I use to track the ideas and the innovations that come out of the different tools so that I can better align my investments to the tools that are driving the better and more innovative ideas. That's something that I spend a lot of time with other CIOs around the world talking about -- the ROI of social networking.
What's the company's attitude towards younger employees using their own social networking tools, such as Facebook?
HENNESSY: I think it would be hard to try to control it or turn it off. We understand it's a reality and we have to try and leverage that technology internally. So we give all of our employees, regardless of what generation they're from, the opportunity to use these tools to collaborate, post their ideas, and work with colleagues wherever they are to try and come up with the best solutions for their clients or for their own internal customers. We really encourage that, and because we have a culture of innovation, utilising these tools to get ideas from colleagues is very natural and it's taken off quickly.
The other interesting thing is how are we going to start using those social networking tools outside the firewall? We started to do it on a couple of different projects. One is our corporate service corps, which is a group of IBMers that have taken a leave to work in emerging markets and places that need their assistance. We now have a Web site that is a part of the social networking tool that allows interaction between those folks and the government agencies that they're working with and others that have ideas that can help them. And we're going to do more of those types of things to help give our clients better access into our resources, our people, our intellectual property and our key industry thoughts, because we think that will be helpful in terms of developing new ideas and new solutions and helping create more value for our clients.
What advice do you have for other CIOs around innovation?
HENNESSY: I would say experiment and pilot. There are different innovation tools and approaches out there -- it's not one size fits all. Everybody's company is a little different. Their organisations, their geographies, their cultures are a little different. If you start with different tools and incubate them and test them and pilot them, you'll start to see what may work well for your company. I was with a CIO in Japan and his approach was to create a blog for himself and ask employees, what were the issues that were keeping them from being successful? And he was amazed at how quickly he got ideas back. He didn't expect that kind of direct dialogue. Another CIO started his own Facebook type of social networking tool and he posted ideas about himself personally. Others in his organisation started doing the same thing, and they found that the relationships started building quickly across business units and geographies -- they got to know people who were interested in similar kinds of projects, who were working on the same kinds of issues for their clients, and so that took off pretty quickly for them. So try different things. See what catches on and turns out to be valuable for your organisation.
What technology would you point to that is going to have a significant impact in the next three years?
HENNESSY: The pervasive devices that are emerging around the world in all different industries -- sensors, monitors, cell phones or whatever -- are really going to change the environment that we're in, whether they be wirelessly connected or not. These pervasive devices, as they become intelligent and interconnected, are going to create an incredible opportunity for understanding the environment and making some significant changes. Road monitoring is a great example. Because of all the intelligent sensors now in place, cities are able to monitor the flows of traffic and figure out where the bottlenecks are so that traffic can be rerouted.
This has reduced congestion and pollution in many areas. It's kind of like a 'smart' environment for the roads. All of these embedded devices, as they become more interconnected and intelligent, are going to give us opportunities for other types of 'smart' environments. And figuring out how to take advantage of that, not only to improve efficiency and effectiveness but also to give value back to businesses, governments and society as a whole, is going to be very important. The question is, how will companies take advantage of that? Who will they turn to to help them figure out how to utilise all of these sensors and all of this data in order to better manage their operations and create more value.
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