IT Services Business Growth Strategy
October 13, 2010 Takuji Tomiyama IT Services Business Unit Senior Vice President and Member of the Board NEC Corporation To be a leading global company leveraging the power of innovation to realize an information society friendly to humans and the earth
NEC Group Vision 2017
Page 2 Content
▐ １．Business Outline
▐ ２．Basic Direction of Business Development
▐ ３．Core Business Strategy ３－１．Cloud Services Business ３－２．International Business ３－３．Initiative for improving profitability in System Integration
▐ ４．Towards V2012 target
Page 3 The Mission and Position of NEC’s IT Services Business
▐ NEC provides integrated IT services covering everything from consulting through to System Integration, Operation, Maintenance and Outsourcing About 37,000 employees (including all group companies) and 29 Japanese subsidiaries and 28 overseas subsidiaries
Segment IT services Platforms Carrier Social Personal Others Networks Infrastructure Solutions
Sales business unit
Overseas sales business unit P S C I P T er o l arr a
N c S t s i f on E er a i o er l C r
v N a I m
En i n N l c E
f S e Organization e r C O s o a t B B B B B er w T s t l h u u u u u u t g o r er O s s s s s ti y u r i i i i i ons ks
n n n n n c K s D t e e e e e u I e ss ss ss ss ss N r v e
i U U U U U c e n n n n n s i i i i i t t t t t
NEC Soft, NEC System Technologies System development Key NEC Fielding Maintenance subsidiaries NEC Nexsolutions SME market, outsourcing ABeam Consulting Consulting
Page 4 Earning Trends for the IT Services Business
▐ Sales shrank during FY2009 due to a general decline in IT investment. In FY2010, NEC is aiming for increased revenue by working with our customers as they make investments for future growth. ▐ Operating profit increased during 2009 due to systematic reductions in fixed costs. In FY2010 NEC is aiming to increase profit through SI reforms.
Sales Operating profit
(¥100 million) Contribution to total NEC Contribution to total 9338 Group sales in NEC Group operating 2010: 27% profit in 2010: 56% 560 8900 -7.2% IT services are 532 +5.3% 8663 a key pillar of sales 518 +2.7% and profit for the +2.7% entire company
FY2008 FY2009 FY2010 (expected) FY2008 FY2009 FY2010 (expected) * Expected values as of October 13, 2010
Page 5 Sales Composition (1/2)
▐ The business has expanded over a wide range of industries NEC supports the needs of diverse customers as an IT partner
Ratio of sales by industry (FY2009) Examples of systems provided by NEC on a consolidated basis
Private sector demand Public sector/healthcare (manufacturing/Devices/ Public sector/Medicine Finance/Communications/Media Systems for central government Bank settlement systems Distribution/Service) 35% ministries Billing systems for Resident information systems telecommunications carriers 40% Electric medical record systems Systems for broadcasters
Finance/communications/media Manufacturing/Devices Distribution/Services 25% Production management systems Retails systems for stores and Sales management systems head offices Technical information Hotel systems management systems Distribution management systems
Page 6 Sales Composition (2/2)
▐ NEC is a leading vendor in the Japanese IT services sector (the second largest service provider in Japan, and the eighth largest in the world) The drivers of future growth will be overseas operations and the services business 2009 rankings for sales of IT services Ratio of sales by region (FY2009) International: Rank Japanese market Global market Less than 10% 1 Fujitsu IBM
2 NEC HP Domestic 3 NTT Data Fujitsu
4 Hitachi Accenture
5 IBM Japan CSC Ratio of sales by business (FY2009) 6 Nomura Research Institute Lockheed Martin
7 IT Holdings Capgemini Services business: About 30% 8 Canon Marketing Japan NEC
9 Nihon Unisys NTT Data
10 ITOCHU Techno-Solutions SAIC SI business
Source: Gartner, “2009 IT Services Vendor Revenue”, August 20, 2010
Page 7 NEC’s Strengths in IT Services
▐ Strong capabilities in SI (System Integration) and SI reform, acquired through responding to the high expectations of our Japanese customers ▐ Strong capabilities with large-scale Open Mission Critical Systems (OMCS), cultivated by taking the lead in the shift to open standards ▐ Technology assets in IT and networks, covering everything from contact devices and terminals through to cloud-based services ▐ Strong capabilities in creating solutions that anticipate future developments
Finance Communications, Media Manufacturing, Devices Distribution, Services Government, Medical Knowledge and experience of a diverse range of industries Customer assets of 150,000 users
Finance industry: open settlement systems, high-speed real-time processing OMCS Communications industry: billing systems, i-mode gateway systems
System integration and SI reform IT/network technology Quality, cost, productivity, and RFID tags, mobile phones, computers, POS systems, on-time delivery ATMs, energy efficient servers, programmable flow switches
Page 8 ▐ 1. Business Outline
▐ 2. Basic Direction of Business Development
▐ 3. Core Business Strategy 3-1. Cloud Services Business 3-2. International Business 3-3. Initiative for improving profitability in System Integration
▐ 4. Towards V2012 target
Page 9 Mid-Term Market Trends and Business Opportunities
Market trends Business opportunities An accelerating trend for companies to Customers Increased use of cloud services outsource their IT resources Relentless demands for cost reductions Cloud services in mission critical field Customers using clouds to create new businesses Rapid responses to risks and business opportunities
Increased utilization of information Technology Increasing digitization from contact devices Widespread adoption of contact devices, such as Widespread application in social and corporate IC cards, sensors and RFID tags systems Automobiles, homes, shops, medical centers, satellites, etc Service platforms that can quickly process large Evolving networks (NGN, LTE, WiMAX) volumes of information in real time
Markets The base of Economic growth has shifted to Buoyant demand for IT in developing nations developing nations Sluggish growth in developed economies Active investment by local companies, in addition (the New Normal) to investment by companies from developed China and the Asia-Pacific are to becoming one nations huge economic zone Increased demand for social infrastructure
Page 10 Market Trends
▐ Japanese market for IT services ▐ Forecast for the Japanese
Investment trends as the Japanese economy recovers market for cloud services CAGR for 09-15ＣＡＧＲ 2009 to 2015 Year-on-year 10-12 2009 2010 2011 2012 ＋+３５35%％ % change CAGR 2009 is year zero for cloud services Project-Oriented 1.6 1.8 3.0 4.1 3.6 (¥100 million) （SI/Consulting) 25,000 Despite the effects of 23,698 Support & Training -8.8 -4.2 1.7 2.1 1.9 the recession in Japan, the cloud market is expanding Maintenance/ training -5.6 -2.9 -0.9 -0.4 -0.6 20,000
Overall market -3.9 -1.3 1.8 2.5 2.1 SaaS 15,000 Source: Japan IT Services 2010-2014 Forecast Update and 2009 Review by Vertical Segments: First-Half 2010 10,109 ▐ Global market for IT services 10,000 7,442 PaaS Developed nations • Growth opportunities in North America, Western Europe 5,000 3,871 developing nations IaaS Market size in 2014: $666B • China and the Asia-Pacific CAGR for 2009 to 2014: 3.9% region in particular are the key to success 0 Developing nations 2009 2010 2011 2015 Asia Pacific, Central & North America, Middle East, Africa, Eastern Europe Source: 2010 WHITE PAPER Information and Market size in 2014: $162B Source: Gartner "IT Services Market Forecast by Segment, June 2010"” Communications in Japan (MIC) CAGR for 2009 to 2014: 8.9% July 23, 2010
Page 11 Examples of Initiatives for New Market Opportunities Cloud (mission critical business area) ▐ Three cities in Fukuoka Prefecture* NEC is using clouds to provide mission critical systems for local governments (such as resident information systems) * Three local governments in the southern part of the Kasuya region of Fukuoka Prefecture (Umimachi, Shimemachi, Suemachi) TCO is expected to be cut by about 40% through work reforms and using cloud- based services Proactive approach to the market where large expansion ▐ Plurinational State of Bolivia Developing nation is expected in the future NEC has created a large-scale fingerprint matching system to prevent voters from enrolling more than once for the presidential elections NEC has installed three thousand fingerprint registration devices around the country, which have been used by four million voters
Page 12 Basic Policy for Business Expansion
▐ To expand our business by utilizing our relationships with 150,000 customers in Japan NEC will expand its cloud services while still strengthening its core systems integration (SI) business ▐ To accelerate the expansion of our global business by creating services based on our SI industry solutions. NEC will launch five Cloud Oriented Data Centers (CODC)*
Future direction for business expansion Developing five CODCs around the world
Expanding Delivering global China DC industry solutions integration services International Europe DC North where we have a by developing five American DC competitive edge CODCs around Japan DC the world Creating new businesses with a view to further APAC DC rapid progress Improving our Mission critical clouds Domestic core SI business Foundation of Creating new our technology business with our * Our Cloud Oriented Data Centers (CODC) are data centers where a Key source of profits service delivery infrastructure system has been created using a system customers model with a track record of use with NEC’s own mission critical systems SI Services
Page 13 International development of CODC Business
▐ Creating a Global Services Network to deliver cloud services to customers around the world
(1) Providing mission critical systems with a flexible service delivery model - Mission critical service (Mainly with NEC’s SAP infrastructure system) IaaS, PaaS, SaaS (2) Providing a globally consistent service menu and SLA (SLA= Service Level Agreement) (3) Partnerships with major players in each region, such as system integrators, service providers and application providers with large customer bases. (4) Partnerships with global product vendors (CODC infrastructure) (5) Expanding in harmony with the particular features of each region
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Page 14 Business Target
▐ Business driver: Cloud Services Business and worldwide business expansion ▐ Generate profit from System Integration (SI) business. Investment are made for Services Business establishment and business area expansion
FY2012
International SI (International) Approx. 40% Services Approx. 30% Investment for Establishment of Japan Domestic Services Business and business area expansion ¥100B SI (Japan Domestic) FY2010-2012
Page 15 ▐ 1. Business Outline
▐ 2. Basic Direction of Business Development
▐ 3. Core Business Strategy 3-1. Cloud Services Business 3-2．International Business 3-3. Initiative for improving profitability in System Integration
▐ 4. Towards V2012 target
Page 16 Capabilities Demanded in the Cloud Era
Information systems for the cloud era Existing system Service linkage Third party SaaS
Application Application There is a need to link cloud services to existing systems linkage linkage Individual Individual SaaS and third-party services application application (Application service) For organizations such as companies in particular, there
is a demand for highly reliable, high quality systems that Individual utilize OMCS technology platform Cloud infrastructure
Capabilities demanded Process reform consulting, Business relationships cultivated through in the cloud era BPM tools, etc the system integration business, company size and financial strength, etc
Business Partnership consulting capabilities for The cloud Expanding our capabilities working with business is a supporting service customers to create cloud business new businesses contest of total application capabilities Product planning, Service & Sales Structure, Delivery Structure/Operations, methodology The strengths we System integration Technology and know-how cultivated through system integration have developed through Capability to create large-scale, open distributed systems (OMCS), knowledge and the System Integration and operation experiences of customers and industries, application development and project business are a great advantage in the management capabilities, quality, productivity, etc cloud era
Page 17 An Overview of NEC’s Cloud Vision (LCM Service) LCM=Life Cycle Management
▐ NEC supports its customers’ systems over the full lifecycle by continuously providing staged migration from their existing systems over to cloud environments (LCM services) Cloud services cannot be provided without system integration capabilities
Delivering cloud services with life cycle management
Evaluation and Consulting installation, Migration, Operation and integration transition improvement
Staged migration service Continuously operating services
SaaS, mission critical Customer applications business activities Migration App Application App App App App ・・・ App App App App Integration PaaS Service linkage SaaS infrastructure, application development environment Platform IaaS Cloud Data Center Infrastructure (COD infrastructure) infrastructure Customer’s CODC existing system
Organizational structure NEC’s unique system integration technology Service skills and know-how A comprehensive organizational structure SI and OMCS capabilities for integrating Core personnel with special training, for supporting the IT services business, a diverse range of products and services knowledge and experience with IT services including other group companies
Page 18 Developing Cloud-Oriented Service Platform Solutions
▐ Taking the lead in strengthening cloud-oriented initiatives Opened Cloud oriented service platform solutions Announced October April 2009 NEC Cloud Plaza 2009 - The plaza has received visits from Balanced management to overcome adverse economic conditions 1700 people from 550 companies since its opening Requirements Balanced Quickly launching for corporate Lean management - The plaza gives visitors a real sense of the value of management management new businesses cloud solutions
Requirements for corporate Cost savings Speed Flexibility systems
Cloud oriented service platform solutions
O Consulting services Business process reforms M
C SaaS, collaborative centers,
S Application services individual support
ac
h IT infrastructure services RIACUBE, OMCS infrastructure Customer feedback i e v
e Thin clients, etc
m Platform services - “I was able to understand how standardizing e
n REAL IT PLATFORM Generation2 business activities is essential for clouds”
t Platform products s Cloud oriented data centers - “I felt that clouds are the top-down promotion of management strategies.” NEC’s practical knowledge and experience with management system reforms - “I found the fact that clouds can be installed quickly and at low cost extremely attractive Rapidly expanding 42 lineups 110 lineups when it comes to addressing IFRS service menu (initially) (current) (International Financial Reporting Standard).”
Page 19 NEC’s Track Record with Cloud Services
▐ Sales from cloud services in FY 2009: About ¥10 billion ▐ Providing wide-range of services by types of industry. Expanding services for future needs. (Reference) Key cloud-related press releases : New service announcement : Collaboration Public Sector/Healthcare Finance/Communications/Media Electronic medical records/regional medical solution (July 2009) Telefónica: SaaS project (July 2009) Trials of a diagnosis support system for pathology images at MGH in the US PanelDirector digital signage service (July) (October) Japan Agricultural Cooperatives: JA point system (September) Systematization of health care solutions (October) Tokio Marine and Nichido Fire Insurance: Thin client system (September) GPRIME for SaaS (January 2010) KDDI au: Digital signage experiment in stores (November) Collaboration with Sanyo on a regional medical care solution (June) Telefónica: Cloud collaboration in Central and South America (February Collaboration with SomaLogic: Aptamer business launched (August) 2010) GPRIME for SaaS/Library (August) Shinsegae Group: Digital signage collaboration (May) GPRIME for SaaS/Convenience store document issuing (September) GPRIME at three cities in Kasuya, Fukuoka Prefecture (October) NEC European Cloud Competence Center (May) Educational Cloud “Nao Web Service” (Sennan-shi) (October) Sumitomo Life Insurance Company: Cloud service for asset management (July) K-Opticom Corporation: Advertisement distribution service (September)
Manufacturing and distribution services Common to all industries
EXPLANNER for SaaS ERP service (August 2009) Cloud oriented service platform solution (April 2009) Kirin Breweries: Product information system (September) NEC Cloud Plaza established (October) NeoSarf/EC Large-scale EC service (October) On-site Life Cycle Management (January 2010) Exedy: Cloud oriented accounting service (May, 2010) Expanded SaaS solutions for SMEs (February) Sumitomo Forestry: Cloud service collaboration for the housing industry (July) World Sentosa (Singaporean resort): IT management service (March) Nippon View Hotel: Integrated hotel cloud service (July) KDDI: Mobile cloud service collaboration (May) Consulting service for cloud service applications (July) Neusoft (China): Cloud service collaboration (August) Collaboration with SAP (BusinessObjects) (August) Epson Sales Japan: Mobile cloud verification trial (September) Obbligato III (Cloud version) (October) JR West Trading Procurement System (September) Integrated Construction companies Cooperation of Core infrastructure service (October)
Page 20 Expansion of business Opportunities for future Cloud Business
▐ Use of cloud services among the customers are at planning & end-user related divisions and further down to customers within customers. ▐ For the creation of new business, cooperation/alliance comes from one company/group to single industry and different industry C
u Expansion of s
t New markets
o Cloud business m Creation of e through linking r
Customer in v new businesses a Customer different industries l u New e (BtoB. Then to C) by customers (cross-industry business models clouds)
Better added value for core Planning/ Joint usage businesses Customer relate through industry division standardization Mission critical Cost savings/ (industry clouds) business area improved cash flow
Company/organization Industry Inter-industry Market
Page 21 (Reference) Expanding Cloud Services Opportunity
▐ Establishment of a variety of Cloud Services Platform: Enterprise, Single-Industry, Cross-Industry
Automobile Enterprise Retail Remote Maintenance/Roadside assistance Personalized Navigation support Automobile Company Automobile Cloud （Car Dealer） Sensor
Maintenance Shop Amusement Park
Manufacturing Industry Industry Healthcare Cross Industry Environmental regulation Medical checkup（Preventive care） Health maintenance Health food company Parts Manufacturer B Parts Manufacturer C Parts Manufacturer A Hospital, health clinic Environmental Control Cloud Healthcare Cloud
Enterprise Machinery Manufacturer precision instruments Manufacturer （health care service） Electric Appliance Manufacturer Fitness Club, Esthetic clinic, etc.
Page 22 Future Development of the Cloud Service Business
▐ NEC is focusing on creating and expanding its business in three key areas where we can take advantage of our strengths Mission critical systems, new business creation, and “one stop” services for SMEs
Three key areas NEC’s positioning
Government Large customers SME customers agencies, large SMEs companies (1) (2) (3) One Stop Creating new Mission New businesses Cloud services where I
Application n NEC is focusing Business d Critical i v
Development i du Mission critical Cloud oriented Creation (front and back ends) service platform SaaS for SMEs Systems a
l systems
solutions a pp li ca
ti Front end on systems
s Application/SaaS vendors / S
aa Internet service vendors
S Office Platform vendors automation
Customer Iaas/PaaS (Public) OMCS relationships/ Dealer/ capabilities/ Ubiquitous Sales partner • Cloud oriented service platform solutions Internal initiatives technology (announced April 2009) NEC’s strengths • SaaS solutions for SMEs (February 2010)
Page 23 (Reference) Key Areas from a Cloud Services Layer Perspective
▐ NEC is focusing on cloud businesses with high added value, that include the provision of business applications where we can take advantage of our system integration capabilities Three delivery models: the SaaS model, the Joint Center model, and the Individual Support model Provide IaaS and PaaS models by Private cloud NEC supports its customers’ cloud-era information systems over the full lifecycle (LCM approach)
Focused areas
Using an LCM approach to provide Provide as Private Cloud business application cloud services
Everything up to the application/software level
Up to the platform level SaaS Model Joint Center Model Individual Application development Support Model environment/Shared functions PaaS Infrastructure only (servers and storage solutions) IaaS (HaaS)
Page 24 Mission Critical Systems (1) Mission Critical Systems Private cloud initiatives on a global scale New Business Creation SMEs
▐ Mission critical business area for 120,000 people in the NEC Group, are shifting to cloud-based systems ▐ Reforms to business processes and IT systems can be achieved in a short time, delivering real cost savings. ▐ Provide service to customers by basis of NEC’s know-how and actual results. (incl. global companies) NEC is actively seeking to provide mission critical systems to new customers
NEC Corporation NEC Group NEC Group NEC Group NEC Group Head Office Companies (Japan) Companies (China) Companies (North America) Companies in other region ......
Fully in operation from October Private cloud 2010 Global standard management system: Accounting/Sales/Purchasing Incredibly fast system creation (SAP) Global standards (for about 50 companies, SAP services are ready to be Process provided only in 2+1/2 years) template Cost savings system NEC’s Main Data Center Business processes : -20% Cloud Oriented Data Center IT systems: -20%
Page 25 Mission Critical Systems (Reference) Starting with Consultation New Business Creation SMEs
▐ The challenges our customers face ▐ NEC’s management system reforms
NEC strengthens your ability to support From a presentation on NEC’s management system reforms changes and internal controls Disparate business processes and IT systems NEC creates and applies standard business processes and standard systems at a global level “We have created separate business processes and IT systems for each division at head office, and for each of our affiliates. There is a lot of Code standardization at a global level (27 types) duplication and waste.” (machine tools industry Company) NEC makes management information visible Management information cannot be made visible “We haven’t been able to standardize codes.” + (for accounts, clients, items, etc) (automotive components company) NEC creates mechanisms for Cost blowout complying with regulations and international standards continuous improvement and maintenance “REACH regulations, internal controls, IFRS, … it’s a constant battle.” Stronger IT strategies and governance at the (Beverage company) Struggling with IT governance at a global level group level NEC adopts systems for process and code “Our IT subsidiaries are not very engaged with our overseas ownership at a global level businesses.” - NEC maintains and improves standard business “We need to restructure the roles of our IT organization.” processes and standard code schemas (Electronics company)
Customer comment: “The things we were having difficulties with were exactly the things that NEC was already working on!”
Page 26 Mission Critical Systems
New Business Creation
NEC’s Track Record with Mission Critical Systems SMEs
▐ Exedy Exedy has adopted NEC’s cloud-oriented accounting Exedy Corp.
service for its global accounting system Production management/ Financial accounting Cost price management This has resulted in cost savings while also Sales management/ Cloud oriented Purchasing management… supporting IFRS in anticipation of further accounting service EXPLANNER (SAP based) global development
Cloud oriented accounting service: NEC has already Hosting Service Service provision received consulting orders from several major players, NEC’s Cloud-Oriented Data Center and is in discussions with more than 50 companies
▐ Collaboration between four construction companies Consortium/Joint Development Takenaka (Tokyu Construction, Takenaka Civil Engineering and Tokyu Construction Civil Engineering JDC Corporation Tsuchiya-gumi Construction, JDC Corporation and Tsuchiya-gumi) and Construction NEC is providing mission critical CCoommppaannyy AA CCoommppaannyy BB CCoommppaannyy CC CCoommppaannyy DD systems for the construction and civil TTaasskk TTaasskk TTaasskk TTaasskk engineering industry using cloud services CCoommmmonon AApppplliiccaattiioonn based on a joint industry center model, that has been jointly designed by four CCoommmmonon PPllaattffoorrmm construction companies. Common Center
Page 27 Mission Critical Systems (2) Working with Our Customers to Create New Businesses New Business Creation SMEs
▐ At NEC, we work with our customers as an innovation partner to create new businesses utilizing clouds NECs creates clouds for certain industries and clouds to link different industries (cross-industry clouds) together with our customers NEC provides clouds that take advantage of technical strength in the areas of ubiquitous technology, networks and IT (to make effective use of the information gained from contact devices)
New buクラsinウeドssがe生s eみm出erすgi新ngた fなro事m業 clouds
NEC wo新rksた wなithビ cジusネtomスeモrs デto ルcreをat共e nにew創 buりsi出neすss models
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Page 28 Examples of New Businesses Created in Collaboration Mission Critical Systems New Business Creation with Our Customers SMEs Consider new business model jointly with the customers from planning stage
Residential housing IT vendors JHOP Regional players businesses ▐ Sumitomo Forestry Provide their own - Business production Provision of Use of on- products and services - Cloud service provision community-based demand services Sumitomo services Sumitomo Forestry provides a business CAD vendors Forestry system to residential housing businesses as Business system CAD General builders vendors Order support Major regional construction Material factory a cloud service, based on its own Settlements and budgeting wholesalers NEC Construction CAD Project management Distribution wholesalers knowledge, experience and sales channels. provision companies Company A Distribution Housing company Ordering system Business Design office Company B system provision Construction related sales Company C PR
Home making information Clients NEC cloud infrastructure General consumers
▐ Sumitomo Life Insurance: “Sumisei” Current situation After moving to cloud services
Asset Applications and information system Sumitomo Life Insurance management Securities Loan business activities Information management management SLC management
Asset Infrastructure functions for financial institutions Sumitomo Life is aiming to cut TCO by management Securities Resource operation Information management Hardware NEC about 40%* by converting its asset management Cloud infrastructure
Market and Loan management system to a cloud credit risk management service management 40% Liquidity and Other Financial product lower analysis management TCO Sumitomo Life will also sell this service Sumitomo Life financial to other financial institutions Asset Management Department institutions * Over five years
Page 29 Mission Critical Systems
NEC Provides Cloud Services Platform Based on Our Technical Strengths New Business Creation (Ubiquitous technology and IT and network technology) SMEs
▐ NEC provides platform services from terminals to application platform, centered on a service platform that can process the huge volumes of data collected from contact devices in real time ⇒ Customer construct/use various cloud services on NEC’s platform
Industry applications Product and component Mobile EC Loyalty cards e-Government Medical dose management Electricity control Traffic jam forecasts V SaaS management e r
t AP SaaS AP SaaS AP SaaS i c a l l y Service
Image analysis Information distribution Marketing i n Platforms (ID authentication t infrastructure) Situation analysis Billing, settlement … e g r a t
e Network
d NGN, LTE, WiMax, etc
services s e r v i
c Terminals e s
Contact RFID tags, sensors, cameras, GPS, … devices
Tem- Hu- Accel- People Things Places Information Images Gas Light Pressure Flow peraturemidity eration Real world ID
Page 30 An Example of Vertically Integrated Services: Mission Critical Systems New Business Creation A Mobile Cloud Service SMEs ▐ Jointly developed with KDDI, and is scheduled for delivery by the end of 2010, ▐ By using mobile phone with RFID read-writer, the information required for product management and maintenance inspections can be collected and managed quickly, ▐ NEC is conducting joint trials with Epson Sales (for centrally managing information from the display devices in large electrical appliance stores)
RFID Multi Reader/Writer - Support for dynamic recognition App/SaaS App/SaaS App/SaaS App/SaaS in three frequency bands Implemented as an SDIO card RFID company - Small size and low power mobile phones consumption for mobile use Gateway server ID management server
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Joint trial with ID ID ID ID ID ID ID Epson Sales ID ID Distribution Display device management Route Management, Home delivery Clothing Gas cylinder Fire extinguisher Personnel Management Logistics
Page 31 (3) Initiatives for Small and Medium Businesses, Mission Critical Systems New Business Creation Organizations SMEs
▐ Provide for small and medium businesses, local governments and healthcare services. ▐ Surpass the scale of the IT assets of customers themselves and enjoy the benefits of cloud computing.
Enterprises Organizations
Cloud computing for local Provided to customers in governments a wide range of industries GPRIME for SaaS with a focus on private sector demand NEC Group Medium Medical cloud computing - NEC Businesses MegaOakSR for SaaS - NEXS* ERP as a Service Community healthcare EXPLANNER for SaaS coordination solution Small ID-Link Partners Businesses
* NEC Nexsolutions
Page 32 Mission Critical Systems
Deployment of SaaS Solutions for New Business Creation Small and Medium Businesses SMEs ▐ One-stop provision of a wide assortment of products from infrastructure to front-office and mission- critical tasks ▐ As a form of support for partners, the NEC SaaS Partner Program is operated by NEC Nexsolutions and a 200 person team. Support is provided for the prompt launching, development and sales promotion of partner SaaS businesses. Services Offered CCaateteggoorryy Services Offered 50 lineups KKeeyy PPooiinnttss Portal Frrontt Email Schedule Management Address Book Facility Reservations Introduction to the service and Offffiiccee Web Meetings Knowledge SFA BI commence usage.
Common Form Tools Workflow Job Management Toollss A wide range of services for tasks
Management Received Order Logistics peripheral to mission-critical tasks, Visualization Visualization Expenditure Corporate Visualization (Integrated (Integrated E-learning Other (BSC) Settlement Screening expanding the task coverage rate and Miissssiion Order Receipt) Inventory) Crritiiticacall Partner Applications effects. Taasskss// Sales Debts Indirect Retail/ EDI Production Logistics Material Hotels Shopping Linkage with Peerriipheerraall and Credits Purchasing Centers other systems Mission-critical systems can be Tasks Tasks Accounting Personnel Wholesale Other selected in line with business size and Salaries Housing Wire Industry Fixed Assets Affairs Business Templates industry characteristics.
Cloud Computing Operational Support Consulting IT Governance ID Integrated Individual Support Total support from planning and Consulting Application Diagnostic Services for Mission- Planning Services Management Service BPO Service Seerrviiccee Service Critical Tasks introduction support to operation.
Neettworrk Security Measure Support Service Sececurriitty Network A safe, secure and Clilieenttss Thin Clients stable platform to support enterprise Utility Hosting systems. SaaaaS Housing Services IInffrraassttrrucctturree Billing Management Payment Management Tenant Management Contract Management Log Management User Management
Page 33 Enhancement of Service Business Platform 1. Data Center (DC) Services DC Services: Housing, hosting, ITO (Platform operation and maintenance, AP operation, service desk, etc.)
▐ Focused investments in 10 Core DCs that support cloud computing services ▐ Through the utilization of the NEC Fielding nationwide support network and partner cooperation, an across-the-board deployment of regional DCs has been expanded.
Centralized monitoring and operation from an integrated monitoring center Core DCs PPrroovviissiioonn ooff ccllououdd ccoommpuputtiingng sseerrvviicecess Expanded (Ibaraki DC, Kawasaki DC, Osaka DC) Expanded (Ibaraki DC, Kawasaki DC, Osaka DC) Cloud <
Regional DCs PPrroovviissiioonn ooff sseerrvviicecess ttoo lloocacall ggoovveerrnnmmeennttss LLoocacall aandnd llooccaall mmeeddiiuumm--ssiizzeedd bbuussiinneesssseess GGovoveerrnnmmeenntt// <
Page 34 Enhancement of Service Business Platform 2. Common Platform Base
▐ Create a common base (base for cloud-oriented data centers, or CODCs) for service businesses (cloud computing, outsourcing) and SI services and seek overall optimization. ▐ Employ cloud computing technologies such as virtualization, resource pooling and orchestration to enhance competitiveness of services in the era of cloud computing.
Private Cloud SI Services Cloud Computing Outsourcing (Development of Services for Successive provision Services (Custodial Backbone SMBs of services that solve (SaaS/Joint Center) Type) Systems) customer problems
Resource Orchestration Multi- Real IT CODC Base Pooling CODC Base Tenant Cool Products* Cloud Computing Functions Cloud Computing Functions
Customer DC NEC DC
RIACUBE *NEC platform products that support data center streamlining Remote Integrated Operation Operation and Monitoring
Integrated Operation and Monitoring Center
Page 35 (Reference) Utilization of Cloud Computing Platform Technology and Eco-Compatibility at Data Centers
▐ By utilizing NEC’s high-density platform and the latest virtualization technology, the number of operating servers per rack has been vastly improved, resulting in significant reduction in installation space. ▐ Cooling efficiency has been improved due to power-saving facilities, achieving greater integration of DC space and energy-saving operation.
Thorough energy-savings, space-savings and Efficient cooling of high heat-generation through reduced weight through the employment of high- localized cooling density products Exhaust heat from equipment is sucked in by localized cooling units. Cold air is efficiently produced and supplied to IT equipment.
Localized Power-Saving Cooling Unit Server, Storage, NW product Localized Low Cost Cooling Unit e isl t A Ho Reduced Weight Server Front
Space-Saving Server Rear CCoooolilingng eeffffiicciieennccyy iiss Server Front iimmpprroovveedd bbyy aadopdoptitingng aa Storage efficiency of up hhoott aaiissllee ccoonnttaaiinnmmeenntt Storage efficiency of up ssyysstteemm ((HHAACCSS)) tthhaatt ttoo 240240 sseerrvveerrss ppeerr rraacckk eenncclloosseess hhoott aaiisslleess..
Data Centers for the Services can be provided in around one tenth Cloud Computing Era of the installation area previously required.
Page 36 Enhancing the Implementation System for Cloud Computing Services
Develop SI-focused SEs into personnel that are also largely capable of service proposals and the SE building and operation of systems for data centers (establish a 11,000 SE-strong force across the group FY2012). Expand activities to through a cloud computing sales expansion team working closely with Sales service/solution business units and sales departments for each industry.
The Cloud Strategy Office, which will engage in the development of cloud computing services Planning under the “OneNEC” concept, has been newly established (50-person team, October 1, 2010) The office will coordinate with the approximately 350 cloud computing personnel assigned to various business units
• Full development of education, • Consulting personnel who achieve including group companies, business innovation and system through e-learning Putting forth every effort innovation together with customers • Thorough provision of as our customers’ partner • Service managers to whom system specialized education for core operation can be entrusted with peace human resources of mind • Sharing of proposal examples, Service Personnel: 11,000* • Operational personnel with a expertise commitment to highly reliable and Core Personnel: 2,000* high quality operation
*: FY2012 targets
Page 37 ▐ 1. Business Outline
▐ 2. Basic Direction of Business Development
▐ 3. Core Business Strategy 3-1. Cloud Services Business 3-2. International Business 3-3. Initiative for improving profitability in System Integration
▐ 4. Towards V2012 target
Page 38 State of International Business Expansion of IT Services Business (1/2)
▐ Industry-based solutions businesses aimed at Japanese companies deployed mainly throughout Greater China and APAC ▐ In the field of public safety, business is growing in North America and developing nations in Africa and the Middle East ▐ Development of new fields: Public services, healthcare, telecom carriers, POS, etc. Development of Business in 32 Countries and Regions Around the World
Business Locations (local subsidiaries, project offices)
Scandinavia NEC UK Moscow NEC Europe France Deutschland NEC Iberica Hungary NEC Solutions China NEC Corporation Italy Ankara Korea of America Niteo Portugal Hong Kong Composition of Tripoli Malaysia Taiwan Sales Overseas Mexico Saudi Arabia Vietnam India Thailand Philippines
NEC Asia Indonesia Greater China/APAC: Approx. 70% Brazil
Johannesburg Chile Australia 09 年度 Argentina New Zealand
Page 39 State of International Business Expansion of IT Services Business (2/2)
▐ With the expanded scale of operations, in addition to businesses expanding from Japan, the localization of businesses and solutions is also being driven.
Expansion model where Expansion Model where businesses originate in Japan solutions originate locally (Point-based Expansion) (Lined Expansion)
Global SL ・・・・・・
・ Control Tower for ・ Global Coordination ・ + Local SL
Support for global expansion of Japanese Creation of solutions that originend locally companies Solutions localized for the region Application and deployment of Japanese Solutions to be deployed internationally solutions in overseas localities From Japanese companies, to support for local International expansion of solutions for users and multinational companies which NEC has an edge
Page 40 Examples of Solutions of Local Origin Local Power Advanced Qualities (Global) (Innovative) ▐ China: RFID Solution ▐ North America: Healthcare Services Supplied Jointown Pharmaceutical Group* Collaborated with U.S. firm SomaLogic to with a temperature traceability system provide a next-generation blood test service utilizing RFID utilizing aptamer technologies * China’s third-largest pharmaceutical distributor and wholesaler
Visualized the ＲＦＩＤ Successively expanded service distribution process and accessibility from drug ensured the safety of manufacturers and research ＲＦＩＤ pharmaceuticals ＲＦＩＤ institutes to individuals.
▐ APAC: Payment Services ▐ APAC: IT Managed Services Provided Singaporean firm Decillion with Provided Resort World Sentosa* with a SWIFT* connection service and also services including an IT systems service desk, began provision of payment services such security measures and asset management as debit payment and trade finance * A theme park complex located on * A common network for the carrying out of remittances Sentosa Island, Singapore and settlements, etc. between financial institutions Comprehensive three-year Acquired and expanded Singapore China service contract the business of the company in 2004 Indonesia Australia
Page 41 International Expansion of Operations in the Field of Public Safety
World-top Tiers ▐ Based on AFIS technologies, installing over 200 biometrics solutions in over 30 countries. Extensive track record includes Ministry of Justice (Japan), United States Police, Singapore e-Passport, South African national identity documents, Bolivian elections, Brazilian state ID, Columbian prisons, etc.
▐ Expanded horizontally into the fields of Civil ID and physical security based on technology cultivated through AFIS*, towards vertical expansion, including into the AP field. Through the “OneNEC” approach, NEC has developed the field of large-scale social infrastructure. *AFIS: Automated Fingerprint Identification System ▐ NEC has established a Global Development Center and Competence Center to enhance worldwide integration and support. Public Safety
Bボoーrダdーer ＡＦＩＳ コCンoトnロtrーolル Pフhィyジsiカcルal Sセキecュuリriテtyィ <＜In統統合teg合rate監d M視oソnitリorュinーg Sシolョuンtio＞n> ＜<赤Infr外are線d Sセenンsoサrs>＞ National Eｅ-Pパaスssポpーortト s 国I民DＩＤ
• NEC established the NEC Biometrics Excellence Center in Bangalore, India, and the Competence Center in Argentina. • In September 2010, a new Competence Center was established in Singapore. New Center will be planned to open in Europe, next fiscal year.
Page 42 Expansion of the Cloud Computing Business for Telecom Carriers
▐ Based on achievement building systems for Spanish carrier Telefonica, systems are being horizontally deployed for telecom carriers in various countries throughout Europe, Latin America and Asia New business model: Revenue share model Cloud (SaaS, DaaS*, etc.) infrastructure building, provision of operational outso* uDrecsikngtop sase rav Siecervisce
Telefonica Spain Introduction of SaaS infrastructure complete
Establishment of Europe Cloud Telefonica International Competence Center Agreement on joint development (May 2010) of cloud computing business in Latin America (February 2009)
- Capability to build service infrastructure Fusion - Telecom carrier customer base - Expertise in service provider of IT and - Strength in network products Networks
Page 43 Future International Business Expansion
Drive further localization of business Launch CODC business Enhance local solutions structure Deploy across five global regions Enhance marketing capabilities Greater China, APAC, EMEA, North America, Expansion of SE and delivery Japan structure Alliances with powerful partners Coordination with partners (sales Utilize cloud-oriented data centers (CODCs) to and solution development) develop SI Based solutions into a service IT cross sell cultivated by corporate network users (200K users)
International expansion in terms of coordination of both to provide globally-integrated services
Medical 医Ca療re North ＰＯＳ ＲＦＩＤ 北北米米 Hヘeaルlthス ＰＯＳ America Cケarアe ＳＡＰ Greater ＳＡＰ C中中h華華in圏a圏 ・・・ Telecom ＤＣ Cキaャrriリerアs ＤＣ ・・・ ＳＡＰ 日本 ＡＦＩＳ ＤＣ ＰＯＳ ＰＯＳ ＡＦＩＳ J日ap本an ＡＦＩＳ Re住siden民 t Info情rm報ation ＤＣ SWIFT ＤＣ ・・・ Pグroロvisーionバ ofル Gl統oba合lly-サInーtegビratスed のSer提vice供s ＡＡＡＰＰＰＡＣＡＡＣＣ ＥＥＭＭＥＥＡＡ ＳＡＰ
・・・
Page 44 Utilizing CODCs to make SI-based Solutions into Services
▐ Transform advantageous solutions for each industry into service business models Efforts to Transform Industry Solutions into a Service Business Target Business Model
Security utilizing Horizontal development of common MaaS (Matching as a Service) Government biometric authentication authentication services business authentication service
Public National cloud-based deployment of Local Govt. cloud computing Resident information Services resident information packages by region/country (South East Asia Country A)
Medical Healthcare services Disease detection services Aptamer blood testing service Care for individuals
Development of comprehensive Cloud-based services Finance Payment services payment service for payment solutions
Operational support Collaborative cloud-based Communications services for cloud SaaS, DaaS services services in conjunction with computing providers global telecom carrier
Cloud computing for Accounting cloud LCM cloud service for Manufacturing SAP mission-critical tasks JOC global rollout mission-critical tasks
Service desk service for LCM cloud service for Logistics POS/In-store solutions POS and in-store systems global retailing
Page 45 Expanding the CODC Business through Alliances with Powerful Companies ▐ Established NEC Neusoft Information Technologies Co., Ltd. as a first step for five regional structure of CODCs. ▐ The new company will provide SaaS service based on advanced clout technologies.
Customers in the Chinese Market August 31, 2010 Press Conference (Beijing)
Sales Provision Sales Activities of Services Activities Provision Provision of SI of SI
・ New Company Acquisition of customers in the Chinese market through advanced SI technical Neusoft capabilities and implementation of support ・Provide applications Technical and Technical and Operational Operational Support Support ・Development of NEC IT and cloud computing technologies and utilization of NEC its global network ・Provide applications China as a start, expanding into APAC, EMEA and North America
Page 46 Growth fields of our International Business
▐ Continuously expand Public Safety business and business for local companies in existing business fields ▐ Develop new business by competitive solutions (Public, Healthcare, Carrier, Digital Signage, etc.) ⇒ Develop locally originated solutions. Promote the transformation of solutions into a Global Service by utilizing CODC ▐ Focus on Greater China and APAC
Sales by business Sales by region
New business ・Public Medical, Healthcare ・Carrier, Digital Signage ・Payment Services ・CODC etc Greater China and APAC Existing business ・Public Safety ・Private-sector demand （Japanese companies → Local companies） ・POS Other areas ・Platform Services FY2009 FY2012 FY2009 FY2012
*Expected values as of October 13, 2010
Page 47 ▐ 1. Business Outline
▐ 2. Basic Direction of Business Development
▐ 3. Core Business Strategy 3-1. Cloud Services Business 3-2. International Business 3-3. Initiative for improving profitability in System Integration
▐ 4. Towards V2012 target
Page 48 Recognizing Challenges in the SI Business
Growth of SI Business Importance of SI Business SI continues to serve as the axis ・Expand Service and Global of NEC’s IT services business, business by maintaining profit of but amid an increasing shift of SI business which is a revenue services, significant growth base. cannot be expected. ・Strong SI capabilities are essential for a strong services business
Refine SI capabilities and enhance the earning strength of the SI business (Achieve this through SI innovation activities)
Page 49 Initiative for improving profitability in System Integration
▐ Strengthen SI capabilities organizationally and continuously （SI innovation Activity）
FY2004 FY2008 FY2010 Defensive SI innovation Aggressive SI innovation
Reinforce activities from Minimize damages of Prevention of customers’ viewpoint/ Innovation in unprofitable projects SI business unprofitable projects Further improvement of QCD*2
•SI engineering activity •Enhance screening before •Enhance ability to propose solutions •Introduction of next-generation receiving order •Analysis and deliberation •Speed up system integration developing environment ”SW factory” •Enhance Screening by PMO*1 each Projects -Thorough the standardization and •Improve certainty and reliability visualization of project status •Promote off-shore utilization •Technical training for OMCS •Improve total flexibility of systems ・Expand achievements of SI innovation •Promote self-manufacturing and efficiency of IT investment into global/service business
*1:Project Management Office *2:Quality, Cost, Delivery
Decreased the amount of unprofitable projects by half. Achievements *3 SI costs reduced by more than 10% *3: FY2009 actual compared to FY2003
Page 50 (Reference) SI Innovation Activity Implementation Measures
▐ Deploy innovation activities across all areas (planning, building, maintenance and operation) of SI.
Planning System Building Maintenance and Operation
Enhanced ability to deal Improved quality Standardization with customers and productivity (cost reductions)
Project Enhanced ability to propose System model-based SI ITIL-based service process solutions Standard WBS standards Activities (Service edition of APPEAL) Business model consulting and system Productivity improvement tools model consulting methodologies Operational and maintenance Enhanced ability to define Project management standards process guidelines for requirements applications
Eradication of unprofitable projects PMO Activities Enhanced upstream screening Third party monitoring Service project screening (proposal/quotation/design)
Enhancement of SE Resources Promote off-shore utilization Human Utilize skill of group personnel Development of service- Resource Development of business model Develop project leaders oriented human resources Development and system model consultants Develop global human resources
Page 51 Software Factory Introduction - Achieving Innovation in Software Development - ▐ NEC built a software factory as the basis for supporting the international deployment and acceleration of the products of SI innovation. - Achieves integrated management of both the development environment (object management) and the development process (project management) through cloud computing. - Through automation, rework prevention, cost streamlining and other measures, processes will be shortened by 30% and costs reduced by 20% (target). - The software factory will start being adopted for actual projects from late 2010 CxO PMO Software Factory Managers/PMOs/ Development development members share Project Team project status in real-time Project management functions (implemented Standard processes, WBS management internationally) Dailan Project Management functions Real-time communication functions in a Full utilization of worldwide distributed environment (audio/video) development resources
Cloud development environment Bangalore NEC standard development tools NEC development standards Development Management Automation (build backups, etc.) deployed on an international Support services (code checking, etc.) basis Tokyo Asset sharing Development process shortening and improved Cloud Environment productivity
Internationally Distributed Development To be used by over 10,000 people in the NEC Group* FY2012 *IT Services Business area
Page 52 ▐ 1. Business Outline
▐ 2. Basic Direction of Business Development
▐ 3. Core Business Strategy 3-1. Cloud Services Business 3-2. International Business 3-3. Initiative for improving profitability in System Integration
▐4. Towards V2012 target
Page 53 FY2012 ＜Sales＞ 2009-2012 CAGR 1100 FY2009 ＋８％ Billion yen Appx. 15% Towards V2012 target Appx. 10% 866.3 International SI (International: non-Japan) Appx. 40% Services Appx. 30%
▐ Achieve business growth by “Cloud Service Business” Japan Domestic
SI (Japan Domestic) and “International Business”
• create new businesses by utilizing cloud with our customers as an innovation partner • Catch the tide of expanding cloud business such as clouds for certain industries and cloud to link different industries (inter- industry cloud)
International Business ：+100 billion yen ＊ *:increase (FY09→FY12)
• Create locally originated solutions and develop SI based solutions into a service by utilizing five regional structure of CODCs
▐ Continuous improvement of profitability operating profit ratio 8%
（Target in FY2012. Improve 2pt compared to FY2009 actual）
Carry on the “aggressive SI innovation” (Standard WBS, SW factory, etc.)
Target in the medium- and long-term
Top IT service provider in Asia *Expected values as of October 13, 2010
Page 54
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