China Global Delivery Center

1.0 Executive Summary

The China Global Delivery Center ("GDC" or "the company") is IBM's second largest global delivery Center worldwide, and is part of the larger Global Business Services ("GBS") business unit primarily focusing on providing clients with professional consulting services in the areas of infrastructure and business transformation services ("BTO"). With five locations in China, the GDC is a strategic center for IBM's BTO service line located in the Asia-Pacific region providing multilingual services for customers worldwide. These consulting services provide industry expertise by partnering with clients and offering a range of technology solutions that enable companies to effectively manage the complex business issues that arise in their operations . The Business Process Outsourcing ("BPO") and transformation services include solutions for the customer relationship management ("CRM"), finance and accounting ("F&A"), human resources ("HR"), procurement, and supply chain management ("SCM") processes as well as management consulting and data analytics.

IBM has significant experience in delivering these services worldwide; however, China is considered a growth market for the company. In the past, the China GDC focused on establishing its reputation by transforming back office functions for clients operating globally allowing for customer to outsource certain functions to lower overall operating costs. The GDC has been increasingly diversifying its services by providing highly skilled consultants to assist clients with strategic decisions in their business processes including information technology ("IT") and management consulting.

China GDC will leverage its core competencies and distinguish itself by developing strong relationships with new and existing clients by delivering value added propositions and solutions. To this end, we would recommend a product development and market development strategies to increase revenue by 10% and maximize profit in the region by focusing associate utilization at or above 85%. The GDC will target new clients with its BPO service and target its existing clients with cross-selling opportunities for higher valued consulting engagements.

This strategy will solidify the company's brand equity by creating true value for customers in lowering overall operating costs which in turn will free up capital that can be reinvested into their business. According to a Plunkett Research study there is a positive outlook for consultancies focusing on projects that clearly reduce business costs and enhance operating ratios in a reasonably short period of time will find a ripe corporate market (such as consultants who focus on cash flow enhancement, supply chain efficiency and manufacturing efficiency) . The GDC is in a very favorable position as its strategy is to offer state of the art process improvement enhancements to lower overall costs, increase operating margins, and provide higher valued consulting services as customers consider global expansion.

2.0 Situation Analysis

2.1 Market Summary

2.1.1 Market Demographics

Outsourcing is a service model where business delegates non-core functions to external service providers, allowing them to be more efficient at their core competencies. Outsourcing stems from the economics of specialization and economies of scale that enable service providers to perform functions more efficiently and at a lower cost than their clients.

Over the years the outsourcing model has gained credibility as service providers have expanded their capacities and technology has allowed for remote processing. With the introduction of "the Cloud" and adoption of cloud computing, this trend will continue to increase and accordingly service providers have scaled their capacities and offerings as the functions being outsourced have moved up the value chain. As technology and software have evolved, outsourcing has expanded into more sophisticated territory, and companies are increasingly contracting outside firms to reduce the administrative burden of keeping up with the changes.

After decades of specializing as a computer manufacturer and provider of computer-related services, IBM began expanding its services offerings from the technology hardware to business outsourcing and consulting by acquiring the consulting practice from PricewaterhouseCoopers in 2002 . IBM began off-shoring services to India as a way to reduce costs and add value for its clients. Over the past decade IBM has continued this expansion approach by establishing over 50 delivery centers globally. IBM opened its GDC in China in 1999 and is now IBM's second largest delivery center worldwide.

2.1.2 Market Needs

One of the largest deterrents to the outsourced model is cost. Price oriented customers are more concerned with the rate per hours and not the intangibles that can create value. However, as market conditions began to turn, companies began to switch to a solution oriented mindset and the need to reduce cost and become more efficient became more prevalent.

Business process vendors like IBM have progressively proven that value is more than cost alone. The result has been the expanding service offering to vendors, including strategy, process improvement consulting, process optimization, infrastructure, software implementation, data analytics and efforts to provide these service "solutions" instead of simple transaction-based processes.

In a 2008 survey of companies engaging in outsourcing, the result indicates "Cheap" is clearly no longer the dominant descriptor of what companies are looking for in an outsourcing partner . Business partners are more concerned with:

 Accessibility to qualified and skilled manpower resources. Qualified labor is essential to the success of outsourcing operations, and companies seeking suppliers will want assurances that there is sufficient availability of qualified associates on an immediate basis.

 Proven delivery capabilities and experience. Companies are generally risk averse, and given the opportunity will adopt a "follow the leader" approach to major investment decisions. Outsourcing vendors that have a demonstrated history of successful delivery will automatically rise to the top of decision makers' lists.

 Optimized labor and other cost factors. Labor, communications and travel related costs remains a very important consideration, particularly with the advent of a global economic slowdown.

2.1.3