CFO’s Sharing: Is this possible to turn technology Capex to Opex for Growth Agility?

1. IBM Global Technology Services Journey to the Future Funding Innovation for Growth Adesh Mathur, CPA, CMA CFO, Global Technology Services IBM Greater China Group

2. IBM Global Technology Services Digital invaders with disruptive business models are reshaping industries. The pressure to innovate has never been greater, nor managing the risks more difficult. The top CFOs are rising to the strategy development with CxOs, funding innovations with flexible financing models and they help the board room to accelerate digital transformation for growth in the age of disruption. Be an Innovative CFO, a Progressive Thinker.

3. ©2016 IBM Corporation3 For Global C-suite Study we surveyed business leaders, Chief Executive Officers (CEOs) Chief Financial Officers (CFOs) Chief Human Resources Officers (CHROs) Chief Information Officers (CIOs) Chief Marketing Officers (CMOs) Chief Operating Officers (COOs) 818 643 601 1,805 723 657 ©2015 IBM Corporation3 including 643CFOs from 54 countries

4. ©2016 IBM Corporation4 “The ‘Uber syndrome’ – where a competitor with a completely different business model enters your industry and flattens you.” CIO, Transportation, United States What’s putting the world’s top executives on edge?

6. ©2016 IBM Corporation6 IBM Global Technology Services Total CEO CFO CHRO CIO CMO COO 70% 60% 50% 40% 30% 20% 10% 0% Industry convergence The “anywhere” workplace Rising cyber risk The redistribution of consumer purchasing power The sustainability imperative Alternative finance and financing mechanisms The sharing economy Top trends to impact business (in 3 to 5 years) CFOs, like other CxOs, expect industry convergence to have the biggest impact on their business 67% 47%48% 29% 22% 46% 24%

8. ©2016 IBM Corporation8 IBM Global Technology Services External forces impacting the enterprise (in 3 to 5 years) For the first time, the entire C-suite selected technology as the main game changer Technology factors Market factors Regulatory concerns Macro- economic factors People skills Socio- economic factors Globalization Geopolitical factors Environmental issues 72% 71% 55% 51% 48% 34% 31% 31% 27%

9. ©2016 IBM Corporation9 ©2016 IBM Corporation9 “It’s very hard to evaluate the impact of new technologies. We worry that we might miss a disruptive game-changer.” Dr. Stefan Mäder, CFO, SIX, Switzerland

11. ©2016 IBM Corporation11 IBM Global Technology Services Agility for Growth Can the existing technology adapt to the constantly changing business needs? Technology Investment Strategy Does the investmentalign with business growth? Considerations on achieving business objectives Operational Effectiveness Are technology maintenance/ ongoing operation resources and costwell managed? On-premises Infrastructure Data Center for DR x On-premises Infrastructure (Core Applications) Cloud An Air Cargo Logistics Operator in Hong Kong enables Agility with Innovationfor the Future Business • Ensure Agility and Flexibility for business growth and faster time to market • Shift to a predictablyOPEX modelto align cash flows better with business growth • Maintain the better service level, reduce TCO by 20% and on site IT operation resources Why change? Technology Transformation • Replaced the static platformwith a flexible and agile one • Eliminated the high operating expensesand resourcesassociated with maintaining the data center • Run a vendor-managedoperational model Change to Pay-per-Consumption Model based on financial analysis What did they change?

12. ©2016 IBM Corporation12 IBM Global Technology Services Agility for RapidExpansion Is the existing IT resources capable to build and run a new IT infrastructure for the new dealershipbusinessin 3 months required by the M&A deal? IT Resources and skills Are the existing IT resourcesand skills adequate to manage the ongoing operations and supportthe future expansion plan? Considerations for achieving business objectives A Premium Automobile Dealer based in HK meets the Stringent Requirements of New Dealership for Business Expansion in UK Ensure Agility for RapidExpansionand faster time to marketto grasp the new opportunities Leverage Managed Optionto source additionaltechnology resources and skills required urgentlyto supportthe additional500 users in 12 office locations in 2 UK cities from Hong Kong headquarter Why change? Mindset Change Open to new delivery modeland adoptcloud as the most suitable one to complete the transition in 3 months, instead of the traditional way which takes more than 6 months New Sourcing Options Evaluated the value of in-house vs managed options in consideration of resourcesand financial constraints on expansion plan What did they change? IT Resources based in HK HQ supporting WW IT operations New Business in UK 500 users, 12 offices, 2 cities

13. ©2016 IBM Corporation13 Yet, do you still believe….. Technology is a capital investment with no measureable impact on revenue Reality: Technology can accelerate the digital transformation and support innovation to grow revenue CIO is the provider of infrastructure Reality: CIO emerged as a strategic partner for development of business strategy and plans, and the provider of technology services to address the business challenges Public cloud is the only cloud and its biggest benefit is cost reduction Reality: Enterprises also use private clouds within their organizations. More are deploying hybrid IT model across public and private clouds, and legacy systems. 1 2 3

14. ©2016 IBM Corporation14 Take the long view Focus on the strategic implications of industry convergence and digital transformation, scan the entire scene, look for new opportunities to expand 1 What to do

15. ©2016 IBM Corporation15 IBM Global Technology Services 8% More digital, virtual interaction +19% 201320% 81% 68% 2015 More face-to-face interaction 21% More focus on customers as individuals +22% 2013 no change 33% 66% 54% 2015 More focus on customers as segments CxOs increasingly leverage new technologies to focus on customers as individuals Business landscape change (in 3 to 5 years) no change The Way to Engage with Customers

17. ©2016 IBM Corporation17 IBM Global Technology Services 10% 12% Technologies revolutionizing business (in 3 to 5 years) The technologies that CFOs expect to revolutionize business tomorrow are already in play today Cloud computing and services Mobile solutions Internet of Things (IoT) Cognitive computing Advanced manufacturing technologies New energy sources and solutions Bioengineering Man-machine hybrids 63% 61% 57% 37% 28% 23% 60% 52% 52% 36% 14% 11% 38% 26% All CxOs CFOs

18. ©2016 IBM Corporation18 IBM Global Technology Services 24% CxOs see a need to collaborate more, with more external parties, for innovation More external innovation +15% 2013 no change 38% 54% 47% 2015 More internal innovation “One of my priorities is making alliances with companies that have greater technological know-how than we do.” Rodrigo Castillo, CFO, Comercializadora Mayorista del Golfo, Mexico Business landscape change (in 3 to 5 years) Source of Innovation

19. ©2016 IBM Corporation19 Find out the one suit you best Analyze the financial implications on investment, determine the most appropriate operational and financing models, make sure to align your financial planning with strategic and operational planning 3 What to do

20. ©2016 IBM Corporation20 IBM Global Technology Services Source of new skills and capabilities 86% 77% 77% 41% 20% Working with contractors,consulting firms or specialist agencies/outsourcers Partnering with other enterprises to tap their expertize Hiring in new employees with the skills you require Investing in automated systems or services (e.g. robotics) Soliciting help from customers and rewarding them for their assistance The vast majority of CIOs aims to acquire new skills and capabilities by forming new partnerships and hiring new employees

22. IBM Global Technology Services

CFO’s Sharing: Is this possible to turn technology Capex to Opex for Growth Agility?

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