IBM Journey towards the Future Giovanni Linzi General Manager Sales IBM Italy

1. Master in Economics and Political Science – Universita’ degli Studi di Milano IBM Journey towards the Future Giovanni LinziGeneral Manager Sales IBM Italy

2. agenda About me ........ 2011 IBM Annual Report snapshots IBM Transformation Journey IBM 2015 Roadmap

3. About me …. 1980 ……………………. 1997 EMEA T&T Services Executive 1998 EMEA GM T&T Industry - London 1999 WW GM CGP Industry - Paris 2000 EMEA Business Innovation Services VP, Distribution Sector - Paris 2001 Region South Business Consulting Services VP - Milan 2004 Region South System and Technology Group VP • Managing Director Unicredit Group Integrated Account 2010 General Manager Sales IBM Italy Born in 1955 Joined IBM in 1980

4. The Global CEO Study 2010: Standouts (*) capitalize on complexity in three ways The fourth biennial CEO study, building on insights and findings over the last 6 years1,541 CEO face to face interviews (*) Standouts means Company with significant economic performance in the short term and in the medium long term

5. 2011 IBM Annual Report

6. 2011 IBM Annual Report

7. 2011 IBM Annual Report IBM operations in more than 170 countries Integration of major global enteprice functions allowed more than 6B$ in enterprise productivity savings in 5 years

8. 2011 IBM Annual Report • Primary drivers for growth • Gross profit margins expansion, as result of shift to higher value segments • Improved productivity across the Enterprise

9. 2011 IBM Annual Report

10. IBM Transformation Journey - 100 years of IBM Pioneering the science of information Reinventing the modern corporation Making the world work better How to capture the opportunity of enterprise computing How to build a new kind of organisation and sustain it over time How to apply technology to transform companies, industries, societies

11. IBM Transformation Journey: we started several years ago… • Keeping company together & stabilizing business • Bringing massive decentralization under control (e.g., 128 CIOs to 1; 70 ad agencies to 1) • From country to global brand P&L statements • Move to integrated solutions • Dramatic growth in services “I think the greatest challenge facing the company is … to adapt our strategy, structure and culture to a world of constant change. I can’t promise this journey will be easy or fast… the steps we will take will be bold strides.” Lou Gerstner, 1993 Focus Areas 2009 1993 1995 1997 1999 2001 2003 2005 2007 2011 Phase One Gerstner era (’93 thru 2002)

12. …an ongoing journey • Shift to high-value solutions • Move to Values-based culture • Lowering center of gravity for decision-making • Becoming premier globally integrated enterprise • Maintain focus and execute in a radically shifting market • A Smarter Planet “The crisis in our financial markets has jolted us awake to the realities and dangers of highly complex global systems. But in truth, the first decade of the 21st century has been a series of wake-up calls with a single subject: the reality of global integration.” Sam Palmisano, Nov. 6, 2008 Focus Areas 2009 1993 1995 1997 1999 2001 2003 2005 2007 2011 Phase Three Rometty era (starting in 2012) Phase Two Palmisano era (‘03 thru present)

13. The shift to a Globally Integrated Enterprise

14. GIE: Global Shared Services as internal efficiency improvement and external offering • IBM has driven continuous improvement through structured approaches, shared GIE principles, governance and cross Shared Service measurement of process maturity • Shared Services reduced spending by $4B over the last four years • Supply chain averaging $3-5B in savings every year for the last six years • Each Shared Service driving ongoing efficiency & effectiveness: • Finance E/R reduced from 3% to 1% • Real Estate improved E/R by 50% • HR HC Ratio to Employee: improved from 1:122 to 1:169 Sharing and Partnering Established consistent set of processes, measures, systems and governance 2002 Globally Integrating • Established global function owners accountable for meeting productivity goals 2006 Making Things Smarter • Pursue opportunities to: • Instrument • Interconnect • Make intelligent 2010 “We no longer have to replicate IBM from floor to ceiling in every country. We are optimizing key operations in the right places in the world – eliminating redundancies and excess overhead – and integrating those operations horizontally and globally. …This is about doing the right tasks, with the right skills, in the right places.”- Sam Palmisano, May 20, 2005 Analyst Meeting

15. Major Employee Sites Customer Fulfillment Manufacturing Employee Service Centers IBM Research Centers IBM Internal Data Centers IBM became a Globally Integrated Enterprise, leveraging its scale to capture new growth. We shifted our operating model to become a Globally Integrated Enterprise that optimizes its supply chain, production and demand management to capture new opportunities. A Globally Integrated Enterprise is an open, modular organization that is integrated into the fabric of the networked economy and operates under a business model that makes economic sense in the new global landscape.

16. IBM organization and Governance – Strategy to Execute IBM Organization At a Glance IBM Leadership Governance Geographies Business Units Sectors Operating Team Public Sales & Distribution (S&D) North America Day-to-day marketplace execution Communications Strategy Team Global Technology Services (GTS) Northeast Europe IBM’s strategic direction and emerging business opportunities Financial Services Software Group (SWG) Southwest Europe Technology Team Distribution Systems & Technology Group (STG) Japan Near- and long-term emerging technologies, technical developments and issues Industrial Performance Team Global Business Services (GBS) Growth Markets General Business Accountable for business performance & results. Develop cross-unit strategies. Integration and Values Team (I&VT) Globally Integrated Shared Services Integrate IBM’s enterprise-wide capabilities, and align and communicate strategies and values HR Integrated Supply Chain Real Estate Finance Legal Sales Operations Marketing/Comm IT

17. Exited commoditized businesses: PCs Hard disk drives Printing Systems Strengthened position in: Business Consulting Service-Oriented Architecture Information on demand Virtualization Open, modular systems Acquired over 60 companies in last 5 years to complement and scale our portfolio of products and offerings Business Model, Operating Model and Workforce Transformation Shift in geographic mix… Remixed our portfolio toward services, software, and integrated solutions… • 2010 revenue: • 23% Asia Pacific • 34% Europe, Middle East, Africa • 43% Americas Strong Performance in 2010… 18

18. IBM 2010 financial roadmap $11.00 2010 Retirement-Related Future Acquisitions & Growth Initiatives Contributing to margin expansion by globally integrating: Share Repurchases Margin Expansion $1.00 Historical Revenue Growth $0.75 Service Delivery 2006 $6.06 Support Functions Supply Chain EPS

19. IBM 2010 EPS Roadmap

20. IBM 2010 EPS Roadmap

21. IBM’s Roadmap to 2015 Business Model, Operating Model and Workforce Transformation • Software contributes about half of our segment profit • Growth initiatives deliver $20B in revenue growth • Growth markets revenue approaches 30% of IBM total • Enterprise productivity delivers $8B in gross savings • IBM generates $100B in free cash flow, returning 70% to shareholders • Contribute to margin expansion by • globally integrating: • Service Delivery • Support Functions • Supply Chain • Shift to faster growing business mix • Leverage on acquisitions

22. IBM’s Roadmap to 2015 Business Model, Operating Model and Workforce Transformation • Contribute to margin expansion by • globally integrating: • Service Delivery • Support Functions • Supply Chain • Smarter Planet: Approximately 400 recent client engagements illustrate reach • Business Analytics: Grows to ~$16B business by 2015 – • Cloud: Grows to ~$7B business of which ~$3B is incremental • Growth Markets:contributes ~50% of IBM’s growth over the roadmap Shift to faster growing business mix Leverage on acquisitions

23. IBM values • Dedication to every client’s success • Innovation that matters – for our company and for the world • Trust and personal responsibility in all relationships

24. T-Shaped competences • People and competences have to be aligned with IBM focus on client • There is the need of T-shaped persons (deeper and wider competences) Organizational Change & Learning Industrial and Systems Engineering Computer Science & Info. Systems Math and Operations Research Economics and Social Sciences Science and Engineering Business and Management Business Anthropology

25. Leading the transition to a smarter planet Our world is becoming INSTRUMENTED Our world is becoming INTERCONNECTED Virtually all processes and ways of working are becoming INTELLIGENT Today, IBM is helping our clients tochange the way the world literally works– and to make the planet not just smaller and “flatter,” butsmarter. IBM is applying its expertise, global scope and creativity to build the backbone of 21st century industries and public institutions.

26. General Manager Sales, Italy giovanni_linzi@it.ibm.com

27. Complexity as the “New Normal” Volatility, uncertainty and risk Continued cost pressures New regulatory regimes New Stress on global inter-dependencies Industry restructuring and consolidation Markets & business models change Technology

28. Complexity as the “New Normal” In 2001, there were 60 million transistors for every human on the planet ... … today there are 1 billion transistors per human… … each costing 1/10 millionth of a cent. Volatility, uncertainty and risk Continued cost pressures New regulatory regimes New Stress on global inter-dependencies Industry restructuring and consolidation Markets & business models change Technology

29. Complexity as the “New Normal” There are 4 billion mobile phone subscribers worldwide… That’s more than one phone for every two people on the planet Volatility, uncertainty and risk Continued cost pressures New regulatory regimes New Stress on global inter-dependencies Industry restructuring and consolidation Markets & business models change Technology

30. Complexity as the “New Normal” Volatility, uncertainty and risk Continued cost pressures New regulatory regimes New Stress on global inter-dependencies Industry restructuring and consolidation Markets & business models change Technology In 2005 there were 1.3 billion RFID tags in circulation… … today there are 33 billion.

31. Complexity as the “New Normal” 2 billion people will be on the Web by 2011 ... … and a trillion connected objects – cars, appliances, cameras, roadways, pipelines – comprising the "Internet of Things." Volatility, uncertainty and risk Continued cost pressures New regulatory regimes New Stress on global inter-dependencies Industry restructuring and consolidation Markets & business models change Technology

32. Smarter Planet Our world is becoming INSTRUMENTED Our vision is to bring a new level of smart to how the world works — how every person, business, organization, government, natural system, and man-made system interacts. Each interaction represents a chance to do something better, more efficiently, more productively. But more than that, as the systems of the planet become smart, we have a chance to open up meaningful new possibilities for progress. Our world is becoming INTERCONNECTED Virtually all things, processes and waysof working are becoming INTELLIGENT

33. The World is Getting Smarter: because it must 40-70 percent of the electrical energy is lost due to inefficiencies in the grid. In one small business district in Los Angeles alone, cars burned 47,000 gallons of gasoline just looking for parking. Consumer products and retail industries lose about $40 billion annually due to inefficient supply chains. In a world where 820 million people are undernourished, $48 billion worth of the food is thrown away each year in the US. Our healthcare “system ” can’t link from diagnosis to drug discovery, providers, insurers, employers and patients. Financial markets spread risk but can’t track it; this has led to undermined confidence and uncertainty.

34. Building a smarter planet together Smart trafficsystems Intelligentoil fieldtechnologies Smart foodsystems Smarthealthcare Smart energygrids Smart retail Smart water mgmt Smart supply chains Smart countries Smart weather Smart regions Smart cities