Tieto strategy 2015 Delivering best customer experience and growth Capital Market Day 25 November 2010 Helsinki, Finland Hannu Syrjälä President and CEO
Content Markets Management agenda in 2010 how did we succeed? Strategic focus areas how do we position ourselves How to create best service experience Growth enabler Examples of offerings Way forward
Markets and customers: Back-end loaded year and slow decision making Modest growth for 2010 Full-year growth of IT services expected to be at the lower end of the 0 2% range Outsourcing of ICT infrastructure and application management as well as BPO* are the strongest growth areas in 2010 Outsourcing trend is extending from large to small and medium-sized companies Increased offshoring puts pressure on prices Gradual growth in sales to key customers Modest growth evident in most industries Finance, industrial manufacturing, media and telecom sectors most keen on investing Productivity and efficiency improvements are the main investment drivers Growing interest in cloud services and buying IT as a service 3
Market growth estimates 2009 2014 Positive outlook but is the world economy supporting this? Source: PAC Market Figures, Software and IT Services, IT Services total, October 2010 4
Outsourcing continues to grow in the Nordics Tieto s strong hold In the Nordics, highest growth expected in outsourcing services Application and infrastructure management accounts for around 50% of Tieto s net sales Tieto focuses on outsourcing in core business processes EUR billion 3.6% CAGR for 2009 2013 7.0% Source IDC, BCG analysis 2010-09-28
Management agenda for 2010 strong execution in difficult markets Target Result Comment 1. Manage profitability Leaning the organization and cost base Focus on Sweden and International 2. Focus on cash flow and strong balance sheet 3. Increase efficiency and productivity Offshore target 35% in 2010 4. Execute portfolio adjustments 5. Organic growth 6. Growth investments Improved utilization, investments in growth Operating profit in Sweden up EUR 33 million, actions ongoing in International 9-month cash flow EUR 70.5 (54.7) million Gearing 17.5% Offshore rate up, number of employees increased by 35% Divestments in France and the USA 9-month net sales down by 2% Good order intake in Q2 and Q3 New data centres ready Investments in Russia
Strategy 2015
Strategic journey continues From Verticalized Custom IT Company 2. phase 2010 2015 To A leading service Integrated integrator Business creating Solution the best Partner service experience in IT. Drive more differentiation, more specialized offerings and competences Specialization and differentiation Tieto 2007 1. phase 2008 2009 Strong operational focus on improving quality and efficiency 8 Industrialization: cost, quality
Strategic choices Leadership in Northeast Europe, focused global growth Best IT Service Experience Services Consulting, system integration, outsourcing and product engineering (R&D) Industry and Enterprise Solutions Core business processes and selected spearheads Industries Broad industry offering focused on service industries Customers Global customers, large and medium-sized local and regional companies Markets Northeast Europe; focused elsewhere
Tieto s position in Northeast Europe Strong position, room for growth Northeast Europe represents EUR 20 billion opportunity IT services market EUR billion Sweden 4.8 Denmark 4.2 Finland 3.0 #4 #1 Norway 3.0 8% 25% Poland 2.2 Russia 1.8 Growth markets: Poland and Russia #1 in the Nordics with 7.8% market share Main competitors: Accenture, CapGemini, EDB-Ergo, HP, IBM and Logica Applications and infrastructure management account for 50% of the Nordic IT services market Good demand for Tieto s industry expertise in growth markets
Tieto s strengths build strong foundation for growth 1. Deep technology know-how and strong infrastructure platform Knowledgeable people Modern technology Wide operations capabilities Outsourcing 45 % IT project 20 % Software solutions 15 % 2. Solid financial position Long-term reliable partner for customers Ability to invest in innovations and service development Strong balance sheet Product engineering 20 % 3. Advanced Global Delivery Model 1/3 resources in delivery centres Established GDM process Rated among the top GDM practises 4. Strong customer relationships Long history Customers business knowledge Strong customer interface Experience Expertise Best service experience Capabilities Customer relations
Latest data centre investments Energy-efficient platform Tullinge, Sweden EUR 8.5 million 4 000 m² 2 13 MWh Green energy solutions: district heating and virtualization Espoo, Finland EUR 18 million 6 000 m² 2 15 MWh Green energy solutions: district heating and virtualization Moscow, Russia* EUR 20 million 1 600 m² 2.5 5.2 MWh Virtualization The most modern data centre in Russia Full scale cloud services * Joint venture 1. Deep technology know-how and strong infrastructure platform 12
Quarterly development Net sales and EBIT Gross margin and expenses/fte MEUR Rolling 12 mth gross margin/average FTE Rolling 12 mth expenses/average FTE 95 90 85 80 75 % MEURQ3/09 Q4/09 Q1/10 Q2/10 Q3/10 Cash flow Gearing MEUR % 2. Solid financial position 13
35% offshoring target reached ahead of plans Target for 2010 3. Advanced Global Delivery Model 14
Buzz around new services key driver for our customers businesses Functionality 4. Strong customer relationships Usability Excitement!
Combining technology and customer know-how key for our growth Market view IT as a Service Cloud services Cloud consulting enables customers cloud adaption in a secure way e-invoicing, digitalized business transactions in the network Testing as a Service speeds up time to market 20% of IT market in 2015 Tablet and smartphone solutions Forerunner in cross-industry Mobile Solutions for enterprises Smart applications & business acceleration solutions Co-Innovation Services & Mobility for branding and marketing Tablet units up >50% in 2011 Business Intelligence Enabling customers to manage mission critical business information Full scope incl. Sustainability Intelligence, Business Process Performance Services, BI optimization, Enterprise Data management Double digit growth forecast 16
Innovations lead the way Examples of new solutions Sustainability Intelligence iphone and Android apps Mobile Ticketing iprovisio in ipad Reporting and analysing a company s sustainability performance First Nordic Mobile insurance service solution targeted especially at car owners Integrates existing travel card into the user s mobile phone Access to ERP system with the ipad client during patient rounds. 17
Going forward
Where can we grow Focus on profitable growth Markets Customers Services Large market opportunity Russia market making Poland market making Sweden share growth Expertise in service industries Government and public Healthcare and welfare Energy and utilities Financial services Telecom, media and entertainment IT as a Service cloud services Outsourcing Spearhead offerings Mobile services everything goes mobile! Tieto growth ambition > Market growth
Focus on execution solid foundation in place for growth Trends Rebalancing economy and new competition IT as a Service becomes a norm Changing customer demand Strategic intent and themes A leading service integrator creating the best service experience in IT IT as a service Service experience Targets Market leadership Growth EBIT > 10% Preferred brand Employer of Choice Vision Building leaders of the digital world a world of better service, higher productivity and new opportunities Innovations co-created in networks Values We work together. We care for our people & customers. We are committed to quality. We learn and grow.