IBM Institute for Business Value

IBM Institute for Business Value New ZealandCIO Study 2011 Comparative Deck Insights from theGlobal Chief Information Officer Study 1

Our ongoing CIO research focuses on activities deployed by the CIO as part of their ongoing efforts to grow authority and impact IBM Institute for Business Value WHAT are CIOs doing? 2009 CIO Study: The new voice of the CIO WHY are CIOs doing this? 2010: Connecting across the C-suite HOW are CIOs doing it? 2011 CIO Study: The Essential CIO 2

IBM Institute for Business Value Results were compiled from more than 3,000 face-to-face CIO interviews The study represents a diverse group of organisationsin 72 countries and 33 industries in 5 sectors Geography Sector organisation Size North America (16%) Public (15%) Communications (12%) Less than 1,000employees(28%) Over 10,000employees(33%) Europe (35%) Japan (6%) Industrial (25%) Distribution (26%) Growth Markets (43%) Financial Services (22%) Between 1,000 and10,000 employees(39%) Note: Growth Markets include Latin America, Asia Pacific (excluding Japan), Middle East and Africa 3

Strong public sector and Distribution representation in NZ results IBM Institute for Business Value New Zealand comparative deck represents a group of organisations in 5 sectors Sector organisation Size Over 10,000 employees (6%) Communications (6%) Public (35%) Less than 1,000 employees (44%) Distribution (29%) Financial Services (12%) Between 1,000 and 10,000 employees (50%) Industrial (18%) Source: 2011 CIO Study; New Zealand, n=54 4

As the world becomes more instrumented, interconnected and intelligent, the CIO role holds even more importance IBM Institute for Business Value Business needs and expectations drive the CIO’s mandate to use technology CIOs report their organizations have largely integrated business and technology to innovate CIOs have a seat at the executive table to help infuse technology into products, services and processes 58% Senior management would rank technology as totally critical to the success of the business A clear mandate empowers CIOs to help the business get the most out of technology 68% “We will provide the appropriate technology for the continuously changing business environment and more accurate information to the business.“ Zsolt Rasztovits, CIO MKB Bank Zrt. Source: 2011 CIO Study,Questions D.C: “To what extent has your organization integrated business and technology to innovate?”; D.E: “What score would the entire senior management team give technology for its contribution to the business?” (n=3,018) 5

Agenda CIOs align strongly with the CEO Distinct CIO mandates help to grow “Authority and Impact” The Essential CIO IBM Institute for Business Value 6

Two years have significantly changed CIOassessments of external forces with responses that are similar to the 2010 CEO perspective 2011 CIO 1 2 3 4 5 6 IBM Institute for Business Value 2009 CIO 2011 NZ 2010 CEO 1 1 Market factors 2 2 Technological factors 3 3 Macroeconomic factors 4 4 People skills 6 5 Regulatory concerns 8* 6 Globalisation “New technologies are about to disrupt the industry.” Industrial Products CIO, Germany * Budgets (Public Only) was ranked #5 in New Zealand Source: Quarter 4 2010 responses derived from Question 1 were weighted due to a ranked response in the 2011 CIO Study questionnaire; Q1: “What are the three most important external forces that will impact your organisation over the next 3 to 5 years?” (n=3,018) 7

The trend is also reflected in New Zealand IBM Institute for Business Value Expectation of complexity and change in the coming 3 to 5 years 2010 CEO Study 2011 CIO Study – New Zealand 13% 55% 19% 54% More More Change Change 8% 24% 7% 20% Less Less Less More Less More Complexity Complexity Source: CEO study 2010, based on face-to-face conversations with 1500 CEOs / CIO study 2011, based on face-to-face conversations with over 3,000 CIOs, New Zealand ,n=54 8

IBM Institute for Business Value CEOs and CIOs are both highly focused on insights, clients and people skills CEO focus over the next 5 years CIO focus over the next 5 years 79% Insight and intelligence 83% 88% Getting closer to customer 71% 81% People skills Client intimacy 63% 76% Insight and intelligence 66% People skills 56% Enterprise model changes 57% 64% Internal collaboration & Communications Risk management 55% 50% Industry model changes 54% 50% Risk management 31% Revenue model changes 54% 48% Enterprise model changes 50% 39% Industry model changes 41% Global sample New Zealand 35% Revenue model changes 26% Source: 2010 CEO Study Q13: “Which of the following dimensions will you focus on more to realise your strategy in the new economic environment over the next 5 years?”,n=1,523; 2011 CIO Study,Q13: “Where will you focus IT to help your organisation’s strategy over the next 3 to 5 years?”; Global sample, n=3,018; New Zealand, n=54 9

Business intelligence and analytics play a key role in NZ CIOs’ visionary plans IBM Institute for Business Value Most Important Visionary Plan Elements (Interviewed CIOs could select as many as they wanted) 83% Business Intelligence and analytics 98% 74% Mobility solutions 78% 68% Virtualisation 80% 60% Cloud computing 61% 60% Business process management 70% 58% Risk management and compliance 70% 57% Self-service portals 83% 55% Collaboration and Social Networking 61% Global sample New Zealand Source: 2011 CIO Study,Q12: “Which visionary plans do you have to increase competitiveness over the next 3 to 5 years?”; Global sample, n=3,018; New Zealand, n=54 10

CIO response patterns associated with business expectations of IT fall into four categories we define as “The CIO Mandate” IBM Institute for Business Value • The CIO Mandate • Empowerment of the CIO to achieve the organization’s goals by leveraging business and information technology • Agreement between business and IT • Explicit, open and broadly communicated • Applicable across industries and sectors • Changes when the organization’s needs change "Importantly, the role of CIO is not being looked on as 'Chief IT Mechanic.' It is recognized as a means to extract value from technology and gain insight from complex systems.“ Mark Hale, Director of IS for Food Retail, The Co-operative Group Note: Outperformers and underperformers in each mandate were identified by answers to questions about their organization’s competitive position. Those who selected “substantially outperform industry peers” were identified as top performers, those who selected “somewhat or substantially underperforming industry peers” were grouped as lower performers. 12

CIO Mandates come with distinct characteristics that line up with the organisations’ goals and strategy IBM Institute for Business Value Expand Mandate Refine business processes and enhance collaboration Leverage Mandate Streamline operations and increase organisational effectiveness Successful CIOs understand the business’ strategic needs and deliver on the related mandate, using the best mix of activities Mandates are defined by strategic needs of the business Transform Mandate Change theindustry value chain through improved relationships Pioneer Mandate Radically innovate products, markets, business models Mandates can change – when the business needs change 13

Leverage mandate: optimise and grow IT fundamentals and enhance organisational process efficiency IBM Institute for Business Value Leverage Key focus areas based on Leverage mandate CIO responses Business view of IT Global (14%) New Zealand (28%) • Enhance organisational efficiency • and effectiveness • Continually review and update legacy environment • Renewed emphasis on information sharing and collaboration with internal customers • Leverage data to measure basic business and IT metrics Provider of fundamental technology services 52% 57% Facilitator of organisational process efficiency 28% 24% Provider of industry specific solutions to support business 14% 13% Critical enabler of business/organisation vision 6% 6% “We anticipate information technology to impact our industry and company significantly.” Electronics VP and CIO, United States Source: 2011 CIO Study,Demographic Question D: “How does your business look at the role of IT?”; Global Leverage sample, n=417 and full analysis of all responses by Leverage mandate CIOs ; New Zealand total, n=54; New Zealand Leverage, n=15 14

Leverage mandate CIOs continually review their legacy environment - NZ Leverage CIOs favour bold action IBM Institute for Business Value How CIOs plan to control / reduce legacy cost(allocation of 100 points across 7 activities) New Zealand Global sample Rationalise application portfolio 22% 23% Gradually alter hardware (5 to 10 years) 5% 18% Radically and totally renew IT environment 18% 15% Use outsource partner 10% 13% Utilise cloud services 19% 12% Use SOA to modernise / replace legacy 10% 8% Wrap / isolate legacy environment 9% 7% “Remove Legacy - it is taking more and more time to support, tying up resources needed to support new clients on new technologies.” Travel & Transportation CIO, United States “Legacy rationalisation, simplification and product agility is the way that we will capitalise on the increasing complexity and change management.” Insurance CIO, NZ Source: 2011 CIO Study,Q16: “How do you plan to control and/or reduce the costs of your Legacy environment in the next 3 to 5 years?”; Global Leverage sample, n=417; New Zealand Leverage, n=15; percentages represent average percentage; Figures may not total to 100% as “Other” priorities have not been included 15

Delivering on the Leverage mandate IBM Institute for Business Value How to excel • Open new communication channels: Make it a high priority to improve communication and collaboration throughout the organisation. • Tap the right team: Carefully match the IT and business talents to the tasks at hand. • Standardise and consolidate: Standardise the IT infrastructure and related processes organisation-wide. • Update and renew: Think ahead to develop practical plans to gradually renew legacy systems and hardware. • Discover the dashboard: Establish dashboards that measure key business and IT metrics. • In what ways will you enhance relationships and improve communication throughout the organisation? • What is your plan to get, keep and grow people with the IT and business skills your organisation needs the most? • How many disparate architectures does your organisation currently have, and why? • Are you aggressive enough in rationalising hardware and the application portfolio as part of controlling costs? • How do your dashboards measure IT in terms of business benefits? Are you “Essential”? 16

Expand mandate: strong focus on enterprise-wide optimisation of technology for highest possible integration and effectiveness IBM Institute for Business Value Expand Key focus areas based on Expand mandate CIO responses Global (50%) New Zealand (48%) • Improve competitive differentiation • Explore and identify outsourcing opportunities for non-critical IT functions • Enhance internal communication and collaboration • Review, analyse and implement business process management • Continually review and update legacy environment Business view of IT Provider of fundamentaltechnology services 27% 31% Facilitator of organisational process efficiency 32% 25% Provider of industry specific solutions to support business 27% 26% Critical enabler of business/organisation vision 15% 18% “Bring IT from a cost center to a business enabler.” Industrial Products CIO, Switzerland Source: 2011 CIO Study,Demographic Question D: “How does your business look at the role of IT?”; Global Expand sample, n=1,508 and full analysis of all responses by Expand mandate CIOs; New Zealand Total, n=54; New Zealand Expand, n=26 17

Expand mandate CIOs are focusing on the benefits from global integration in key areas IBM Institute for Business Value Changing the mix of capabilities, knowledge and assets within the organization Global sample Both 14% 20% 66% Maintain thecurrent mix Deeply changethe mix New Zealand 53% 20% 27% “Strategic partnering with some of the more commoditised parts of the business so we can focus on the differentiators.” Travel & Transportation CIO, NZ Partnering versus doing everything in-house Global sample Both 17% 18% 65% Do everythingin-house Partnerextensively New Zealand 20% 53% 27% “Our focus is on best of breed partners and strategic alliances rather than outsourcing.” Government CIO, UK Source: 2011 CIO Study, Q7: “To benefit from global integration will your organization do the following?”; Global Expand sample, n≤1,214; New Zealand Expand, n≤15 18

Delivering on the Expand mandate IBM Institute for Business Value • Enable state-of-the-art collaboration: Evaluate and adopt tools to strengthen enterprise-wide collaboration and exchange of data. • Tighten business and technology integration: Increase two-way transparency by involving internal clients in planning and decision-making . • Focus on the core: Rely on trusted partners to handle non-strategic IT functions. • Simplify, automate, integrate: Implement advanced business process management. • Advance the metrics: Provide sophisticated dashboards through more advanced types of analytics How to excel • What leading edge collaboration tools have you implemented across the enterprise to help integrate technology with business? • How deeply are your internal customers involved in your key planning and decision processes? • What is your plan to engage partners to outsource information technology functions? • Which persistently inefficient processes can you eliminate or improve to increase customer satisfaction? • How do you work with internal customers to ensure dashboards measure enterprise-wide key performance indicators? Are you “Essential”? 19

Transform mandate: emphasis on IT optimisation to enhance the organisation’s position outside the four walls of the enterprise IBM Institute for Business Value Key focus areas based on Transform mandate CIO responses Transform Business view of IT Global (23%) New Zealand (17%) • Change the industry value chain • Use of “Big” data to expand/enhance customer and partner relationships • Simplification for clients and partners • Enhancement and expansion of the value chain outside the organisation • Enhance relationship with the organisation: business-IT intimacy Provider of fundamental technology services 14% 20% Facilitator of organisational process efficiency 26% 20% Provider of industry specific solutions to support business 34% 26% Critical enabler of business/organisation vision 27% 34% “We are passionate about providing intelligent information back to the business..” Industrial Products CIO, NZ Source: 2011 CIO Study,Demographic Question D: “How does your business look at the role of IT?”; Global Transform sample, n=688 and full analysis of all responses by Transform mandate CIOs; New Zealand total, n=54; New Zealand Transform, n=9 20

“Simplify, simplify, simplify” is the mantra for Transform mandate CIOs IBM Institute for Business Value How will IT drive operational improvements for the organisation? Global sample New Zealand 0% 11% 89% 1 15% 84% Simplify internal key processes 0% 44% 4 22% 75% 56% Simplify for clients 10% 39% 51% 56% 0% 44% Simplify for external partners No involvement Support Lead “Clients want better access to their own information, so we will simplify and standardise the “look and feel” across channels for client interactions.” Banking CIO, United States “Trying to build ‘information trough’ where business users can drink without effort.” Financial Services CIO, NZ Source: 2011 CIO Study,Q10: “To enable and improve your organisation’s operations, how will you help drive the following initiatives?”; Global Transform sample, n=688; New Zealand Transform, n=9. Some responses may add to over 100% due to rounding up 21

Delivering on the Transform mandate IBM Institute for Business Value How to excel • Simplify, simplify, simplify: Make your organisation easier to do business with. Remove unnecessary complexity. • Make it real: Design dashboards that use real-time data collection. • Extend the value chain: Enhance and expand influence throughout the value chain. • Harness more real-time data: Generate insights through feedback collection, sentiment analysis and connection to social networks. • Analyse! Dive deep into advanced analytics to develop insights into customer behavior, value chain relationships and competitive intelligence • What are your plans to simplify the customer experience, products and services to increase functionality, use and satisfaction? • Does your dashboard design include real-time metrics, such as internal and external customer satisfaction levels, end-user time savings and talent retention? • Are you introducing social media and collaboration capabilities to customers and partners, as well as internal clients? • How do you take advantage of Big Data and new IT capabilities to achieve real-time insights? • In what ways are you exploiting leading-edge analytical skills and technology? Are you “Essential”? 22

Pioneer mandate: CIOs and their teams optimise IT to radically change products, markets, business models IBM Institute for Business Value Pioneer Key focus areas based on Pioneer mandate CIO responses Business view of IT Global (13%) New Zealand (7%) • Radically change products, markets, business models • Widespread use of predictive intelligence to fundamentally change the business • Search for new sources of revenue • Take customer experience to a whole new level using social network analysis and related technologies Provider of fundamental technology services 8% 10% Facilitator of organisational process efficiency 14% 15% Provider of industry specific solutions to support business 26% 28% Critical enabler of business/organisation vision 52% 47% “Work with the business to find out what they need, to guide IT strategy.” Industrial Products CIO, NZ Source: 2011 CIO Study,Demographic Question D: “How does your business look at the role of IT?”; Global Pioneer sample, n=405 and full analysis of all responses by Pioneer mandate CIOs; New Zealand total, n=54; New Zealand Pioneer, n=4 23

CIOs with a Pioneer mandate are focusing on a wide array of revenue and profitability metrics IBM Institute for Business Value Activities related to increasing revenue Global sample New Zealand 50% 0% 50% 16% 15% 68% Product/service profitability analysis 0% 0% 100% 16% 24% 60% Product/service utilisation analysis 25% 25% 50% 21% 22% 57% Adding new sources of revenue Revenue model changes 25% 25% 50% 27% 25% 47% Low transformative potential Average transformative potential High transformative potential “We plan to increase revenue and profitability by providing the right platform to measure and analyse data.” Jean-Daniel Renevey, Head of Information Services, APAC,Roche Diagnostics Asia Pacific Pte Ltd “Clearly focus on enabling the business to interact with the client more effectively and efficiently, and aligned with new product going to market.” Telecommunications CIO, NZ Source: 2011 CIO Study,Q8: “How will information technology impact your industry and organisation over the next 3 to 5 years?”; Q13: “Where will you focus IT to help your organisation’s strategy over the next 3 to 5 years?”; Global Pioneer sample, n=405; New Zealand Pioneer, n=4; some responses may add to over 100% due to rounding up 24

Delivering on the Pioneer mandate IBM Institute for Business Value • Innovate on the top line Build predictive intelligence capabilities that can fundamentally change the business • Act on deep customer understanding Discover new sources of revenue through provocative invention/re-invention and co-creation • Exceed the expectations Elevate the customer experience by using social network analysis and related technologies • Develop a culture of analytics Offer dynamic dashboards using real-time data to provide situational metrics • Add dials to your dashboard How to excel Are you “Essential”? • Which channels can you leverage to share ideas and co-create new products and services that delight your customers? • How will you leverage social media and business intelligence to spot trends that present new customer opportunities? • What are you doing to converge disparate technologies for the benefit of your organisation, customers, value chain and beyond? • How can you develop talent to apply predictive intelligence to radically change your business model, products or industry? • How will you design dynamic dashboards that leverage real-time data and predictive analytics? 25

The CIO reporting relationship is in part driven by the mandate IBM Institute for Business Value CIO Reporting Chain Other COO CFO CEO 18% 16% 11% 56% Pioneer 16% Transform 21% 14% 50% 23% 12% 25% 40% Expand 29% 11% 27% 32% Leverage 22% 9% 15% 54% New Zealand Source: 2011 CIO Study,Demographic Question G: “As a CIO I report to the CEO/CFO/COO/Other“; Global sample, n=3,013; New Zealand, n=54 27

CIOs have identified three distinct key success factors when implementing major initiatives, regardless of mandate IBM Institute for Business Value New Zealand 2011 Global CIO2011 1 1 Having IT / business talent in place “It's about organisation development and skills competency. Bringing in talented people to lead changes." Travel CIO, Singapore 2 2 Manage beyond line responsibilities 3 3 Create right conditions before starting 4 4 Build cross organisation constituency 5 5 Obtain budget for end to end realisation 6 6 Winning client / citizen support “We will create value through the ability to manage beyond line responsibilities and building constituency across the company." Cezary Kosewski, CIO, Sklepy Komfort S.A. 7 7 Determine proper pace of activities 8 8 External stakeholders constituency 9 9 Guiding solutions through procurement Source: 2011 CIO Study,Q20: “When you’ve been successful with a major initiative, which of the following actions have proven most important?”(n=3,018) 28

The most successful CIOs will be those who understand anddeliver on their mandates, aligned with the organisation’s strategy IBM Institute for Business Value Expand mandate Refine business processes and enhance collaboration • Outsource • Communicate & collaborate internally • Focus on business process management • Review and update legacy environment • Integrate business & technology for innovation Leverage mandate Streamline operations andincrease organisational effectiveness • Standardise infrastructure & processes • Control legacy costs • Implement collaboration tools for internal clients • Gradually introduce technology • Have the right business & IT team on projects “We need to cope with change by re-engaging with our internal customers in a more intimate way - the solution is part structural and part cultural.” Government CIO, Australia “Internal collaboration is a must, cultural issues have to be addressed, and knowledge has to be shared and used.” Banking CIO, India Transform mandate Change the industry value chainthrough improved relationships Pioneer mandate Radically innovate products, markets, business models • Use “Big data” and real-time info • Simplify for clients/partners • Enhance and expand the value chain • Use risk management frameworks • Use visual dashboards to support informed decisions • Pilot technology for social value • Explore new sources of revenue • Enhance customer experience • Pursue non-stop growth • Pursue non-stop growth “Using IT tools and applications to help the business units to have better info and visibility to manage the risk, will help lower costs and improve competitiveness.” Electronics CIO, Taiwan “When we improve or create new processes, we get closer to the customer and generate new revenue sources.” Automotive CIO, Brazil 29

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IBM Institute for Business Value