Market dynamics and Tieto value creation in 2012 2016 Kimmo Alkio
Macro trends Social Changing demographics Data explosion Social networks Technology Mobility Cloud Big data Economic Efficiency Globalization Ecosystems
IT industry drivers Social Technology Mobility Cloud Big data Enterprise mobility & BYOD Cloud adoption Intelligence everywhere and predictive analytics Changing demographics Data explosion Social networks Building information society Power and value of information Social enterprise From information and automation to innovation and business transformation Economic Efficiency Globalization Ecosystems Efficient business transformation Unlimited global opportunities Ecosystems as innovation engine
Tieto driving customers transformation Competitive Edge Expanding to provide full life-cycle IT services Strong customer base ~800 Outsourcing- Software-Integration Realize full stack opportunity with CSI MS automation and efficiency New technologies and alliances Reinforce industry expertise Industry and customer process insight Industry products and IPR Industry specific solution packaging Transformation services Drive new business models e.g. SaaS Focus on selected markets Nordics as core Global delivery scale Leading PES capabilities Growth in Nordics and selective expansion Accelerate global delivery Expand PES global customer base
Attractiveness of Nordics Worlds 8th largest economy 25 million inhabitants, GDP growth 1.5% Stable financial, political and social environment IT market size EUR 40 billion Educated society Technology innovation and adaptation All Nordic countries among top 10 in internet penetration Long track record of technology innovation Appetite for embracing new services and technologies Customers value a trusted local partner Demand for local culture and regulatory knowledge Emphasize social responsibility and transparency Customer process knowledge as a pre-requisite for IT transformation partner 2011 Tieto Corporation
Market drivers and opportunities
Market drivers Data doubles every 40 months 50 billion devices connected by 2020 New offering CAGR +25% Need for predictive analytics to become critical success factor Big Data Cloud 2010 2015 2020 Basic offering CAGR -1 to -3% 500% wireless penetration is possible Mobile connected devices to double by 2020 Mobility Social Media 85% said Internet has positive effect on their social world Online and offline worlds will accelerate changing behavior Highly engaging virtual social world will dominate future workplaces Multiple sources
Market drivers and opportunities Predictive analytics for transaction centric industries Unstructured data as a source of innovation Modernizing information management Big Data Cloud Proactive transformation with large infrastructure customers Industry specific cloud services (e.g. Lifecare) Cloud integration as value driver New services and user experiences across all industries Smart devices and applications with global PES customers Mobility Social Media Eureka as enterprise and public crowd-sourcing solution (e.g. City of Helsinki, OP-Pohjola) Enterprise transformation with Social media and traditional intranet
Tieto s full IT life-cycle services Business logic Value creation Tieto enablers Software products Consulting and system integration Continuous services Software & industry expertise Competences Solution packaging Repeatability Scale, quality and automation Industry IPR Industry process insight Innovative delivery models CSI Service practices Reusable solution components Transformation consulting Managed Services practices Infrastructure as a Service Application management
Tieto s product and service offering Product Engineering Services Network Infrastructure Solutions Connected Life Solutions Financial Services Software products Capital markets Abasec TCM Probroker Transaction banking PaymentSuite CardSuite CBS ebanking Insurance Life insurance Public, Healthcare and Welfare Software products Healthcare and Welfare Lifecare Manufacturing, Retail & Logistics Software products Forest, pulp and paper TIPS TIPP Manufacturing Lean Telecom, Media and Energy Software products Oil & Gas Energy Components Utilities CAB / WMS AMI Forum Powergrid / NAM E3 Consulting and System Integration Managed services Business & Transformation Consulting Front-end and Analytics Enterprise applications IT Solutions and System development Cloud services Application Management Customer specific infrastructure Services Shared Infrastructure Services
Proven expertise in Nordic industries
Value creation in 2012 2016
Value creation and Total shareholder return in 2012 2016 CSI Shareholder value Growth Profit improvement Cash flow Transformation services Selective expansions PES Competitive cost structure Business mix Quality Offshoring and automation Healthy operative cash flow Optimal capital structure Attractive dividend yield TSR above peer group average* *EPS growth and TSR as targets in the Long-Term Incentive Programme 2012 2015
Value creation Simplification Customer value Future growth Simplified organization, practices and cost structure Optimizing for profit outside Nordics Initiate transformation programs with key customers towards new full life-cycle services Global delivery and MS automation Launch focused industry repeatable services (cloud, analytics) Enable PES to pursue global opportunities Continue driving to a benchmarked cost structure Consider bolt-on acquisitions Expanding transformation services to the 800 customer base Expand customer base with new services Global delivery Identify future markets for growth and launch spearhead industry packages PES global expansion Prepare organization for possible M&A and integrations Launch repeatable full life-cycle IT services in future growth markets Global delivery PES recognized as a global player Expand in new markets for IT services 2012-2013 2014-2015 ~2016 2010 Tieto Corporation Offsetting factors Inflation Price erosion Revenue cannibalization Macro economic uncertainty Inflation Price erosion Revenue cannibalization Macro economic uncertainty Saturation of outsourcing Inflation Price erosion Revenue cannibalization Macro economic uncertainty Competition
This provides an opportunity for revenue growth and improved profitability Tieto focus EBIT % Tieto 2012 Tieto target profitability 2016 Average market growth Tieto 2016 Transformation and CSI MS Automation Competitive cost structure PES global expansion Global delivery Growth Size of the bubble represents revenue in 2012 and 2016 (M )
Managed Services Consulting and System Integration Application Management CSI 2016 Tieto target profitability 2016 MS 2016 CSI 2012 Tieto target profitability 2016 MS 2012 Average market growth Consulting and integration Average market growth Industry Products Product Engineering Services IP 2016 Tieto target profitability 2016 IP 2012 Tieto target profitability 2016 PES 2016 Average market growth PES 2012 Average market growth
Our long-term journey proceeds as planned Transition to industry driven structure Accelerate Consulting and System Integration expansion and Managed Services automation Implement competitive cost structure Focus on 2012 operating plan 2015-2016 Focus on future growth 2013-2014 Expand service scope 2012 Build the foundation Seek growth in and beyond core markets Consider strategic inorganic opportunities Expand full life-cycle IT services in core markets Qualify and build future core markets Product Engineering Services pursues growth globally
Focus on successful strategy execution Leading IT transformation partner in Nordics Full life-cycle IT services with industry and customer process insight Innovation and technology adaptation High quality and repeatable solutions driving future growth Expansion to new markets and PES globally Attractive shareholder value
Organization structure CEO Kimmo Alkio Product Engineering Services Antti Vasara Financial Services Per Johanson Public, Healthcare and Welfare Satu Kiiskinen (as of 1 Jan 2013) Manufacturing, Retail and Logistics Ari Järvelä Telecom, Media, Energy and Utilities Eva Gidlöf New Markets Kolbjørn Haarr Consulting and System Integration Henrik Sund Managed Services Ari Karppinen CFO, Lasse Heinonen HR, Katariina Kravi