IBM e-business Hosting Services

1. IBM e-business Hosting Services The Cisco Powered Network and Dedicated Hosting Architectures January 2002

2. Agenda The Value of Outsourcing Why IBM Global Services for Hosting? Why Cisco? Cisco Powered Network and the Cisco Dedicated Hosting Architecture Summary

3. Key business drivers • Focus resources on core strategic initiatives • Reduce upfront investment, conserve capital • Transfer financial and technical risk to provider • Time-to-market advantage • Fast path from strategy to implementation • Flexibility to respond quickly to market changes • More cost-effective than in-house solution • Minimal increase in staff and overhead • Benefit from provider's economies of scale in infrastructure investment and 24x7 operations Why outsource your Web environment?

4. Key technical drivers • Access to specialized Internet technology and skills • Knowledgeable IT talent • Critical technologies --security features, high availability, applications • Enhanced reliability • Hardened 24x7 Internet data centers • Advanced server, application monitoring • Geographically dispersed load balancing • Performance optimization • Access to high-bandwidth Internet connectivity • Burstable, scalable capacity Why outsource your Web environment?

5. Performance and business benefits from hosting overshadow the large cost benefits • Downtime drops by close to 90% and average cost savings can reach 80-90% Hosting Advantages Companies gain 3 significant benefits from hosting Access to skills Better Performance Lower Costs according to Morgan Stanley... Improvement/(Reduction) due to hosting In-House Cost/Server $35K Hosted Cost/Server $7K (80%)Rev from Reduced Downtime/Server $52K Employee Productivity $7K Demand for critical web skills is growing faster than for any other occupation today. The number of resources to maintain a hosted site is significantly lower. Resources Dedicated to Site # Emp In-house Hosted 0-5 29% 45% 5-10 21% 36% 10+ 50% 18% Improvement/(Reduction) due to hosting Total Server Downtime (88%) Total Employee Downtime (92%) Downtime Incidents (87%) Servers Affected (11%) Employees Affected (44%) Savings achieved through hosting expertise and economies of scale allow companies to improve their IT return on investment. Value of hosting skills is also achieved by 24x7 service level agreements and gaining access to additional managed services expertise. Sharp reduction in downtime, and the associated increases in productivity and potential reve-nue provide hosted companies with a clear business advantage. Source: "The Internet Hosting Report," J. Camp, A. Henry, MorganStanley Dean Witter, November 2000

6. 2Q Results 3Q Results IBM Global Services 2001 Earnings Performance Revenue $8.7B, +13% @CC Revenue $8.7B, +9% @CC Signings $16B Backlog $95B Signings $10B Backlog $97B Services +15% Maintenance +3% Services +11% Maintenance +1% • Strong signings and backlog growth • Second largest signings quarter • $1 billion of Web Hosting Services signings year-to-date • Customer focus on cost savings and Infrastructure • Outsourcing and e-sourcing up 15% • Continued strength in Asia Pacific outsourcing • Web Hosting Services revenue more than doubled • Backlog continued to grow • $1.7 billion of Web Hosting Services signings year-to-date • Strong outsourcing pipeline • Outsourcing and e-sourcing up 13% • Web Hosting Services revenue up 50% • Continued margin improvement Source: IBM 2001 Earnings Presentation www.ibm.com/investor

7. Asia Pacific Europe Total IBM Global Services Capabilities Americas e-business Hosting Centers 21 Centers 39 Centers 10 Centers 8 Centers 201 886 361,611 1,915 56,935 48 Data Centers 290 Processors 121,000 MIPS 432 Terabytes 19,153 M/R Svrs 92 Data Centers 175 Processors 51,558 MIPS 216 Terabytes 10,728 M/R Svrs 61 Data Centers 421 Processors 189,053 MIPS 1,267 Terabytes 27,054 M/R Svrs Processing Capabilities Managed Desktops 274,869 1,459,117 570,500 613,748 Customer Service Centers 24 Centers 2,503,000 Calls 71 Centers 19,835,000 Calls 16 Centers 5,932,000 Calls 23 Centers 11,400,000 Calls • 500,000 non-IBM machines under management • 20,000 e-business engagements • 2,100 Hosting Clients • Leader in Web Privacy and Security Services • 138,100 professionals in 60 countries • 201 Data Centers with 361,611 mips • $85B contract backlog $33B revenue in 2000 • Unparalleled capability for major Web events • International Sales Organization Global At A Glance 3Q 2001

8. IBM’s Commitment to the Hosting Business • $4 billion investment • 35 e-business hosting centers IBM Data Centers are Cisco Powered Networks.

9. Cisco Powered Network • Cisco partners with network services providers who offer the highest levels of quality and reliability • IBM is an authorized Cisco Powered Network service provider incorporating the latest in Cisco routing and switching network technology into its advanced e-business Hosting Centers

10. IBM Leader in e-business • The worldwide leader in servers, software, services and technologies for e-business • Complete end-to-end e-business solutions leadership with unparalleled industry expertise • 150,000 experienced e-business consultants with over 25,000 engagements worldwide • Trusted partner with the ability to work with companies on a world wide scale • $5.6 billion R&D investment, $5.6 billion in capital expenditures and $500 million in strategic acquisitions

11. Cisco Leader in Internet expertise • The worldwide leader in networking for the Internet • Complete end-to-end networking product leadership • Consistently rated # 1 in networking industry customer satisfaction surveys • Horizontal integration model providing customers best-of class solutions

12. e-business Hosting Environment Double security layer and high availability options available.

13. Cisco Dedicated Hosting Architecture Cisco DHA is a set of network equipment, dedicated for each enterprise customer, for deployment in a cage or rack in IBM’s data centers. Basic bundles – rest are options Small Large Medium Cat 6509 Layer 2 Switch Cat 4006 Cat 2980 GA CSS 11155 Content Switch CSS 11151 CSS 11051 PIX 535 Firewall PIX 525 PIX 525 SSL Termination SCA 11000 SCA 11000 SCA 11000 Content Engine CE 560 CE 560 CE 507 Intrusion Detection IDS 4230 IDS 4230 IDS 4230 Back-End Router 2651 2651 2621 Monitoring HSE HSE HSE Multiple ISPs (BGP) 7200 7200 Wireless Support CTE 1400 CTE 1400 CTE 1400 Additional Firewalls PIX 535 PIX 525 PIX 525 Additional L3 Functionality 3640 2621 3620 Each Bundle Also has a High Availability Scenario

14. Benefits of Cisco Dedicated Hosting Architectures Cisco DHA Value Proposition DHA comes with easy to use deployment guides Cisco is the single point of support for all networking issues HSE Management Product makes monitoring and daily management easy Cisco has industry-leading L2-L7 products Ease of deployment Single point of support Ease of management Best-of-breed products IGS provides Cisco Network Bundle (DHA) to Enterprise customer Facilities Hosting/ Co-location Service If Enterprise Wants to Outsource DHAs are prearchitected, making it easier for IGS to design and install the enterprise web/e-commerce site The DHAs have been tested and verified for inter-operability. This enables IGS to offer industry leading SLAs. Cisco has industry-leading L2-L7 products Faster time-to-service Better SLAs – flexible, scalable, and reliable Comfort factor – all Cisco equipment Managed Hosting/ e-business Hosting/ e-sourcing IGS or customer- owned equipment.

15. Summary • Cisco is the worldwide leader in networking components for the Internet • Managed Hosting Services is IBM’s core business • A network of multiple Tier 1 backbones that is global, fast, and highly reliable • Flexible web hosting infrastructures • Proactive and comprehensive management service options • Integrated repeatable solutions by industry leaders • Flexibility to add or subtract services and support as needed

16. IBM and Cisco The logical choice