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8/25/2010
12:10 PM
Bob Evans
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Global CIO: IBM Top Product Exec Discusses Strategy, Systems, & Oracle

IBM's head of Software and Systems Steve Mills describes customer priorities, optimized systems, and Oracle's "bait-and-switch" philosophy.

1) Strategic imperatives: Process Integration and Predictive Analytics. "Certainly in areas such as process integration, customers have evolved across the course of many years from the idea of vertical automation to horizontal integration. Businesses talk about straight-through processing, they talk about integrated supply-chain structures, they talk about integrated order-to-cash model for this business. So they're thinking and talking these days about processes, whereas in the past they might have talked about functions: 'I need an accounting system,' or 'I have to improve my accounts payable or accounts receivable,' or 'I need to expand my inventory system.' And they continue to try to improve and work on those things, but the greater payback will be realized through more efficient operational integration, frictionless execution of business process—that can translate into improved service to the customer, it could translate into better operational ratios," Mills said

He later expanded on that by connecting the power of predictive analytics to customers' desire to move more rapidly with more focus on the world outside their own four walls: "This process-integration idea we've been on for years is a key driver for the IBM company. There's a companion activity that's grown significantly in terms of customer interest and enthusiasm and that's business optimization through business analytics. In other words, not only do I want to run efficiently, but I want to monitor what I'm doing and see what's happening in the market—I want to be predictive—I want to use information technology to help steer my ship to where I can go to to have competitive advantage. If I can see trends and directions—and I mean 'see' in quotes—if I can see where the world is going, I can anticipate, I can react, I can defend. Look at the last couple years of difficult financial conditions, and the September 2008 financial meltdown—this is a key boardroom discussion. Boards want to know, 'Does our company have reasonable insight into the things that are happening in our market? And are we taking the right steps, or are we going to be a casualty?' Nobody wants to be a casualty—quite the opposite—they want to be the first mover so they can take advantage. And there's a strongly held and even growing view of how the use of information technology around business analysis, predictive analytics, and business optimization represents a critical strategic investment for information technology, and as you know, we've been investing heavily in building out a portfolio in information management and business analytics technologies that support where the customers want to go. This is not driven by IBM simply believing it's true; the customers verify it and confirm it, and that drives our investment strategies."

2) The 80/20 IT-Budget Trap. "We ought to look at these things the way we look at a city—a city is a living, breathing thing, and you don't literally rebuild New York every year: you add to it. And more often than not, you're renovating what's already there—you're improving what already exists, you're not replacing what exists. And that's very much the mode that most businesses are in with their IT infrastructures—it's not a greenfield for them, and the latest buzzword of the day is not gonna save them. When 70 or 80% of your annual IT budget goes to the care and feeding and extension of what you have, no new thing is going to set you free—it's a different world. The IT industry in its youth could talk about greenfields and brand-new things and 'IT will change your life' and this industry has always loved the next new thing that's come along, with whole books written on the topic. We're very good in this industry at changing the names of things we've done before to make them seem new. In the packaged-goods industry, you put 'new and improved' on the box; in the tech industry, you change the name. Voila! It's new again! The old wine in a new bottle idea."

3) IBM's Immersion In Complex Technologies and Complex Solutions. "It's what we've done for a very long time—we were in the database business before anyone used the term 'database'—we invented relational database back in the 1960s, we've been a prolific leader in developing technology around complex and sophisticated analytics. We do genomics, proteomics, astrophysics, we do weather forecasting—there are very few areas from an analytics perspective that IBM does not have researchers and technology and examples of where out capability has been a principal innovating contributor to whatever that activity is—we've been doing things that are quite out there in terms of complex, leading-edge exploration of new ideas and techniques that may take decades to perfect and realize."

Central to IBM's ability to play in those complex fields—to help customers see things that perhaps some competitors cannot illuminate—is Mills' belief that IBM's massive development teams can be far more effective if they spend only part of their time working in their labs by making sure they spend significant amounts of time with customers: "We have a very outbound-laboratory model—I've bought 100 companies, and no company that I've bought and no company I could name has a more outbound-laboratory model than we do. We deploy our technical talent as a true strategic advantage for IBM, not just because of their inventiveness but because of the extraordinary value they deliver every day to customers. Every year, I use thousands of person-years of laboratory talent in customer engagements, helping customers deploy technology. And I get a great secondary benefit from that because my developers then understand what customers do with the technology far greater than if I just sequestered them in the laboratory. And they build better products as a result, and they do that faster because they've developed insight into what the customers actually do and need to do. . . . That outbound model that we have, that open-door laboratory structure we think is a big competitive advantage for IBM, and every day it distinguishes us from our competitors in the marketplace."

4) The Power of Optimized Systems: Why IBM Combined its Software and Hardware Groups Under Mills. "We're going to continue to do as we have been doing. Our customers evaluate software products one by one. They evaluate hardware products one by one. But they also look at systems—that's one of the challenges that we as a very diverse IT company face: we have many things to offer, and also many types of customer constituents who want to evaluate things one by one, but others want to evaluate at a systems level. And, of course, many of our customers want to start with a discussion about outcome rather than technology. So we have to sell at many different levels: we have to sell consultatively, we have to sell around transformational solutions and things that change the way you do business. But invariably those things cascade down to discussions more and more about products and technology, and the optimization of hardware and software together is a differentiator for us—always has been. We've done a lot work around how IBM hardware and software work together to deliver a superior solution—that's very evident and has been evident throughout my 37 years in the mainframe market, and it's something we've been doing now for quite some time with our Power systems, and we've moved that same type of thought process to our Intel x-series offerings, and the same thing's true with storage: there's an intersection of hardware and software.

"The customers think workloads and results and outcomes, so your generic capability is something they're certainly going to look at but the buying of workload-based systems is something that's certainly picked up momentum across the whole market in recent years. And that's a little bit of back to the future: it's really where mainframes and computing the '50s and '60s began: you couldn't think of it in any other way, computers were incredibly expensive at that time so you were very focused on workload and results, and then came minicomputers and open systems and we had a long period of time in which the idea was kind of to give you a blank slate: here's a computer, it runs fast, stick your work on it. As long as you can make the computer run fast just as a computer, somehow or other things would run well. But you reach a point where that begins to run out of steam—you can't get the next increment of improvement and performance and optimization without thinking in greater detail about the nature of the workload: what's going to run well in what kind of environment?"

And as more IT vendors take that path, here's how Mills says IBM is differentiating itself:

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