Tieto Strategy 2019Kimmo Alkio

President and CEO, Tieto Corporation

Reorientingfor growth

Accelerate growth portfolio and M&A

Build capabilities in Sweden and industry solutions expansion

Customer Experience and Learning as a lifestyle

✓Long term positive

development in CX and EX

✓Healthy investments

including internal startups

✓Healthy multi-year

financial performance

✓Acquisitions x 9 in

software and consulting

Accelerate innovationand growth

2016

2014

2018

Consistently creating value to all stakeholders

2

Autonomous vehiclesCyber security

Virtual reality

Re-fabricated industries

Machine learning, robotics

Natural language processing

Hyperscale

Blockchain

Design

Platform economy

Digital identity

5G

Hyper

personalized

Circular and

sustainable

society

On-demand,

autonomous

Privacy and

ethics

Wellbeing and

longevity

Smart

lifestylesArtificial intelligence

Living the data-rich world

3

Personalized

experiences

Data-driven value

Cross-industry

ecosystems

Agile and adaptive

TIME

VALUE

CREATIONTODAY

Omnichannel

Industry 4.0

Servitization

Realtime

payments

Predictive

healthcare

Smart cities

Sustainability

IoTDigital

citizen

services

Connected

vehicles

Industry

clouds

Connected

consumer

products

Designed experiences and data-driven services

Agile business models, services and ways of working

Make my product / service better, faster and cheaper

Definite products, processes and technologies

Customer agenda for driving competitiveness

Changing industry paradigm with new data-driven experiences

and business models

4

Data at the core of innovation and value creation

Adaptenterprise

architecture

Data and insights

Design and experience

Renewapplications

Agile

Hybrid Infrastructure

Cloud first Connected products Agile

AI Ecosystems Platforms

Cyber security

ML/NLP/RPA

Automation

Microservices

Agile sprints

co-creating

business

outcomes for

customers

Active innovation agenda

in the market

Design and data led

Agility driving both

innovation and efficiency

Faster time to market

5

Making customers

more competitive

Creating great

everyday experiences

6

Services enabling

customers’

competitiveness

Networked ways

of working

and leadership

Context-rich

customer

engagement

Leading CX in the market

Most engaging workplace

Upgraded financial ambition

We aim to make customers more competitiveStrategy 2019 choices and ambition

7

Services enabling customers’

competitiveness

8

Digital

Experience

Hybrid Infra

Industry

Software

Product

Development

Services

Enable new business models and

experiences for customers.

Capability uplift

Agile at scale

Ensure customer’s business continuity,

efficiency and unified service experience.

Multi-cloud and scale

Automation and quality

Drive customer’s business critical

processes and functions.

Common R&D practices

Expansion

Making customers products connected with

world-class engineering.

New industry segments

Global expansion

Services enabling customers’ competitivenessTieto Service portfolio

9

Adaptenterprise

architecture

Data and insights

Design and experience

Renewapplications

Agile

Digital Experience

Cloud native

development and

system integration

Technology advisory

incl. architecture

Design, business

consulting and CX

Data science,

analytics and

platforms

Strong foundation with

existing businesses and

investments

Agenda to expand

capabilities

(with ˜2500-3000 people)

Centers of Excellence to

incubate future services

Digital Experience is the spearhead enabling customer’s business

agility and innovation

10

Multicloud orchestration

Global technology partners

Robotics and automation

High availability and 24x7

End-user services

Best service experience

across heterogenous

environments

Leading service integrator

in the Nordics

Tieto dynamic

landscapeOneCloud Nordic data-centers

High security

Government cloud

Global partnerships Automation

Hosted workspaceService Integration &

Management

Hybrid Infra to drive best service experience, quality and

24x7 business continuity

11

Hybrid Infra

PRODUCTION

EXCELLENCE

OIL & GAS

SMART UTILITY

CREDIT

PAYMENTS

WEALTH

BANKING

CASE MANAGEMENTEDUCATION

HEALTHCARE

WELFARE

Strong industry fit and

knowledge base

Drive synergies and

common best practices

Operate as a “Software company”

Look for expansion opportunities

and partnerships

Industrial

Public

Financial

Differentiating Industry Software to focus on

functional upgrade and selective business expansion

12

PDS continues to expand its global customer base and

capabilities in software R&D services

Strengthen customer base and expand to new industries beyond

Telecom, Automotive, Consumer Electronics and Semiconductor

Excel in SW R&D services in selected industry domains with

leading edge technologies such as 5G, Cloud, Positioning, etc.

Accelerate growth focusing on expanding global capabilities

and customer base

Strengthen global scale expanding delivery centers

Virtualisation

SDNV2X - Connected car

NB-IoT

5G Network Slicing

Android Automotive

TensorFlow

IoS Apps

Ambition

Customer’s first choice

for software R&D services

13

© Tieto Corporation

Secre

t

Key markets: Finland, Sweden and Norway

Building on strong global delivery capabilities and long term

off-shore development

Focus on Nordic enterprises and the public sector

Selective international expansion of Industry Software

Longer term ambition for broader Tieto expansion

in European markets

PDS continues to grow its global customer base -

focusing on software R&D

Global delivery capabilities:China, Czech, India and Poland

Nordic focus, serving customers globally – with a global Tieto team

14Employing 15 000+

experts globally Serving customers in over

90 countries world-wide

Context-rich customer

engagement

15

Context-rich customer engagement co-creating business value

with customers

Business

Partners

Client

Partners

Experience teams

Partners with domain knowledge to

co-create customer solutions and

ensure fulfillment.

Agile experience teams led by the

partner to realize the solutions and

utilizing all Tieto capabilities.

Expert teams and service practices

to provide people and capabilities

to Experience teams.Experience teams

Expert teams and services

Design and

experience

Renew

applications

Adapt

enterprise

architectureData and

insights

Agile

Hybrid Infrastructure

Customer’s renewal agenda

16

Experience teams

Networked ways of working

and leadership

17

Context-rich partners and

experience teams

co-creating customer value

Fully-accountable

businesses with minimal

internal coordination

Fit-for purpose measures

and steering per business

Leadership through

network of teams with

a purpose (vs control)

Customer

engagement

Business

structure

LeadershipManagement

system

Tieto structures, go-to-market and management system enabling

networked ways of working

18

Employee

Each service choice as a distinct business

(Digital Experience, Hybrid Infra, Industry

Software and PDS).

Global Delivery embedded into businesses

and CoEs incubating future capabilities and

services.

Each business actively contributing to the

success of Experience teams – for maximum

customer value.

Nordic go-to-market for Digital Experience,

Hybrid Infra and Industry Software, led through

a country management network.

Industry Software with own international

go-to-market.

Product Development Services with own

global go-to-market.

Digital

Experience

Product

Development

Services

Hybrid Infra

Industry

software

Software

assetsExpert teams

Services

Centers of Excellence (CoEs)

Group management and Support

Partner-led experience teams

Agile teams for customer needs, with fully accountable businesses

19

Customer

Global Delivery

Country Management Network

Industry SoftwareHybrid Infra Product Development

Services

Digital Experience

CUSTOMER

• Country market share

• CX, EX

• Resource prioritization

• Growth, P&L

• CX, EX and quality

• High customer activity

FI

SE

NO

Group management and Support

Centers of Excellence and Global Delivery centers

• Four distinct businesses with full accountability: Digital Experience, Hybrid Infra, Industry Software and PDS

• Digital Experience businesses per country to maximize local consulting led market opportunity

• Go-to-market in the Nordics led through a country management network, represented by all relevant businesses

• Centers of Excellence to incubate new technologies, solutions and services

FI SE NO

Tieto’s business and go-to-market structureNetworked ways of working

20

CEO

CFOChief of Strategy

Chief of

Talent & CultureChief of

Tech & QualityChief of

ExperienceHead of

CoEs*

Managing

Partner

Finland

Managing

Partner

Sweden

Managing

Partner

Norway

Head of

Hybrid Infra

CUSTOMER

Head of

Industry

Software

Head of

PDS

Client and consulting partners Experience teams

Kimmo Alkio

Tomi HyryläinenKishore Ghadiyaram

Katariina Kravi Markus Suomi Julius Manni Ari Järvelä

Satu

KiiskinenHåkan

DahlströmN.N.

Petteri

UljasChristian

Segersven

Tom

Leskinen

*Centers of Excellence

Strategy and group performance

Capability and Experience

Performance

Customer and market impact

Introducing Tieto Leadership Network

21

Increased market activity – more time with customers

Expanding the scope within a customer engagement

Reduced internal administration and coordination

More relevant to customers with right contextual knowledge

Simplified management system and measures

Growth, CX

Growth, CX

Efficiency

CX, EX

EX, Efficiency

ImpactBenefits

Operational simplification

potentially impacting ˜700

roles globally, resulting in

annualized savings of

30-35M€

Operational simplification and networked ways of working

drive Tieto’s agility and efficiency

22

Financial ambition

23

Higher growth and profit ambitions while maintaining attractive dividend policy

Ambition 2022

Growth over 5% (CAGR 2019–2022)

Adjusted operating margin (EBIT) 13%1)

1) Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital

gains/losses, goodwill impairment charges and other items affecting comparability

In accordance with IFRS 16, taking effect on 1 Jan 2019 2) In accordance with IFRS 16, taking effect on 1 Jan 2019 – equals to around 1.5 prior to IFRS 16

Aim is to increase base dividend

annually in absolute terms

Net debt/EBITDA below 2.0

in the long term2)

• Temporarily may exceed 2.0 during the period

• CAPEX expected to remain below 4% of sales

• Strong cash flow driving attractive dividend profile

• Continued active M&A in addition to organic growth

• Main drivers include growth, simplified operations

and automation

24

Profitability

Product Development

Services

Industry

Software

Hybrid Infra

Growth

Digital Experience• Consulting-led market demand

• Active investments into capabilities

• Agile ways of working

Share of sales

... ...

...

.

Performance drivers

..

..

..

.

All businesses contributing to Tieto’s growth and profitability ambition by 2022

• Investments into service experience

• Customer base and partnerships

• Automation activities

• Best-in-class competitive software

• Software functionality and SaaS

• Common practices and knowledge

• Demand for connected products and 5G

• Knowledge in connectivity domain

• Global customer reach and delivery

. ...ContributionLow High

✓ Businesses as the

reportable segments

✓ Updated segment

reporting effective

as of Q2 2019

Businesses

25

Investments focusing on accelerating digital capabilities and

software business expansion

Investment focus

• Accelerate digital capabilities e.g. Design, AI, Public cloud

• Incubate future technologies e.g. Blockchain

• Solution accelerators, data assets and platforms

• Ongoing renewals in Healthcare, Utilities and Payments

• Expand functionality to drive competitiveness

• Selective international expansion and SaaS models

• Infra service experience and multi-cloud orchestration

• Enable PDS customer base expansion

• Skill renewal and learning as a Lifestyle

Investment drivers

Total investment level

to be maintained at

˜5% of revenues

Digital Experience

Industry Software

Other

70-80% of

investments

26

Agile implementation of strategy in annual sprints

• Operational transition and efficiency

• Renew customer engagement

• Investments into Digital Experience acceleration

• Continued focus on quality and automation

• PDS expansion continues

Transition and

Digital

Experience

acceleration

2019

New businesses

and market

expansion

2022

Accelerate

innovation and

growth

Leading CX

in the

market

Most

engaging

workplace

>5% growth

and 13% adj.

operating

margin

2018

• Long term positive development in CX and EX

• Growth ˜7% in local currencies

• Reached long-term profit ambition of 10% EBIT27

Strategy 2019 summary

• Strategy to make customers more competitive focusing on• Digital Experience

• Renewed customer engagement

• Simplified operations

• Digital Experience as the main growth driver, while all businesses expected to grow above market

• Investments to build data-driven services and capabilities - addition of 2500-3000 people during the

strategy period to drive growth

• Operational simplification potentially impacting ˜700 roles globally, resulting in annualized savings

of 30-35M€

• Upgraded financial ambition growth >5%, adjusted operating margin 13%, attractive dividend policy

maintained

• Gradual transition to the new structures during Q2’19

28

Creating great everyday experiences in the data-rich world

Advancing Nordic

wellbeing and

sustainable societies

Leading AI ethics

Enabling digital

democracy with

smart use of technology

Creating unique

differentiation for

customers

Contributing to open

source, communities and

standards

Learning as a lifestyle

through global networks

Open source culture

creating engaging

work environment