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Market dynamics and Tieto value creation in 2012–2016Kimmo Alkio
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nMacro trends
Social
Changing demographicsData explosionSocial networks
Economic
EfficiencyGlobalizationEcosystems
Technology
MobilityCloud
Big data
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nIT industry drivers
Social
Changing demographicsData explosionSocial networks
Economic
EfficiencyGlobalizationEcosystems
Technology
MobilityCloud
Big data Efficient business transformation
Unlimited global opportunities
Ecosystems as innovation engine
Enterprise mobility & BYODCloud adoption
Intelligence everywhere and predictive analytics
Building information societyPower and value of
informationSocial enterprise
From information
and automation to innovation and
business transformation
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Competitive Edge
Strong customer base ~800
Outsourcing-Software-Integration
Industry and customer process
insight
Industry products and IPR
Nordics as core
Global delivery scale
Leading PES capabilities
Tieto driving customers’ transformation
Expanding to provide full life-cycle
IT services
Reinforce industryexpertise
Focus on selected markets
Realize “full stack”opportunity with CSI
Industry specificsolution packaging
Growth in Nordics and selective expansion
MS automation and efficiency
Drive new business models e.g. SaaS
Expand PES global customer base
New technologies and alliances
Transformation services
Accelerate global delivery
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nAttractiveness 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
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
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
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nMarket drivers and opportunities
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Market drivers
2010 2015 2020
New offering CAGR +25%
Basic offering CAGR -1 to -3%
Data doubles every 40 months
50 billion devices connected by 2020
Need for predictive analytics to become critical success factor
Mobility
Big Data Cloud
Social Media
500% wireless penetration is possible
Mobile connected devices to double by 2020
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
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Market drivers and opportunities
Mobility
Big Data Cloud
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
• Proactive transformation with large infrastructure customers
• Industry specific cloud services (e.g. Lifecare)
• Cloud integration as value driver
• Predictive analytics for transaction centric industries
• Unstructured data as a source of innovation
• Modernizing information management
• New services and user experiences across all industries
• Smart devices and applications with global PES customers
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Tieto’s full IT life-cycle servicesBusiness logic Value creation Tieto enablers
Consulting and system integration
CSI Service practicesCompetencesSolution packaging
RepeatabilityReusable solution components
Transformation consulting
Software products
Software & industry expertise
Industry IPR
Industry process insight
Innovative delivery models
Continuous services
Scale, quality and automation
Managed Services practices
Infrastructure as a Service
Application management
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Software products
Utilities
Oil & Gas
Software products
Manufacturing
Forest, pulp and paper
Software products
Healthcare and Welfare
Software products
Insurance
Transaction banking
Capital markets
Managed services
Financial Services
Public, Healthcare and Welfare
Manufacturing, Retail & Logistics
Telecom, Media and Energy
Consulting and System Integration
Business & Transformation ConsultingFront-end and AnalyticsEnterprise applicationsIT Solutions and System development
Shared Infrastructure Services
Application ManagementCloud services
Customer specific infrastructure Services
TCM
eBankingCBS
Life insurance
CardSuite
Probroker
Abasec
PaymentSuiteLean
TIPPTIPS
Powergrid / NAM
CAB / WMS
AMI
Energy Components
ForumLifecare
E3
Tieto’s product and service offeringProduct EngineeringServices
Network InfrastructureSolutions
ConnectedLife Solutions
© 2012 Tieto Corporation
Proven expertise in Nordic industries
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Value creation in 2012–2016
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Value creation and Total shareholder return in 2012–2016
TSR above peer
groupaverage*
CSI
Competitivecost structure
Healthy operative cash flow
Selectiveexpansions
Quality
PES
Business mix
Growth
Profit improvement
Cash flow
Shareholder value
Attractive dividend yield
Optimal capital structure
Transformationservices
Offshoring and automation
*EPS growth and TSR as targets in the Long-Term Incentive Programme 2012–2015
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Offsetting factors
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
• Inflation• Price erosion• Revenue cannibalization• Macro economic uncertainty
2012-2013
• 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
• Inflation• Price erosion• Revenue cannibalization• Macro economic uncertainty• Saturation of outsourcing
2014-2015
• 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
• Inflation• Price erosion• Revenue
cannibalization• Macro economic
uncertainty• Competition
~2016
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nThis provides an opportunity for revenue growth and improved profitability
Growth
Tieto focus
•Transformation and CSI•MS Automation•Competitive cost structure•PES global expansion•Global delivery
Size of the bubble represents revenue in 2012 and 2016 (M€)
Tieto target profitability 2016
Average market growth
EBIT
%
Tieto 2012
Tieto 2016
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Tieto target profitability 2016
Average market growth
MS 2012
MS 2016
Managed Services
Tieto target profitability 2016
Consulting and integration
Application Management
CSI 2012
Consulting and System Integration
Tieto target profitability 2016
Average market growth
IP 2012
IP 2016
Average market growth
Tieto target profitability 2016
PES 2012
PES 2016
Product Engineering ServicesIndustry Products
Average market growth
CSI 2016
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nOur long-term journey proceeds as planned
2012Build the foundation
2013-2014Expand servicescope
2015-2016Focus onfuture growth
• Transition to industry driven structure• Accelerate Consulting and System Integration
expansion and Managed Services automation• Implement competitive cost structure• Focus on 2012 operating plan
• Expand full life-cycle IT services in core markets• Qualify and build future core markets• Product Engineering Services pursues growth globally
• Seek growth in and beyond core markets
• Consider strategic inorganic opportunities
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Leading IT transformation partner in Nordics
Innovation and technology adaptation
Full life-cycle IT services with industry and customer process insight
High quality and repeatable solutions driving future growth
Attractive shareholder valueExpansion to new markets and PES globally
Focus on successful strategy execution
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Organization structure
New MarketsKolbjørn Haarr
Financial ServicesPer Johanson
Public,Healthcareand WelfareSatu Kiiskinen(as of 1 Jan 2013)
Manufacturing,Retail andLogisticsAri Järvelä
Telecom, Media, Energy and UtilitiesEva Gidlöf
CFO, Lasse Heinonen
ProductEngineeringServicesAntti Vasara
CEOKimmo Alkio
Consulting and System IntegrationHenrik Sund
Managed ServicesAri Karppinen
HR, Katariina Kravi
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