Agenda

1. Leveraging Partnerships in the Cloud Computing/Smart Technology EraJay Ennesser Presentation to Society for Information Management January 20, 2010

2. Agenda • Leveraging Partnerships in the Cloud Computing/Smart Technology Era • ALLIANCES: Powerful Growth And Earnings Engine For Global Companies • The CIO Study – Impact on all of us • Cloud Computing Driving Collaboration & Coopetition • From Radical Innovation to Radical Collaboration – The Global Business Model • Let’s Build A Smarter Planet • Futures • Top Trends in 2010 • Five Areas of Impact Starting in 2010

3. Partial Acquisitions (Non-Controlling) Joint Ventures ALLIANCE CORE Partial Acquisitions (Controlling) Shared Resources Licenses ALLIANCES:Powerful GrowthAnd EarningsEngine ForGlobalCompanies

4. An organizational construct wherein “partners” are willing – in fact, motivated – to act in concert and share core competencies. Most true alliances result, to some degree, in the virtual (albeit limited) integration of the parties through contracts that define rights and responsibilities over specific time. Other alliances result in actual integration, but usually delayed and in stages. Corporate Alliances Defined

5. Corporate Alliances Licensing (Non-Equity) SharedResources and Competencies (Non-Equity) PartialAcquisitionsNon-Controlling<=50% JointVentures Contractual Collaborative Alliances Come In A Variety Of Forms Continuum Of Transaction Types Outsourcing Traditional M&A Contract Services PartialAcquisitions Controlling >50% 100%Acquisitions Increasing Degree of Integration

6. Staples Deloitte HP PeopleSoft Intel Oracle Eggrock SAP Deloitte Ernst & Young (Mgt Solutions) Info Builders ADP Levi, Ray & Shoup PRT Grp ARIS JD Edwards PwC Rainier Tech Raymond James Symix Arthur Andersen SARCOM MS Supply Chain Sol’ns HP Oracle ADP Open Market Intel Symix AMEX Sterling VISA AMEX Info Access PeopleSoft CTP Verifone FedEx Sabre MS JD Edwards AMEX BAAN SAP Starburs Info Intel ImageX .com MS People Oracle Builders SAP Oracle AMEX SAP Oracle Soft ADP JD Edwards SAP BAAN MS PwC Oracle Oracle SAP Indus BSG Cambridge Sabre BAAN MS Brit Telecom Oracle Walker FileNET BSG SAP Oracle SAP MS TanData SAP Sabre MS MCI/W MCI/W MS MCI/W MarketFirst SAP DG Macola Commerce 1 Oracle MS MS TRADEex HP Unisys HP Nova Is Oracle Peachtree SAP Oracle iCat PeopleSoft Nova Oracle Open Market Unisys SAP DG PeopleSoft GERS Retail Extricity SAP GERS Retail HP Top Tier Oracle PeopleSoft Unisys Unisys Peachtree DG MS Competitor Learning & Innovation Core Component Supplier PeopleSoft Oracle Implementation Services ROLES Resellers Industry Influencers Example: e-Procurement Sector Demonstrates Use of Constellation Ariba Clarus Sterling Concur GEIS Commerce 1 SAP Harbinger AT&T BAAN Client Netscape Source: Booz•Allen & Hamilton

7. END USER DEVICES AND APPLICATIONS CONTENT SERVICE CREATION Comcast Silicon Graphics Turner Broadcasting TCI/Liberty Media TCI QVC IBM Apple Crystal Dynamics Atari Games Electronic Arts Atari Corp. Sega Sega Channel Matsushita 300 TCI Ilachu AT&T Catalog 1 Spiegel Time Warner Toshiba SOFTWARE DEVELOPERS LOCAL SWITCHING AND TRANSPORT Accolade Microsoft TCG Primestar Digital Solutions Qualcomm TCI Cox Cox Hyperbole Compuserv TCI Comcast Comcast Cont. Cablevision Cont. Cablevision Hardware Distribution Central Software GE LOCAL SERVICE PROVISION New house Joint Ventures US WEST Example: Time Warner Deals with Multiple Portfolio Gaps Source: Booz•Allen & Hamilton/Alliance Analyst

8. Globalization Requirements Competency Necessities Limited Management Resources Global Access to Information & Technology Immediate Customer Interaction & Response Forces Driving Alliances Playing Field is Everywhere Few Boundaries Real-Time Commerce & Cycle Time Reduction Information Sharing & Rapid Communication Innovation and R&D Compression Limited Capital Resources Globalization and Competency Forces Driving Alliances

9. Avoid “betting the company” on a single strategy or tactic Industry has high fixed costs and needs greater scale to compete effectively Lack a thorough understanding of customers, applications and/or distribution infrastructure Too difficult and costly to penetrate a foreign market alone Face critical technology gaps and cannot not afford time and/or resources to build Confront large and ever-increasing up-front development costs Need an infusion of top-quality management Gain access to new value-added skills to raise barriers to competition Limited number of acquisition candidates; high cost of entry Prohibitive cost in resources and time to create brand Basis For Alliance More Than Capital Alliance Drivers Descriptions • Share risk • Build economies of scale • Enter new market segment • Expand geographically • Obtain technology • Have funding constraints • Need management skills • Raise value-added hurdles • Overcome entry barriers • Create brand and credibility

10. Alliance Building Blocks ALLIANCE PYRAMID Alliance Governance Control and Administration Capitalization and Voting Rights Management Operations Alliance Form Transferring Assets Terms and Termination Confidentiality and Non-Competition Tax and Accounting Other Issues

11. MICROSOFT APPLE COMCAST STEVE JOBS BSkyB (with QVC in the U.K.) PAUL ALLEN Joint agreement to develop Internet content Primestar Primestar NEWS CORPORATION DISNEY/ ABC Teleport Starwave Sunshine Network E! Entertainment Sprint PCS Fox Sports Américas ESPN Star Sports (Asia) MSBET @ Home Sky Latin America Sunshine Network E! Entertainment Fox Kids Worldwide HBO Ole A&E Fox/Liberty Sports Primestar HBO Brasil Sunshine Network Cablevision HSN Madison Square Garden QVC Channel (V) Music Choice Primestar Cablevision Sunshine Network MSNBC BSkyB Madison Square Garden E! Entertainment Primestar TCI owns 10% of Time Warner Sunshine Network Sky (New Zealand) Court TV Joint venture: cable service in Texas Primestar Star TV (Asia) TCI Cablevision TIME WARNER Court TV Madison Square Garden Primestar Court TV Primestar Primestar GE/NBC Example: The Entertainment Keiretsu Source: Booz•Allen & Hamilton

12. IBM Institute for Business Value Implications for C-Suite

13. IBM Institute for Business Value The IBM Global CIO study is part of our ongoing C-suite study series 2004 CEO Study 2005 CHRO Study 2006 CEO Study 2007 CHRO Study 2008 CEO Study 2009 CSCO Study 2009 CIO Study 2008 CFO Study

14. Organization Size Geography Sector Others Communications 2% 11% Distribution 24% Public 18% Industrial Financial 24% Services 21% IBM Institute for Business Value In the largest known sample of face-to-face interviews, we spoke with over 2,500 CIOs to understand their goals and challenges The study represents different-sized organizationsin 78 countries and 19 industries Our analysis used 2004-2007 Profit before Tax (PBT) growth, relative to peers in their industries, to associate organizations with one of three growth levels: High, Medium or Low. For organizations where this information was not available, we used statistical correlation to assign levels, based on closest overall similarity of answers. In this presentation, we primarily refer to CIOs who work in organizations with high PBT growth as “High-growth CIOs” and to those working in organizations with low PBT growth as “Low-growth CIOs.”

15. IBM Institute for Business Value Our analysis provided insights into how CIOs can make the biggest impact on behalf of the entire organization • CIOs spend an impressive 55% of their time on activities that spur innovation and help the business • Generating buy-in for innovative plans • Implementing new technologies • Managing non-technological issues • Successful CIOs are much more actively engaged in • Setting strategy • Enabling flexibility and change • Solving business problems • CIOs are increasingly recognized as full-fledged members of the senior executive team However, CIOs universally acknowledge that some of their most important objectives sometimes seem to clash

16. Insightful Visionary Savvy Value Creator Collaborative Business Leader Expanding business impact Making Innovation real Raising the ROI of IT Able Pragmatist Relentless Cost Cutter Inspiring IT Manager IBM Institute for Business Value Successful CIOs blend three pairs of roles that seem contradictory, but are actually complementary By integrating these three pairs of roles, the CIO makes innovation real, raises the ROI of IT and expands business impact

17. IBM Institute for Business Value The Insightful Visionary explores how technology drives innovation, and the Able Pragmatist enables innovative plans Insightful Visionary • Truly integrates business and IT to innovate • Proactively reaches out to the business to co-create and champion innovation • Has a clear view of the top technological priorities that will enhance competitiveness Able Pragmatist ”Innovation should be based on practical technology that can deliver business objectives within reasonable time and cost, which can be absorbed by the business.” Life insurance CIO, India • Does practical things to help enable the business and corporate vision, as business leaders expect • Widely uses collaboration and partnering technologies to get work done • Uses third-party business and technology services to allow to focus on the top priorities

18. IBM Institute for Business Value The Savvy Value Creator devises solutions to fit customers’ needs, while the Relentless Cost Cutter is vigilant about trimming expenses Savvy Value Creator • Proactively crafts data into information • Prepares for end-customers that will continuously explore new channels • “Knows” that end-customers expect no less than world class integration and transparency Relentless Cost Cutter “Customer interaction and collaboration are the foundation of our business model.” Anders H. Johansson, CIO, Handelsbanken • Aims for completely standardized, low-cost business processes • Foresees a centralized infrastructure • Focuses relentlessly on taking costs out of ongoing technology environment

19. IBM Institute for Business Value The Collaborative Business Leader knows the business and partners well, while the Inspiring IT Manager sharpens IT expertise Collaborative Business Leader • Participates in strategy teams • Presents the strategy jointly with team members on the senior management team • Is often invited to meetings or even sits permanently on the most senior management team “IT is now seen as a key enabler to business goals and mission, and is engaged in delivering business strategy. Managing with defined goals and intent makes it easier for IT to align to business needs.” CIO, Elders Rural Services, Australia Inspiring IT Manager • Actively promotes business and technology innovation through creation of IT centers of Excellence • Manages IT agenda to allow for multitude of new and inspiring initiatives

20. Achieving real results through real partnerships As the CIO Study indicates, the voice of the CIO is indeed being heard in new ways, as CIOs are increasingly recognized as members of the senior executive team. In addition, successful CIOs are more actively engaged in collaboration with their colleagues across the C-Suite. To attain the organization’s most important goals, CIOs and the C-Suite can partner to: Chief Executive Officer Prepare the organization to compete in an unpredictable future Chief Financial Officer Seek clear financial perspective while managing risk Chief Marketing & Sales Officer Optimize relationships with customers through more flexible and faster technology Chief Human Resource Officer Aim for a more strategic and collaborative HR function Chief Supply Chain Officer Build a smarter supply chain to manage complex information flows

21. Cloud Computing Driving Collaboration & Coopetition

22. IT infrastructure is reaching a breaking point. 70¢ per $1 85% idle 1.5x In distributed computing environments, up to 85% of computing capacity sits idle. Explosion of information driving 54% growth in storage shipments every year. 70% on average is spent on maintaining current IT infrastructures versus adding new capabilities. $40 billion 33% Consumer product and retail industries lose about $40 billion annually, or 3.5 percent of their sales, due to supply chain inefficiencies. 33% of consumers notified of a security breach will terminate their relationship with the company they perceive as responsible.

23. Flexibility Infrastructure needs to become more dynamic … Business and IT Workloads + = + VIRTUALIZATION STANDARDIZATION AUTOMATION Cost … to free budget for new investment and speed deployment of new capabilities.

24. Global Cloud Collaboration & Coopetition Dublin Ireland Beijing China Seoul S. Korea Tokyo Japan Doha Qatar Raleigh North Carolina Silicon Valley California Wuxi China Hanoi Vietnam Bangalore India Johannesburg South Africa São Paulo Brazil

25. From Radical Innovation to Radical Collaboration – The Global Business Model

26. Moore’s Law – Economics Made Simple Moore’s Law: doubling of chip integration every 12-18 months

27. Is There a Sustainable Business Model? Chip Making R&D Versus Revenues (Worldwide in $M) With Permission, VLSI inc. • The industry trend as of today: R&D Expenses far outpace revenues 2004-2020 Projected CAGR Revenues ~ 6.5% R&D ~ 12.2% • This is NOT sustainable, and will/must NOT happen. • Fiscal reality is driving industry towards consolidation around Innovation Networks. Source: VLSI Research inc.

28. Global Semiconductor Technology Collaboration & Innovation Current NXP Toshiba-Sony JV There is a global recognition of challenges facing semiconductor industry, having already driven a its dramatic consolidation Infineon IMEC NEC Intel IBM Samsung Albany STM AMD Toshiba Freescale Toppan SEMATECH SELETE, ASET TSMC Chartered IBM & SUNY Partners CEA-LETI Partners Major Consortia-IMEC&SEMATECH => Pre-competitive cooperation

29. The Business Paradigm - Coopetition • Coopetition via Radical Collaboration is an Imperative • Pooled Assets • Physical Capital • Intellectual “Capital” • What’s Radical? • IBM, Chartered and Samsung (competitors in Foundry) • IBM, STM and Freescale (competitors in PowerPC) • TEL, AMAT, Hitachi HiTech (competitors in semi tooling) • Materials supplier ecosystem development • Outcome • Pre-Competitive collaboration successfully drives otherwise unachievable excellence in semiconductor technology • The Usual Challenge • Engineers have a natural tendency to HATE this idea • Create an open, one team approach to technology development

30. Alliances Live or Die Based Upon Global TrustExample; The Gaming Industry XBOX 360 The Challenge: • Super Computer Performance • Low End Consumer Price • Software Security • High Volume Manufacturing The Solution: • IBM PowerPC Architecture • Industry Leading Security IP • Custom Silicon Design Services • Flexible business model • Silicon-on-Insulator Technology • Manufacturing Platform The Result: • Next generation gaming experience • Secure platform protects games software revenue stream Playstation 3 Revolution

31. Let’s Build A Smarter Planet

32. Our world is becoming INSTRUMENTED Our world is becoming INTERCONNECTED Virtually all things, processes and ways of workingare becoming INTELLIGENT Transition to a Smarter Planet

33. As the world gets smarter, demands on IT will grow. Intelligent oil field technologies Smart retail Smart energy grids Smart traffic systems Smart food systems Smart healthcare Smart water management Smart supply chains Smart countries Smart weather Smart regions Smart cities

34. Today, more than ever, organizations are under pressure to leverage a wealth of information to make more intelligent choices. VOLUME OF DIGITAL DATA With the proliferation of end-user devices, sensors and actuators, the nature of data is changing. Data volumes and network bandwidth are expected to grow tenfold in the next three years. VELOCITY OF DECISION-MAKING The market demands that businesses optimize decisions, take action based on good information and utilize advanced predictive capabilities—all with speed and efficiency. VARIETY OF INFORMATION With the expansion of information comes large variances in the complexion of available data—very noisy with lots of errors and no opportunity to cleanse it in a world of real-time decision-making. SHIFT IN WHAT WE ANALYZE Enterprises need a broader, systems-based approach to the information they examine and optimize. Stream computing and event processing capabilities are enabling the analysis of massive volumes.

35. The Future?

36. Top Predictions/Trends for 2010 • IT Market returns to growth in 2010 - India & China leads recovery • (AMR) Forecast Global Enterprise Application Revenue growth 5% in 2010 (vs. -5% in 2009) • (AMR) survey shows 22% of clients expect software spending in their company to show the greatest increase in 2Q10 • (IDC) More than half of IT Growth in 2010 will come from Emerging Markets – India 13%, China 9%, Brazil 8%, Russia 8% • (IDC) By year end, BRIC will represent 10%+ of Global IT Spending • In 2010, companies rebuild investments in ERP applications, with growth accelerating into 2011 • In Japan, two Bright Spots of Early Pick-up from Finance Users and Hardware Replacement • Smart Industry Transformation • (IDC) Many industries will come out of the recession with transformation agendas • (IDC) over 20M smart meters will be deployed by year end. Key investments in networks, meter data management and distribution/automation management • (IDC) 25% of US Citizens will have an electronic medical record by year end; 60% by 2016. Broad based investment in Infrastructure Services, Hardware and Software • In 2010, solution hot spots for Japan include Smart Health Solutions (5% growth) and Smart Government Social Services (3.4% growth) (Source IBM MI - 2H09 GSV) • Advanced / Real Time Business Analytics • Business Analytics & Optimization is the next big investment area for clients – similar to ERP or CRM in the past • $132B opportunity with 7.8% CGR (Source: 2H09 New Intelligence Market Opportunity - 2009 GMV2H09) • 2010 BI solutions market opportunity in Japan is estimated to reach $9.1B (Source IBM MI) • Growing impact of Cloud Computing • Cloud spending expected to reach $126B in 2012 with a 28% CAGR (Source: IBM MI, IDC, CIO magazine, BCG analysis • (Forrester) SaaS based applications will enable business executives to address application functionality, scalability and deployment needs more rapidly • Cloud Computing market opportunity in Japan is estimated to exceed $5B in 2010 (Source IBM MI)

37. Top Five in Five Predictions • Cities will have healthier immune systems • Given their population density, IBM says cities will remain hotbeds of communicable diseases. • However, the emergence of a “health Internet” will give city officials, hospitals, schools and workplaces the ability to better detect, track, prepare for and prevent infections. • IBM predicts this system will share anonymous medical information contained in electronic health records to provide information for public health officials to know when, where and how diseases are spreading and even which neighborhoods will be affected next. • City buildings will sense and respond like living organisms • The trend towards “smart buildings” has already started and IBM says the trend will only gather pace with technology used to manage building systems such as heat, water, sewage, electricity, etc • Cars and buses will run on empty • This one is a pretty safe bet too. • The switch from fossil fuel powered vehicles is already underway and, although there are a few potential energy sources including hydrogen and various biofuels vying for consideration. • IBM predicts that improved battery technology will be the technology to power the next generation of eco-friendly vehicles. • Smarter systems will quench cities’ thirst for water and save energy • To deal with the estimate that demand for water is expected to increase sixfold in the next 50 years cities will install smarter water systems to reduce water waste by up to 50 percent. • Smart sewer systems will also be installed that not only prevent run-off pollution in rivers and lakes, but purify water to make it drinkable • Cities will respond to a crisis – even before receiving an emergency phone call • We are simply saying that analyzing the right information at the right time will help prevent emergencies, such as crime and disasters. • IBM says it is already helping law enforcement agencies analyze information that will allow public servants to take proactive measures to head off crime

38. In Summary • The Alliance era has started • Alliances are successful on a global scale • Allying with competitors is a reality • Next wave in alliances is between breakout & large firms • Breakout firms are often at a disadvantage in forming an alliance with skilled alliance firms • ASAP - Association for Strategic Alliance Professionals http://www.strategic-alliances.org/