Five Cloud Essentials for the Boardroom Cloud is “computing as a service over the internet”

1. Five Cloud Essentials for the BoardroomWhat Banking & Financial Markets Executives Need To Know About Cloud ComputingDavid ZimmermanGlobal Solutions Executive, WW Cloud LeaderIBM Banking and Financial Marketsdavidzim@us.ibm.com

2. Five Cloud Essentials for the BoardroomCloud is “computing as a service over the internet” • 1. Why Cloud for Banking & Financial Markets? • 2. Cloud hype vs. Cloud realities? • 3. Cloud “feels” like IT plumbing, very tactical. . . • Impact on my overall strategy? • 4. What about Cloud’s risks and “hidden costs”? • 5. Cloud economics: What’s the business case for Cloud?

3. 1. Why Cloud? Industry changes mean that Banking & Financial Markets Executives need agility to drive growth and profitability Turbulent global conditions are affecting revenue and reducing demand for services. Rebuilding customer trust and marketplace confidence is critical to future growth. Competition is intensifying with M&A, divestitures, and non-traditional entrants Radically increased oversight is driving investment in risk management technology. $ Mature and emerging market segments are focus on optimizing use of capital. Clients have rapidly evolving expectations for offerings and services. Cloud helps address The Boardroom Paradox: “How do we cut costs today, while still investing in future growth?”

4. Changing Cloud economics: It’s more than just cost savings…Improving Business Agility, too. What is Your Organization’s Level of Cloud Adoption? % of Respondents 91% Piloting 72% Adopting SubstantiallyImplemented +215% Source: IBM/The Economist Cloud-enabled Business Model Survey of 572 leaders

5. 2. “Hype” vs. realities: Common “hype” About Cloud Computing Cheap Cloud: • Rent vs. own computing • Drives growth while saving money Easy Turnkey Completely Flexible Fast results . . . . . . Can be true – IF you set it up that way 5

6. Cloud realities: Forward-thinking companies view Cloud as a force that will impact their business models Strategy: Expect significant increase in substantial change resulting from cloud: 13% 41% Customers: Expect to reinvent their customer value propositions with cloud: 10% 29% Business Value: Expect to create / transform value chain through cloud: 16% 43% Transformation: Shift focus to driving substantial impact on customer relationships: 14% 57% *Source: Institute for Business Value / The Economist

7. Cloud realities: Cloud is already solving many of today’s typical Enterprise challenges • Maintenance accounts for over 70% of the IT budget • Annual operational costs (power, cooling, and management) exceed their acquisition cost by 2-3X • 10 weeks: The mean time to deliver a • new (or expanded) IT Service from • the time of request. Nearly 40% take • more than 90 days. • 2/3’s of companies miss their original • project/solution deployments.

8. Hyper-connectivity Social Media 2 Cost Flexibility Market Adaptability 3 1 • Shifts fixed to variable cost • Pay as and when needed • Faster time to market • Quickly adapt to regulatory-driven changes • Seasonal & special projects • Rapid product, pricing and services innovation Cloud’s Business Enablers Mobile Banking & Eco-system Connectivity Simple Self Service 4 6 • New value nets • Potential new businesses • Enables rapid simulation and development • Hides IT complexity 5 Mobility Big Data Source: IBV Analysis • 3. Cloud “feels” like IT plumbing, very tactical. Impact on my overall strategy? Cloud’s Six potentially “game-changing” business enablers Context-driven Variability Business Scalability • User-defined experiences • Increases relevance • Provides limitless, cost-effective computing capacity to support growth

9. Cloud’s Impact on my overall strategy?Disruptive Leapfrogging: Cloud’s Strategic Impact Cloud Enablement Framework 1. Disruptorscreate radically different value propositions: NewAsian Mobile Banking provider implements Cloud plus 10,000 agents. Accelerates growth Disruptors Create 2. Innovators significantly extend customer value proposition: Cloud accelerated Global Bank’s results “From 45-days to 20 minutes” for their 20,000 developers Innovators Value Chain Transform 3. Optimizersuse the cloud to improve organizational efficiency: Cloud drives European Bank’s 10-month ROI Optimizers Improve Invent Enhance Extend Customer Value Proposition Five Executives discuss Cloud’s disruptive leapfrogging… http://www.youtube.com/watch?v=CD_elWBD1Zk The Power of Cloud -- IBV PoV and Executive Report

10. Competitive Insights: Getting started is easier than you might think.Cloud computing is already transforming the financial services industry Analytics Allows integration of customer data across banking silos to enable near-real-time insight Business services Enables application and service management, customer relationship management, and client and market analytics CollaborationProvides communications and collaboration tools and solutions to enable employees to share information almost seamlessly Desktop and devices Helps reduce costs and complexity, enables better security of personal computer data and facilitates centralized management of critical enterprise data Development and test Helps accelerate provisioning of resources for development and test environments, facilitating faster time to market while supporting reduced costs • Banking & Financial Markets Solutions • Cloud & Payments • Cloud & Retail Banking • Cloud & Financial Markets • Cloud & Mobile Banking • Cloud & Risk Management (Basel III, Solvency II), etc. Infrastructure compute Provides more flexible and elastic on-demand compute resources for variable application scaling Infrastructure storage Ensures that the near-real-time demands of today's trading and analytics processes are maintainable through scalable storage solutions Managed backupEnables high availability through more rapid backup and recovery services SecurityEnforces security and endpoint management to help ensure compliance of corporate governance and IT policies

11. 4.What are Cloud’s risks and “hidden costs”?. . .For starters. . .one size does not fit all. . . Key Takeaway:Cloud Service Level Agreements (SLA’s) are very important. SLA’s record a common understanding about services, availability, security, privacy, governance, data protection, disaster recovery, workloads, audit, priorities, responsibilities, exit strategies, etc. 11

12. Cloud risks and “hidden costs”: Projects can fail for many reasons Unrealistic Expectations Performance Issues Underdeveloped Transformation Strategy Security, Data Protection, Migration, Governance. . . Business Case Poor Due Diligence . . . . . . How do I mitigate Cloud risks? 12

13. Broad 2 1 Performance Impact Innovate and Integrate 4 3 Narrow High Tech High Biz Strategic Focus Cloud’s risks and “hidden costs”? Cloud Strategy is Important“Getting it right, the first time” covers four key dimensions for cloud adoption • A Cloud strategy needs to incorporate four key dimensions in order to fully address the transformation opportunity for the business. • Our guidance builds on a core set of time-based transformative practices, including roadmaps, business and technology architecture, and investment cases. Application and Delivery Platforms Innovate and Integrate Business Models Real time product changes in market Building cloud-native apps on cloud Enterprise Cloud Strategy Infrastructure Platforms Big data feeding the business model Governance integrating with other providers Data Platforms

14. What are Cloud’s risks and “hidden costs”? Cloud Strategy is ImportantThe “right” Cloud Strategy drives your cloud transformation roadmap • Profitable Growth • Cloud business-model ecosystem: customers, partners, suppliers. . . • Governance, Organization and Service impact of cloud • Brutal Efficiency • Testing & Development Services for Cloud • Mobile Innovation in the Cloud • Cloud Application Modernization • ADaaS (Application Development as a Service) • API Centric Architecture & Roadmap 2 • Roadmap • Cloud Infrastructure Strategy and Design • Workload Transformation Analysis • Network Application and Infra Optimization for Cloud • Security Assessment • Security Roadmap • Resiliency Planning • Migration Services • Private Cloud Implementation Services 1 3 4 • Predictive Cloud-enabled Analytics • Data protection & Privacy • Cloud disaster back-up & recovery

15. Services Cloud risks and “hidden costs” : Build it yourself? vs. IBM’s One-stop shopping Deliver Enterprise class, production applications such as SAP & Oracle via IBM’s SmartCloud platform with subscription-based pricing Business Analytics Services Industry services Client defined services Security Services Resilience Services Enterprise applications Partner services Workplace Services Application Services Application Resources Application Lifecycle Application Environments Application Management Unprecedented choice in the deployment and management of applications on the IBM SmartCloud platform The most complete set of automated and integrated application services to support enterprise applications Open standards based platform for portability across Cloud environments Integration Enterprise class governance, administration and management control Multiple security and isolation options built into the virtual infrastructure and network Real business-centric SLAs that align IBM accountability to your business Enterprise Enterprise+ Management and Support Payment and Billing Infrastructure Platform Security and Compliance Availability andPerformance Enterprise Enterprise Enterprise data center A B Shared cloud services Hosted private cloud Managed private cloud Multiple delivery models allow clients to optimize against economics, integration, security and control.

16. Cloud risks and “hidden costs” : Workload is Important New growth workloads made possible by cloud Ready for cloud Collaborative Care Healthcare Payments Analytics Infrastructure Storage Wealth Management Banking & Financial Markets Solutions Information intensive Risk Management Isolated workloads Collaboration Sensitive Data Workplace, Mobile, Desktop & Devices Mature workloads Highly customized Business Processes Not yet virtualized 3rd party SW Pre- production systems Disaster Recovery Complex processes & transactions Evaluate: May . . .or may not. . . be ready for Cloud based on their attributes or maturity Development & Test Batch processing Infrastructure Compute Regulation sensitive Key Takeaway: Not all workloads may be suited for Cloud

17. Cloud risks and “hidden costs”: Architecture is Important New! Get it right, the first time: Cloud Architecture is Important: IBM joins the new OpenStack Foundation as Platinum Sponsor Platform as a Service Technologies Lifecycle Resources Environments Applications Integration Objectives Foundation Infrastructure as a Service Technologies • Contribute to open source projects and provide resources to help shape and promote the organization • Continues IBM strategy to leverage standards (LinkedData, CCRA, TOSCA, etc.) that accelerate clients’ success with cloud • Work with 180 companies to focus the industry around an ubiquitous Infrastructure as a Service (IaaS) open source cloud computing platform for public and private clouds • Develop and sustain a vibrant, innovative ecosystem and become a platform of choice to build upon Infrastructure Administration Performance Security Usage LinkedData, OSLC*, TOSCA* OpenStackOpen SourceReference IBM’s Cloud Computing Reference Architecture (CCRA) Cloud StandardsCustomer Council(CSCC) IBM’s Ecosystem approach to standards *Open Services for Lifecycle Collaboration; Topology and Orchestration Specification for Cloud Applications

18. Cloud risks and “hidden costs”: Security is ImportantIBM’s history with Cloud Computing in DefenseA Security Framework developed through real-world operational experience • NATO ACT announces their Mission Development Cloud, a platform for federating NATO strategic and tactical mission experiments • Defense Agency’s Cloud, one of the first operationally deployed Cloud infrastructures with the US Intelligence community • Provides self-service on-demand access to imagery exploitation assets • Joint effort with the US Air Force creates an advanced cyber security and analytics system on a hardened Cloud Infrastructure protecting national data Mission Value • Through the NCOIC*, IBM demonstrates a cloud-delivered Common Operational Picture integrating real-time track data across nine worldwide nodes. *NETWORK CENTRIC OPERATIONS INDUSTRY CONSORTIUM Best Cloud Computing Security 2009 2010 2013+ Time & Innovation

19. Cloud risks and “hidden costs”: Migration & Applications are ImportantCloud Application Modernization requires a factory model for migration/modernization of applications to Cloud. . . Step 1: How to get there Step 3: Tool Output Strategy Design, Development and Integration Migration / Deployment N-Tier loosely coupled architecture Open standards based (JEE) WebServices with SOAP protocols Data communications through standard protocols (JDBC/ODBC) Remedy latest version capable of running on Cloud / Virtualized Platform Rebuild candidates Migration candidates Migrate Analysis / Implementation Planning Transformation candidates Design Transform Deploy Cloud Deploy Models Step 2: Tools • An analytical approach to decide on “cloudability” and “API”s for modernization of applications: Migrate / Transform / Rebuild • Tools to conduct analysis: Cloud Transformation Tool, Workload Analysis Tool • Methods, processes and tools - allowing the scale of mass migration • A control model for approaching cloud elasticity Cloud Transformation Tool Workload Analysis Tool

20. Growth: How to reduce time to market for new products, services & segments. . .while also reducing Cost/Income ratio? Efficiency: How to reduce IT maintenance costs (~70% of total IT spend) while accelerating new solution development results? How to reduce infrastructure duplication? How to simplify products and processes? Resilience: How to build an evolutionary architectural framework that induces control and supports growth over the next ten years? Regulation: How to efficiently adapt to regulatory-driven change? Mobile & “Big Data” Analytics Innovation: How to differentiate? How to create a customer-centric view? Lack of Compelling Event More pressing uses of capital Difficult Business case ROI is not sufficient to justify the risk and cannot be realized quickly enough Time-to-Market improvement is not sufficient to justify Business Case Business Case relies on anticipated revenue growth projections rather than “hard” cost reductions Transformation Risk Underdeveloped Business Transformation Roadmap Inexperience with complex projects Risk to Reputation 5. Cloud Economics: Board-level ConsiderationsPros:Cons:

21. Summary: Cloud is driving disruptive leapfrogging and business-model transformation. • Getting started is easier than you might think. . . • www.ibm.com/cloud