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?
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?
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?
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?
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.