This is James Govner from Redmonk at the IBM Industry Analyst Summit for 2008. The economy is in a very interesting situation right now, and it seems that IBM is retooling and repositioning to more effectively meet its client requirements, and here I have Karen Parrish to tell us a little bit more about that. So, why don't you tell us about your role, and then a little bit about this changing go-to-market approach that IBM is trying to do. I have a terrific role. I honestly don't think there is a better role in the IBM company right now, and the reason I say that is because I've been given the opportunity to look across all industries, 17 of them worldwide, and to identify what are the best practices that are going on in those industries as it relates to how we deploy software and how we deploy services to solve particular customer problems. And those customer problems change. They change as economies change. They change as we move into growth markets. They change by industry. And so, what we do is we look at ways to package that up and help solve those problems faster, in a more flexible fashion, and give the customer some ability to be more agile to respond to some of the changing conditions. Some that are within their control, some that are outside of their control. So, one of my questions is, I mean, personally, but also organizationally, how do you boil that ocean? I mean, Red Monk, we thrive on our ADD. We, within the technology markets, have a fairly wide-ranging kind of beats coverage that we pull a lot of information together. But, you know, 17 different industries. How do you personally do that and organizationally? The market drives everything we do. The interesting thing about the approach that we have, which is very different from the way we would normally develop software, for instance, is that this is customer in. So, every industry framework, which is what we call the solution approach, is done completely by customer engagement. So, we look for these best practices as we're working with customers, and that requires industry
2:04expertise. So, the first order of business is, you have to have people who deeply understand the industry. Well, we do. I mean, we have an entire sales and distribution organization. Sure, you do at GBS, but do you have it in software? Well, we do. And, in fact, I run a team who have a set of industry experts. Amongst the executive management team, there's industry expertise, but within these teams, there are architects who are industry experts. There are software people who are industry experts. So, we have the luxury of having core competency. It's not prevalent enough through the organization, and that's a lot of what Robert LeBlanc talked about this morning when he talked about enabling the entire software community to be focused on it. Since I met you, I mean, very clearly, you have a lot of domain expertise. I do. I mean, you've come at this, like retail? Deep. I would always feel happy, like any retail question, I would feel like, you know, let's ask Karen, because she will know the business process, she will know all of the players, and so on. That's right. That's right. That's right. That's right. Not everybody has that kind of depth and expertise. That's right. I mean, A, it seems that also you're obviously broadening that out personally. Yes, I am. But it's a little bit ... There is a danger, I think, that you might put someone in place that perhaps doesn't have the domain expertise of their customer, or a particular analyst. But domain experts are not made overnight. You acquire them, and that we do oftentimes when we bring on companies like Infodyne, where we, in acquiring a company, we actually acquired a group of individuals who knew that market extremely well. Okay. They're subject matter experts. You build them, and we build them through GBS. We have a very strong partnership with GBS. How we go to market, which is sort of the question you asked me earlier, is oftentimes through the solutions that GBS brings to the market. We have a very deep domain expertise as well. And you build that domain expertise over time. The people who work in my organization have been working in the telco space, in the financial services space, for a very, very long time, as long as I've worked in retail. I've had the benefit, personally, of running a business at IBM for the last seven years that was a horizontal play.
4:04We did data warehousing and business intelligence. Mm-hm. Well, you don't understand analytics unless you really understand how customers work. So I had to learn a lot about industries outside of retail, like healthcare, for instance, and insurance and financial services. And that's how I started to get deep in other industries. But nobody can be an expert in all industries. I would never proclaim to be. Mm-hm. What I look for are people on my team who have deep subject matter expertise in a particular industry or a domain, perhaps a sector, like maybe the relationship between financial markets and financial services, banks and financial markets. You can sort of look at that domain expertise as somewhat similar, although the processes can be quite different. And then you look for them to branch out. At the end of the day, the domain expertise has to be in front of the customer. It doesn't really matter if the people on my team has it. It matters that the people who are in front of the customer have it. Mm-hm. So we're all the focus right now is on educating and building industry competencies in each of the geographies where we play. Now, remember that this industry model isn't for all problems across all industries. Right. I've noticed that there seems to be quite a lot of selectivity about the specific markets. And that's something you don't always see from the classic enterprise software play. That's right. By design. You know, GBS has a solution for everything. That's what they are there to do. I mean, they are the consultants across all industries, all domains, all functional areas. And we look to them for really going and building not only customized solutions but harvesting assets around those solutions so that their go-to-market is faster and cheaper as we move down that path. Right, right. What we're looking for are those plays in the marketplace where the market draws us to solve problems in a replicable way. So when I said it's from the customer in, we don't just look at one customer and say, "Ah, we've solved that problem, we can build a framework." This is over and over again where we see the same problem where the solution repeats itself. That's when we decide it's time to build a framework. Okay. It's time for us to harden this in some way that we can make that repeatability.
6:04But even by geo, it doesn't seem like you're... There's clearly a lot of selectivity around which geographies to target with which frameworks as well. It's actually the flip side of that. It's which geographies require the frameworks as opposed to us building a framework and taking it to a geography. Okay. We get the geographies pull us in. So for instance, in China, there's a lot of movement around how do I leapfrog my competition. Robert talked this morning about the retailer who was very, very concerned that the decentralization that was occurring was going to cause the deregulation. Deregulation, right. Deregulation is going to cause the foreign people to come in. Deregulation is coming. Deregulation is coming. Deregulation is coming. Deregulation is coming. Deregulation is coming. Deregulation is coming. Deregulation is coming. Deregulation is coming. Deregulation is coming. Deregulation is coming. Deregulation is coming. Deregulation is coming. Deregulation is coming. Yeah. Deregulation is coming. us in for, you know, the need to differentiate. And upon those engagements is how we build frameworks. So, you know, if it's in a growth market like China, great. And we see that oftentimes what they look for is somewhat different than, for instance, what the United States banks are looking for, where they want to really look at their core banking system. My big question is just about risk in general in this environment. The situation is changing so fast, BZIB investment, that there are investments that were in place that are being cut. There are spending freezes in numerous areas. Clearly, IBM has an opportunity as a flight to quality. Just from a risk management perspective, these are by nature long sale cycle kind of deals. You know, very complicated. And surely, it's quite damaging if one of those deals doesn't come through. I mean, what's the sort of, just at the sort of the risk management of your own portfolio level, how is IBM going to manage that risk? Because it just feels to me, clearly, IBM has a lot of confidence, which is great, that it can weather the storm. But what are some of the things you could do to mitigate that in terms of the customer? So, first of all, I think there are a couple things going on. First and foremost, it's really
8:06important to have the skills close to the customer. And so, you know, in terms of travel restrictions, that doesn't worry me. Because we have people in the geographies next to our customer who know how to do this. And we'll continue to build those skills from the geography up. We'll go and we'll hire people in India. We'll go and we'll hire people in Korea. And we'll teach them the portfolio. Because many of them will already come to us with the industry. It's funny. My colleague, Coté, he Twittered today. He had quite a nice comment. He said, "IBM's smart planet program. That should probably mean having geographies that are smart enough not need to fly a Yankee over to install the software." Well, there you go. And that's exactly what we're trying to do. We're trying to build the competency in the geography. And by the way, customers really appreciate that. Because they look at us and they they recognize the fact that by doing that, you build the capability within their own environment. And that helps to build their economy and strengthen their economy. You know what's going on. You're in there. Okay. You understand the nature of the environment. You understand the dynamics of the business. You understand that industry. So you kind of, I mean, nobody could have anticipated what happened. And so we're all living in react mode. But how do you tell you- We just didn't know when it was going to happen. We knew something bad was going to happen. We just didn't know when. We didn't know when and how bad. But I think actually that, you know, another point in terms of mitigating risk, I actually don't believe that customers are going to fear what we're doing here. I think they're going to embrace it. And I'll tell you why. You mentioned long sales cycles. Not necessarily. When you look at a framework, you see a plethora of stuff. But customers don't buy all that stuff. They don't buy the framework. What they buy is an on-ramp. They look to solve a particular problem. And they look for somebody who has a vision that if you solve that particular problem, which, by the way, can be done fairly quickly in most cases. I think nine months was one of the stories that we heard this morning where a customer got instantaneous ROI. I mean, nine months is pretty good. You can then branch off of that same implementation onto other problem areas without having to reinvent the wheel, without having to rip and replace, without having to buy a ton more stuff, because we have a vision on how this thing plays out over a period of time.
10:09And that's called a framework. Customers see that, and they relax. They say, "Okay, first of all, very fast time to value." IBM has already taken the pieces, pieced them together in an optimized way, so I don't have to do that integration. I can work with GBS. I can work with my business partner. I can work with whomever I want to customize it. I can use the applications that I have in-house today, because IBM has already done the integration to those applications. I mean, we have many ISVs that we work with, big and small, regional, which is very important. In that China customer we talked about this morning, we worked with a regional ISV. It's somebody that they had worked with for many, many years. And it was very important to that customer that that ISV's application ran well on our stack. And so to them, that's a time to value statement. And they know that if they can get all that in one stack, they can implement very fast. So it's about making the platform consumable, making it domain-specific so that it has those industry assets that they don't necessarily have nor do they want to build. And then it's about putting it in front of them in a way that is consumable to their business, because we live in a heterogeneous world. I mean, we're in an environment where we have to make it work within the world that they live in. It's not about it being all. I look at risk mitigation in my portfolio. There are some pieces of my portfolio where we're doing very far-reaching things like intelligent utilities. I love that stuff, by the way. That's a whole subject. I mean, we're going to be doing a lot about that. And we can have a separate conversation about that, but that is really about redefining business and defining new business models, which in tough economies the innovators do. But there are others that retrench. And so things like core banking, getting back to the core businesses that you have, will fit very well. So I think our portfolio is already well balanced. Well, there are a couple of things. A, I mean, you talk about tough times. It was, again, a great Twitter this morning. Someone pointed out, "Oh, you know, things were as bad as they were in 1977." I don't remember that as being bad, but I was only seven at the time.
12:09But they said, "Yeah, so bad that Apple and Microsoft were both formed that year." So we are definitely going to see some new players. We're going to see some disruptions. Finish up now. It's three threes. So three most important verticals. Now, I know that you actually have five, but let's just cut it down to three. Three most important verticals, three most important solutions within that, and then three most important geos. And I'm going to ask you countries rather than any broader. So I'm interested in the top three verticals that you think are going to be most important. It's hard to pick the top three verticals worldwide because they do differ by geography. But I would say, across the board, financial services. And I don't think that's going to change, even given the environment. I think it's going to be more important. Telecommunications, for sure. And then I would say government. I think actually government is going to become far more important because you're going to see far more regulation as a result of what's occurred here. Absolutely. And so I think you're going to see more confusing. Well, everybody, we all work for the government now, don't we? Don't we? Financial services, they work for the government. For the most part, they're part of public sector. Next year, we're going to, yeah. Yeah, we're going to, auto manufacturing in the public sector. Come on. I mean, it's, actually, that was the '70s, isn't it? British Leyland and, yeah, absolutely. Precisely. So I would say those are the three top. So everybody works for the man. Okay. Right. I would say in terms of geography, I think Robert pointed them out for you. It's Russia, it's China, and it's India. And that's major growth markets for us. And we expect that to continue. We do expect that to continue. And the other third one. Well, I guess it would be the specific solutions within that. So I think customer centricity is going to continue to be hot, hot, hot. Risk is going to become incredibly hot, for sure. Right. And then I think things like operational efficiencies, like supply chain efficiency, or operational efficiencies in the government around regulations, anything that talks about efficiencies or governance are going to become very important. Karen, thank you so much. My pleasure. Really nice working with you and safe trip back to life. Okay, thank you. Thank you.