IBM Wants to Help Government Transform Itself

IBM wants to help organizations run not just their IT systems, but the business operations as well. It's a bold move, but will it work?

by / May 16, 2005
Online extra from Public CIO magazine

IBM sells computer hardware, software and the services that businesses and governments need to run their IT organizations. But would you let IBM run your human resource department? Or financial systems? Or procurement?

As radical as that might sound, the world's largest IT firm is quite serious about offering business services using the skills and capabilities that IBM has built up as a world-lass company. Business Week described IBM's new initiative this way: "Instead of merely selling and servicing technology, IBM is putting to use the immense resources it has inhouse, from its software programmers to its 3,300 research scientists, to help companies ... rethink, remake, and even run their businesses -- everything from accounting and customer service to human resources and procurement."

IBM calls the new strategy "business-performance-transformation services" or BPTS and while the focus so far has been on how it can work in the business sector, Todd Ramsey, IBM's general manager for global government industry, believes the public sector will embrace it as well.

Todd Ramsey
Ramsey, who has been with IBM since 1972 and is the author of the recently published, On Demand Government, Continuing the E-Government Journey, explained that in order to understand how BPTS can work in the public sector, you need to know what stage of transformation government has reached using technology and where it should be headed.

Ramsey calls them the four "waves" of digital government. "The first wave was putting existing services online. The second wave was about portals, from the basic to the sophisticated," he said. The third wave has to do with simplifying regulations and services through information integration, making government both more efficient and more effective. The fourth and final wave is government transformation. "At this level you are talking about partners in the value chain," explained Ramsey.

The problem, according to Ramsey, is that governments around the world are stuck on the second wave of digital transformation. He mentions how the city of Hong Kong has 90 percent of its services online, but only a 10 percent adoption rate. "The problem is the lack of integration among services," he said. "It's very hard to integrate services in the public sector."

In order to reach the third wave of digital government, you have to change both processes and culture.

Setting aside culture for the moment, Ramsey explains that process change can occur when you optimize the organization's infrastructure so that it can better serve the customer. "Now you can probably save 15 to 20 percent by outsourcing and optimizing infrastructure. The problem is that government doesn't put that savings back into the operations that drive government. We're saying, take some of those savings from outsourcing and reinvest them in back office processes, such as HR, finance and procurement."

If the public sector wants to get past the second wave of digital government and on to the third, they need to integrate programs in the back office, argues Ramsey. But integration won't occur without an optimized infrastructure. That's where IBM's BPTS comes into play. The computer giant has thousands of workers skilled in streamlining an organization's infrastructure and in core back-office business competencies, such as HR, finance and procurement.

The number of IBM employees focused on business rather than technology has grown from 3,500 in 2002 to more than 50,000 today, according to published reports, and the numbers are growing at more than 10,000 a year.

In the private sector, IBM has used its expertise about finance systems to help Marathon Oil Corp. trim the time it takes to complete financial processes. Dun & Bradstreet has turned over some of its credit report data processing

to IBM; and the Mayo Clinic has an agreement with Big Blue to work with its clinic researchers to change the way Mayo manages patient care and research.

Not surprisingly, competitors are entering the business outsourcing market, which is expected to grow 8 to 11 percent annually, according to research firm IDC. HP, EDS and Accenture have all stepped into the business performance transformation field in their own way.

Ramsey believes state government is the most determined entity in the public sector willing to consider big change, such as outsourcing infrastructure optimization and HR, partly because the severe budget cutbacks in the past few years have forced them to look at all options for cutting costs while increasing efficiency. Elsewhere around the globe, the United Kingdom and Canada stand out as innovators when it comes to business performance transformation.

But Ramsey is concerned about the other kind of change that must take place in the public sector if government transformation is to occur. Altering cultural attitudes and beliefs in the workplace requires leadership. "The government CEO, the elected leader has to lead. He or she can't make a speech about change and then delegate it," he said. "The public sector is facing lots of rising cost challenges with a flat budget. Government can no longer do small, incremental changes. They have to be more aggressive and bold about changing."