October 2013, CloudFirst TT

1. October 2013, CloudFirst TT Ecosystem – CloudFirst and API EconomySandy Carter, GM, Ecosystem DevelopmentPaul Brunet, Julie Carstensen, Jennifer Cooper, Bill Innis, Kellene McCaffrey, Kal Patel, Luis H. Rodriguez, Hope Ruiz, Jeff Schuster, Mark Weber, Sherwood Yao, Meeyoung Yoon 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: • New partner definition and new partner types • Interconnected requirements around the ecosystem • Go to market approach • The ecosystem experience with IBM, stickiness to IBM  • 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 • Participate in existing Ecosystems to drive use of IBM assets (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 hub • 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: the market is ripe for a leader to establish a hub of trust, consumers are becoming producers, and individuals are growing in influence IBM Confidential 4

5. The Start: building credibility around core business Add GovCloud for Federal and 1500+ ISV, Reseller Add AWS for Developers Add 3rd Party via API Entering enterprise services ecosystem, GovCloud APN: 1500+ partners 2012 100s of Merchants 1000s of Merchants + 1000s of Merchants + Retail Retail Retail Retail 1995 2000 2007 2012 Grow ecosystem Marketplace Store front 1999 2008 2010 Add HerokuPaaS Force.com CRM Apps Cross industry CRM SaaS Add Force.com 3rd party CRM Apps Core: CRM Core: CRM Core: CRM • Business model: • AWS - Partner pay IaaS charge in PAYG model. • Salesforce: Partner pay $2500 for review, then rev share w/ partners15%- 25% revenue • 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

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. 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 2007 2013 Clients Partner • API turns a client into a partner, • and that brings much higher workload IBM Confidential IBM Confidential

8. 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 8 IBM Confidential

9. The Framework 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 9 IBM Confidential

10. Members of an Ecosystem New Partner Types Academia Marketing Start-ups IT Professionals Influencers Born on Cloud Partners Business Partners 10 IBM Confidential

11. Defining a Partner in CloudFirst • Individual citizen developers are becoming partners in the ecosystem • The Freemium business model in the Cloud Ecosystem removes price concerns and technical complexity which motivates these new partner types to contribute to the Cloud • These new partner types collaborate to build complimentary cloud services that enable cloud providers to build a nascent economy • Technology Partnership in the CloudFirst! World is typically a deep relationship • One invoice – you are engaged financially • API Provider, API Consumer, Application Marketplace revenue share an app sale • …getting started is more automated • CloudFirst! commands 1 click user experience to get started • Three partner types in CloudFirst! • Technology focused partner ( 2 areas ) • Provide Technology to CloudFirst! • Consultants provide technical and business planning support to customers • Consumer • Buy from the Marketplace • Promoters • Influence the market 11

12. Elements of a Successful Ecosystem Focus Example *Source: IBM Ecosystem Development and Ensuring Platform Success by Growing Ecosystems” By Larry Carvalho, RobustCloud ; Pund-IT October newsletter(p. 18) 12 IBM Confidential

13. 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 13 IBM Confidential

14. Cloud First Ecosystem Hub • Build cloud Ecosystem • Build IBM ecosystem into a Trusted Hub • Execute the New Ecosystem Framework & an IBM governance model • Invest now to change the Ecosystem Experience • Participate in existing Ecosystems • Select Ecosystems based on value and business model • Leverage IBM assets in external Ecosystems • Grow IBM Ecosystem by developing loyalty from users of external Ecosystems • Become an Ecosystem hub • Build IBM Marketplaces • Critical elements of the ecosystem ( certification, personalization, experience, revenue sharing) • Drive ecosystem development - execute 5X Netflix play • White label / Ecosystem hub

15. 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 15 IBM Confidential

16. 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 15,000 partners, including 1,700+ ISVs, 100+ universities in 20 countries, and a SaaS portfolio of 100+ offerings, 8,500+ Resellers, 5,000+ MSPs. 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 16 IBM Confidential

17. We are actively building the ecosystem through startups, and through cloud and related user groups 17 IBM Confidential

18. We need extensibility in our Ecosystem framework to key segments – such as Role, Industry, and Initiative App 1 Anchor Client App n Anchor Client App 1 Anchor Client App n Anchor Client App 1 Anchor Client App n Anchor Client Anchor Clients Partner Apps Partner 1 App Partner n App Partner 1 App Partner n App Partner 1 App Partner n App Commerce Cloud Healthcare Cloud Mobile Business Support Services Operational Support Services Mobile Platform Retail Platform Healthcare Platform Cloud Platform General Content General content Talent Skills and Entrepreneur

19. Ecosystem Potential Preliminary ISVs with offerings in specific industries

20. 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 We can improve interconnections in the external Ecosystem by governing ourselves internally 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 20 IBM Confidential

21. 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 Ecosystem Model Value Market Recruitment and Progression Volume Market Recruitment and Progression Target Market: Top 10 strategic partners by IMT for a total of 30 Focus: High touch face-to-face Target Market: Draw in 1000+ partners through strong brand/industry driven tactics Focus: Low touch tech automation Deliver technical and marketing plans per account by end of year Develop enhanced online self-service engine focused on progressing 1000 partners. Requires incremental investment in IT. Ensure joint marketing and selling commitments with brands and industries. Create virtual CoE (OI Hub / Tech Support Hub) by IOT to progress partners including sales, marketing and technical support. Brand/industry driven tactics and marketing to support targeted areas beginning in Q1 2014 Draw in and extend coverage to Academic and Entrepreneur Communities for early stage recruitment

22. Enhancing the ‘Ecosystem Experience’ is a Must Today Future • Ecosystem Experience • Partner experience at IBM varies based on their ‘partner type’ within an IBM taxonomy • Complex due to focus on showcasing all IBM has to offer • All options presented at one time regardless of interest • Content intensive based on technology, not activity • Limited tracking of partner interactions across businesses • Ecosystem Experience • Simplified self-service flow based on activity and progression • Experience personalized on area of interest • Quick sign-up and availability to assets • Linkage with third party sites for recruitment and social interactions • Access to experts to help in GTM and Technology via CoE • Integrated account and marketing system shared across business units 22 IBM Confidential

23. Create IBM stickiness to the cloud Ecosystem to enhance retention • Become a Trusted Hub of cloud services • Create stickiness by gluing IBM’s business reputation and technical strength to bring together business buyers and the technical suppliers • Buyers need trust and support . e.g., • IBM stands behind its offerings • IBM business is predictable • IBM has a strong reputation in security • Developers select technology. e.g., • IBM is known for breath of capabiliites,scalability and reliability • IBM offers unique or differentiated capabilities, such as pricing optimization • IBM has to deliver a strong developer experience Action: Change our cloud marketing and positioning to explicitly reach out to both the developer and buyer. Target specific messages to each. In cloud space in particular, focus on proving trust and scalability 23 IBM Confidential IBM Confidential

24. Participate in existing Ecosystems to drive use of IBM assets  Example: DemandTec and Coremetrics help to drive Ecosystem participation Revenue to IBM for Marketplace transactions Price Optimization API /Web Services Lack of price optimization API / Web service Core Metrics and others 24 IBM Confidential

25. Select Ecosystems Leverage IBM Assets Grow IBM Ecosystem Become a Hub Action plan to drive participation in other Ecosystems Current participation in external Ecosystems Focus on opportunities for greatest growth: Target Ecosystems with IBM assets that bring the most differentiated value 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 Jump in to ecosystem penetration with targeted marketing campaigns Develop business model for ecosystem influence andpull to IBM

26. Strategy for Building Ecosystem for Cloud First Marketplaces Critical elements of the ecosystem … Value based business model Blue Mix Volume based business model

27. Control risk on IBM thru API Certification • Salesforce, charges $2500 for app validation • Amazon, doesn't validate the app IBM Confidential

28. Ecosystem experience – design for as simple as “one click” Onboarding1 Registered / Regular Partner2 Order, Payment, Collection5 • 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 • Validation of self support • Base model for API usage and payments (i.e. $10/1K calls) Revenue Sharing / Distribution6 Advanced Partner3 • Pay suppliers • Pay Brokerage (if required) • Pay markets (if required) • Support agreement for “services” • Custom Assistance • Structured Assistance – Mandatory / Optional • Low Touch (but not self-serve) Migration Utilities7 • App Migration from external marketplaces • Content migration from current catalogs (meta-data) to future image distribution Deliver self-service client support4 Partner dashboard8 • “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)

29. Execute 5x Netflix Play Ecosystem has turned customers into API and Data providers 17 other Industries Healthcare Industry (231 partners) Web conf (3 partners) Auto Industry (240 partners) Security (4 partners) Finance (2 partners) Everlogic Shoeboxed Wave Yendo Staples App Center Account Data API QuickBooks API Powered by AppDirect 19,000 Financial institution2 5M small business1 1,000s SMB business Builds an ecosystem around its core Accounting and Data APIs Builds an ecosystem around SMB Cloud App Source: 1, 2 Intuit App Center introduction IBM Confidential

30. Simplify cloud service procurement by setting up a company marketplace - White label / Ecosystem hub White label, Ecosystem Hub Your Services IBM Services Private Services Public Services Internal Portal of Cloud Services Populated with commercial offerings curated by IBM Cheaper services because of IBM’s negotiating power with suppliers Manage services – trial, purchase, payment – easily, in one place, and one bill Complete visibility and control over approval and life cycle management IBM’s cloud service procurement specialists can get new services not on the catalog