October 2013, CloudFirst TT

1. October 2013, CloudFirst TT Ecosystem – CloudFirst and API EconomySandy Carter, GM, Ecosystem DevelopmentLuis H. Rodriguez, Director, Ecosystem Development IBM Confidential

2. Executive Summary • A healthy ecosystem is essential for CloudFirst / API Economy success • 62% of CEOs will adopt cloud to improve collaboration with partners (IBM CEO Study) • 75% of F500 enterprises will use open APIs from an ecosystems by 2014 (Gartner) • 25% of new apps will be built by ‘citizen developers’ by 2014 (Gartner) • Average Mobile app in the Cloud consumes a dozen APIs • Salesforce.com generates half its overall revenue through its ecosystem via cloud APIs (SOA Software) • Ecosystem leverage took Ubuntu ahead of Red Hat in the Open Source world (Redmonk) • Analysis of current state, market trends and competitor actions guide the identification of opportunities for accelerating ecosystem growth • A new approach, incentives, and definitions are needed: • The definition of what a partner is • Value based ecosystem incentives • New ecosystem draws from individuals, startups, academia, MSPs • Leverage of SoftLayer • Involvement and linkage of IBM to other ecosystems like Amazon, Force.com, etc. • Create interlocking marketplaces complementing the storefront • The Smart CloudFirst Ecosystem phases: • Build from existing CloudFirst ecosystem through evolution of interlocked and linked ecosystems around CloudFirst! that includes membership, recruitment, enablement, incentives, compensation program • Monetize and increase our value for ecosystems by leveraging other marketplaces(Amazon, Force.com/Heroku, Mashape) promoted through key communities (Github, TopCoder) and IBM programs (Global Entrepreneur, Academic Initiative) • Build IBM Marketplaces, by role, and differentiation after the success of the Storefront • White label, Ecosystem/Marketplace broker • Execute Netflix play 5x over: Netflix, Juniper, Intuit, and Walmart 2 IBM Confidential

3. Agenda • Competitive landscape by Cloud / API ecosystem • Our Framework proposals • What and where should we focus our efforts • Build from current CloudFirst ecosystem • Participate in existing ecosystems • Build IBM Marketplaces • Next Steps 3 IBM Confidential

4. Summary of Cloud / API Ecosystem Competitive Findings Competitors are building ecosystems that include one or more marketplaces Today most of the money is found in high-touch ecosystem relationships and through more traditional services Ease-of-use is common across all successful ecosystems, including simple programs, immediate access to information, clear incentives, a community of engaged experts, efficient user interfaces, effective monetization, and adherence to relevant standards All competitors started marketplaces after establishing a reputation around a crisply defined core offering or expertise Ecosystems are evolving to include marketplaces through personalization of the experience, such as LOB in Adobe CreativeHub or mobile developers in Parse. The focus is on the user experience and less on formalized relationships. Industry is in midst of substantive shift toward API and SDK- driven Developer Experience approaches, where social, mobile play a big role Rapid evolution has led to a lack of stability and trust: consumers are becoming producers, clients are building their own marketplaces, and individuals are growing in influence 4 IBM Confidential

5. Cloud Value Value based business model App Cloud API Volume based business model Ecosystem Platform Cloud API Ecosystem Infrastructure Cloud Flexibility/ Portability Structured Some flexibility Higher flexibility Two different ecosystem business models leveraging the API approach • Core business is how they make money, API is the catalyst for both companies to expand their core business • Volume is a requirement in the commodity IaaS business while a strong value is essential in the enterprise SaaS business • The mission of API in the ecosystem is to increase volume, reduce cost and control risk, like a supply chain manager IBM Confidential

6. Ecosystems are interconnected with marketplaces Twilio Telephony Video Travel Support Analytics email Payments Marketing Billing • Multiple ecosystems by the same vendor for different audiences, with marketplaces • i.e. Salesforce: Force.com for LOB & Heroku for developers • Marketplaces are an element of the ecosystem but not the only element • Vendors are creating marketplaces and participating in others' marketplaces IBM Confidential

7. Clients providing APIs can become partners who can bring much larger workload 100s partners 36M subscribers Netflix Cloud Platform API API Video streaming compete with ships 1M DVDs a day via Netflix.com 1.4 Billion API calls per day 2011 2013 Clients Partner 7 IBM Confidential IBM Confidential

8. The Framework • Members of an Ecosystem • Interconnectedness requirements • Definition of partner or ecosystem member • Elements of incentive for an ecosystem • The “developer” or Individual Experience • Stickiness for affinity and retention IBM Confidential

9. Product Traditional Focus 17% 47% 35% 2% Services Resale Activity Focused Today, IBM Lacks an Overall Ecosystems Approach What is an Ecosystem? A group of … companies (Enterprise, GB, Invest, etc.) … partners (Traditional: VAR/VADs/SIs/ISVs, New: MSPs, Agencies, etc.) … and influencers (Academia, Analyst, Practitioners, VCs, Ad Agencies, etc.) collaborating and innovating to drive business  Today Channel Roles are Blurring, Many New Entrants New Partner Types MSPs CSPs Marketing Service Providers Digital Agencies Marketplaces (APIs, Mobile Apps) Cloud Service Brokers IBM Clients Influencers Academia Practitioners VCs Advertising Agencies Champions Analysts Communities IBM Confidential

10. The Constituents in the Ecosystem New Partner Types Academia Marketing Start-ups IT Professionals Influencers Born on Cloud Partners Business Partners IBM Confidential

11. It’s about VALUE! Partners in the ecosystem participate by receiving and giving value Companies and individuals contribute APIs and participate in the Ecosystem as elevated value add partners Technology Consultants • Cloud Service Brokers • MSPs • CSPs • Marketing Service Providers Consumers • Direct IBM Clients • Indirect Clients served via other marketplaces Promoter • Influencers • Marketing • Academia • VCs • Advertising Agencies • Champions • Analysts • Communities • Digital Agencies Provide Technology • Start-ups • IT Professionals • Individuals • Born on Cloud Partners • Business Partners • Academia • Marketplaces • ( APIs, Apps ) 11 IBM Confidential

12. CloudFirst Ecosystem Hub • Brand and launch vertical Clouds Watson RetailCloud, TravelCloud, HealthCloudRecruit and Launch “Build your own verticals” BYOV Partners • Develop and launch general purpose discovery service, supporting marketplaceDesign Point: cloud native, mobile centric, content rich 3. Provide Supporting Investments Encourage creation of new vertical teams. Establish select direct and indirect programs of investment Need our own HUB image

13. Our immediate focus is building/growing an ecosystem around SoftLayer and our $500M+ SaaS business. We will scale as our portfolio expands. Cloud First Ecosystem 13 IBM Confidential

14. To succeed, we must engage the ecosystem in both a value-driven model, as well as a volume-driven model Cloud Value Value based business model App Cloud … Blue Mix API Platform Cloud Ecosystem Volume based business model Ecosystem API Infrastructure Cloud Flexibility/ Portability Structured Some flexibility Higher flexibility • IBM has offerings for both Value-based and Volume-based business models • We make money starting from the core business, then expanding through APIs as the catalyst • Volume is a requirement in the commodity IaaS business while a strong value proposition is essential in the SaaS business. • The value of APIs in the ecosystem is to increase volume, reduce cost and control risk, somewhat like a supply chain manager. 14 IBM Confidential

15. We are not starting from Ground Zero. We have a base CloudFirst ecosystem. We welcome SoftLayer’s 750 partners to IBM’s cloud ecosystem that includes 1,700+ ISVs, 100+ universities in 20 countries, and a SaaS portfolio of 100+ offerings, 8,500+ Resellers, 5,000+ MSPs, zz SaaS portfolio partners Get stats Attributes of IBM cloud ecosystem include: ~90% of IBM Global Entrepreneur Program members are in the cloud ecosystem developerWorks hosting 140 cloud groups In 2013, 70 universities began teaching IBM cloud related courses Partners drive 30% of our SaaS portfolio revenue Gaps in the current ecosystem: New definition of a partner, leading to new incentives New ecosystem member types to engage Limited interconnectedness around the ecosystem Go-To-Market approach The ‘Ecosystem Experience’ with IBM Stickiness to IBM Order needs to match P8 15 IBM Confidential

16. The Framework of the Ecosystem Anchor Clients App 1 Anchor Client App n Anchor Client App 1 Anchor Client App n Anchor Client App 1 Anchor Client App n Anchor Client Partner Apps Partner 1 App Partner n App Partner 1 App Partner n App Partner 1 App Partner n App Partner Content Partner 1 content Partner n content Partner 1 content Partner n content Partner 1 content Partner n content Watson Travel Cloud Watson Healthcare Cloud Watson Retail Cloud Business Support Services Operational Support Services Retail Platform Travel Platform Healthcare Platform Starter Healthcare Content Starter Retail Content Starter Content Starter Travel content Watson Platform General Content General content Talent Talent

17. We must fully embrace our new partner definition Cloud ecosystem partners include: • Increasing number of Individuals who develop using cloud services • ‘Crowds’ that collaborate to develop cloud services that can create significant revenue opportunity for cloud providers • Organizations contributing to enduring projects like Hadoop Today: • Size of the revenue to IBM matters • Individuals are typically directed to sites that mainly focus on our technology • ‘Crowds’ of developers are not programmatically offered incentives Vision for Tomorrow: • Re-level our programs to capture individuals actively developing cloud projects • Provide those individuals who use, promote, educate, or act as key influencers with digital recognition and access to premium education and IBM experts 17 IBM Confidential IBM Confidential

18. We can improve interconnections in the external ecosystem by governing ourselves internally Responsibilities include: Determining & reporting measured objectives Maintaining strong brand and industry interlock, especially around GTM Alignment across all ecosystem activities and events Shifting resources to further IBM growth via the ecosystem; preventing duplication Run an ecosystem advisory council, made up of key external constituents Internal: Create an IBM Ecosystem Governance Council External: Connect the Ecosystem • Connect complementary partners through our online communities and our IBM centers. • Leverage our global extent to introduce key ecosystem members across geographies • Educate and mentor members on how to work together more effectively 18 IBM Confidential

19. Value Market Recruitment and Progression Volume Market Recruitment and Progression Target Market: Candidates drawn in from strong brand/industry driven tactics Focus: Low touch tech automation Target Market: Top 10 strategic partners by initiative and/or industry (geo) Focus: High touch face-to-face Market/customer driven focused accounts Create  Develop  Capture Enhanced online self-service engine Create  Develop  Capture F2F Management (Business/Technical) Individual Technical and Marketing Plans (Includes Joint and Co-marketing) Broad inside sales and marketing coverage Virtual Partner/Technical/Marketing Execs Joint marketing and selling commitments with brands and industries. Alignment within Blue Prints Draw in and extend coverage to Academic and Entrepreneur Communities Our Ecosystem Go-to-Market needs to shift significantly • Today • Primarily focused on those who resell IBM • Benefits are tiered, favoring those with large transaction volume • Administration of benefits can be burdensome • Cloud Center of Excellence program launched • Smaller, targeted tactics What % of marketing $s go to Cloud? Ecosystem Model

20. Enhancing the ‘Ecosystem Experience’ is a Must Today Future • Ecosystem Experience • Partner experience at IBM varies based on their classification within an IBM taxonomy • Partners must go through an IBM process to ‘sign up’ and to progress within our programs • Navigating IBM is hard • Ecosystem Experience • IBM drives orchestration of our cloud ecosystem • How the ecosystem interrelates • What the ecosystem builds • Ecosystem go to market • Individual members interact with IBM based on what they need, not by how they fit in a taxonomy • Fast, self serve, access, including seamless mobile access 20 IBM Confidential

21. Create IBM stickiness to the cloud ecosystem to enhance retention • Become a Trusted Hub of cloud services • Leverage IBM’s reputation in the market • Mitigate cloud risk, to attract customers who may otherwise be hesitating • Deliver incentives • Provide funding to ecosystem members that fill critical gaps • Drive our IP portfolio into the ecosystem • Publicly recognize members who actively promote, educate, or drive IBM • Deliver constant value • Incessantly roll out unique capabilities, such as pricing optimization or in the future, cognitive computing services • Roll out features constantly, especially ones that customers would have to otherwise build themselves 21 IBM Confidential IBM Confidential

22. Summary Recruit and interconnect members to form the new ecosystem • … Change go to market model to Value / Volume model • … Drive through a new Ecosystem Experience with Stikyness • … 22 IBM Confidential IBM Confidential

23. Monetize and increase our value for ecosystems by leveraging other marketplaces • Select the most viable ecosystems to penetrate • Align unique capabilities to build Ecosystem connections • Promote through key communities and IBM programs • Become an ecosystem broker Ecosystem IBM Unique Capability Ecosystem 23

24. Action plan to drive leverage other marketplaces Current participation in external Ecosystems Select Marketplaces Align Capabilities • Assign team to plan strategic alignment of differentiated capabilities with ecosystems • Swiftly enter a diverse Wordpress Statistics tracking plug-in for Coremetrics Founding members of the merging ecosystems around CloudFoundry and OpenStack Evaluate other marketplaces for IBM top 10 security vulnerability list set of ecosystems GTM Promotion Become a Broker • Jump in to ecosystem penetration with targeted marketing campaigns • Create business model for ecosystem influence and pull to IBM 24 IBM Confidential

25. Apply SOA Solutions Catalog leanings for asset management, delivering high value, and building the ecosystem 25 IBM Confidential

26. Drive Ecosystem Development now and thru the phase to IBM Marketplace 26 IBM Confidential

27. Summary: Recommendation for Ecosystem for Marketplace Ecosystem with SoftLayer Deliver Personalized Exp. • Start building ecosystem for SmartCloud offerings on Softlayer now! • Provide aggressive incentives; i.e. Freeimum, Hackathon at IICs, etc. • Deliver complete solution as outcome • Experience for Developers and LoB Partners • Drive duel strategy • Commerce, Business Analytics • Extensions with services “Single Click” Design Begin backend changes! • Implement “Single Click” as a foundational requirement for partner participation • Provide every service available for partners with in Marketplace “In context” • Start transformation projects now • Partner World for “on-boarding” process • BT/CIO for Billing and Payment process 27 IBM Confidential

28. Backup 28 IBM Confidential

29. Next Steps IBM Confidential

30. Team Members CHQ Mary Van Amburg, Team Lead, Market Insights, Market Analysis – Services GTS Alan Manuel, Director - IBM SmartCloud Application Services William G. Sherman, Global Offering Manager - IBM SmartCloud Application Services Ed Bottini, Global Cloud Computing Ecosystem Manager RES Marc-Thomas H. Schmidt, Distinguished Engineer SWG David L. Barnes, Program Director, Emerging Technology Damion Heredia, Cloud Operating Environment, Product Management & Design (reporting to Danny Sabbah) Janet W. Sifers,Senior Marketing Manager, SmartCloud Solutions MSM Rodney A. Smith, VP, IBM Fellow, Emerging Internet Technologies-SWG John Wolpert, Programming Advisor Andy Warzecha, VP of Strategy Topic Leader Sandra Carter,General Manager, Ecosystem Development SMG Luis H. Rodriguez, Director, IBM Innovation Centers, Ecosystem Development Kal Patel, Program Director - IIC Strategic Initiatives, Ecosystem Development HopeRuiz, Planning and Delivery Manager, Ecosystem Developement Jeff Schuster, Program Director, Global Network of Innovation, Ecosystem Development Mark Weber, Integration Architect, Ecosystem Development Sherwood Yao, Program Manager – PaaS, Ecosystem Development Meeyoung Yoon, Manager of Strategy, Ecosystem Development DirkNicol, Director, Practitioner Outreach and developerWorks SSG JimColson, IBM Fellow, Software Solutions Group MarcDietz, Director, SaaS Strategy & Marketing TomDoucher,Development Director, Cloud Operating Environment, SWG StephenKenna, industry solutions | smarter commerce | master inventor 30 IBM Confidential

31. Executive Reviews Sponsors GBS GTS James Comfort, General Manager, GTS Cloud Development and Delivery, IBM SmartCloud Platform GPS S&D Research STG SMG Danny Sabbah, CTO and General Manager, Next Generation Platform *Deepak Advani, General Manager, Cloud & Smarter Infrastructure SSG ISC GMU CHQ Gopal Gopalakrishnan, Vice President, Corporate Technology * Completed 31 IBM Confidential

32. Corporate Milestone IBM Confidential

33. Competitive View IBM Confidential 33

34. Supplement current ecosystem with new partners types Help extend non-cloud partners into the cloud ecosystem e.g., • Evolve on-prem ISVs to hybrid cloud • Connect traditional ISVs to our MSPs • Enable professors to teach IBM Cloud capabilities Recruit new partners into our ecosystem • Incent with what each type values • Work with IBM customers to begin opening their own APIs • Apply IBM coverage to fill gaps rapidly 34 IBM Confidential

35. Strengthening Linkages and Fostering Interconnection Today • Internally: • Many parts of IBM touch members across the ecosystem: ISVs, SIs, VAR/VADs, MSPs, etc. • Some members are touched by multiple parts of IBM • Externally: • In many cases our own ecosystem members are not themselves connecting or working together in a structured manner to increase their opportunities 35 IBM Confidential

36. Ecosystem Potential Preliminary ISVs with offerings in specific industries

37. Select the most viable ecosystems to penetrate Awareness Growth • Growth and “stickiness” opportunity for IBM capabilities • Emerging internal marketplaces, e.g. Staples • Emerging geographic ecosystems Specialty China Ecosystem Africa Ecosystem Israel Ecosystem Emerging Focus Size (revenue) 37 IBM Confidential

38. Align unique capabilities to build Ecosystem connections • Unique, differentiated capabilities • Easily adopted, low touch and higher touch capabilities • Establish IBM relevancy in each quadrant Awareness Growth Specialty China Ecosystem IBM Cloud Consulting Managed Services Africa Ecosystem IBM Cloud Consulting Managed Services Israel Ecosystem IBM Cloud Consulting Managed Services Emerging Focus Size (revenue) 38 IBM Confidential IBM Confidential

39. Promote through key communities and IBM programs Jump in to ecosystem penetration with targeted marketing campaigns Provide incentives and programs for to recruit ecosystem members from Marketplaces Target marketplace users with education about relevant add-on capabilities Invite marketplace users to conferences and events aligned with capability subscription Provide incentive competitions to ecosystem members such as hackathons Pull ecosystem members into opportunities at IBM storefront and Ecosystem Promoted through key communities Github TopCoder Promote through IBM programs Global Entrepreneur Academic Initiative 39 IBM Confidential

40. Become an ecosystem broker Develop a business model to become a ecosystem broker and influencer Integrate in tools to transverse ecosystems and standards for app development, such as: Security certification Regulatory compliance (e.g. HIPPAA) Quality Standards Create pull strategy to maintain ownership and revenue stream for standards developed 40 IBM Confidential

41. Use Ecosystem Tactics for attract, retain and build loyalty Attract 41 IBM Confidential

42. Simplified “one click” experience for the ecosystem partners Onboarding1 Registered / Regular Partner2 Order, Payment, Collection5 Migration Utilities9 • Sales Engagement • Credit Card Checkout • Metering • Billing (SMB, Ent, Global) • Partner validation (restrictions for Microsoft, Oracle, etc.) • Billing/payment options (usage, performance) • Manage Commercial Agreements • New and special offers • API/Offer mgmt. & lifecycle • Customer support policies SLA for end-client • Catalog - registry – repository • Auto certification • API validation • Validation of self support • Base model for API usage and payments (i.e. $10/1K calls) • App Migration from external marketplaces • Content migration from current catalogs (meta-data) to future image distribution Revenue Sharing / Distribution6 • Pay suppliers • Pay Brokerage (if required) • Pay markets (if required) Advanced Partner3 Discovery Tooling10 • Support agreement for “services” • Custom Assistance • Structured Assistance – Mandatory / Optional • Low Touch (but not self-serve) • Crawlers that automate the discovery of highest utilized APIs / Apps • Identify marketplaces to publish based on various criteria (i.e. API usage) Book to IBM Ledger7 • Net/Gross • Sales commission Partner dashboard8 Deliver self-service client support4 • “In context” of the Marketplace • On boarding interactions • Reporting and best in class analytics • API utilization/metering • Sales leads • Payment and billing • Require documentation • Setting started, self-help • Interactive API docs • New release comm • Webinars, Whitepapers (optional) • Social engagement (optional)

43. To be deleted 43 IBM Confidential

44. The Start: building credibility around core business Add GovCloud for Federal and 1500+ ISV, Reseller Add AWS for Developers Add 3rd Party via API 100s of Merchants 1000s of Merchants + 1000s of Merchants + Retail Retail Retail Retail 1995 2000 2007 2012 Store front Grow ecosystem Marketplace 1999 2008 2010 Add Heroku PaaS Force.com CRM Apps Cross industry CRM SaaS Add Force.com 3rd party CRM Apps Core: CRM Core: CRM Core: CRM • Build a competitively differentiated core business first • Add API linking to their core business next • One size doesn't fit all, SF has two API ecosystems IBM Confidential

45. What distinguishes the AWS Ecosystem? First mover led to market dominance in Cloud space Volume-based business model based on using excess capacity from datacenters Large & Diverse group of Technology Partners (652) offers a great deal of variety to Customers(587 Customer Apps, over 1500 AMIs) Many familiar ISVs and Consulting firms are members of the ecosystem, such as SAP and CapGemini, increasing the confidence of medium & large companies in using AWS forenterprise workloads Diverse customer base with a wide range of use cases drives innovation among its technology ecosystem, from startups to Netflix to Federal agencies Price leadership, brand recognition, and relatively small field sales capacity equates to large opportunities for consultants and resellers Individuals are attracted by AWS' public data sets (54), sample code & libraries (277), and SDKs for iOS, Android, Java, Ruby, PHP, and Node.js Source: Gartner: Magic Quadrant for Cloud Infrastructure, August 2013 45 IBM Confidential

46. What distinguishes the Force.com Ecosystem? Two ecosystems: LOB (Force) and Developer (Heroku). Heroku acquisition is a direct response to the power of the developer: preference for platforms that support programming languages they already know. Value-based business model based on extending SaaS offering. All partners can earn referral fees for sales leads after successful close. Published service availability improves transparency. Customers are provided online community venues to make themselves heard. Effective and sustained social media presence and online community engagement lets ecosystem members influence platform decisions. 46 IBM Confidential

47. The ecosystem relationship keeps evolving in the API economy: a client yesterday can be a partner tomorrow 100s partners 36M subscribers Netflix Cloud Platform API API Video streaming compete with ships 1M DVDs a day via Netflix.com 1.4 Billion API calls per day 2011 2013 Clients Partner API turns a client into a partner, and that brings much higher workload IBM Confidential IBM Confidential

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49. Ecosystem Development and Evangelism New Partner Types Academia K-12 Students Marketing Start-ups K-12 Institutions Secondary Institutions MOOCs Professors Secondary Students IT Professionals Training Influencers Born on Cloud Partners Business Partners IBM Confidential

50. Ecosystem Development and Evangelism New Partner Types Academia Marketing Service Providers Marketing Start-ups Marketing Agencies (Traditional & Comms) Digital / eCommerce Agencies IT Professionals Influencers Born on Cloud Partners Business Partners IBM Confidential