International Business Machines Corporation · NYSE:IBM
International Business Machines — IBM — Investor Day (2021)
75 slides from International Business Machines's investor day presentation, 2021
Slide 1: IBM Investor Briefing 2021
IBM Investor Briefing 2021
Slide 2: Introduction
Introduction IBM Investor Briefing 2021 — Patricia Murphy Vice President, Investor Relations
Slide 3: IBM Investor Briefing 2021 Agenda
IBM Investor Briefing 2021 Agenda Strategic Overview Arvind Krishna, Chairman and Chief Executive Officer Software Red Hat Paul Cormier, President and Chief Executive Officer, Red Hat Software Tom Rosamilia, Senior Vice President, Cloud and Cognitive Software Consulting Mark Foster, Senior Vice Pres
Slide 4: Forward-looking statements and non-GAAP information
Forward-looking statements and non-GAAP information Certain comments made in this presentation may be In an effort to provide additional and useful information regarding characterized as forward looking under the Private Securities IBM’s historical results and forward-looking financial information o
Slide 5: Strategic Overview
Strategic Overview IBM Investor Briefing 2021 — Arvind Krishna Chairman and Chief Executive Officer
Slide 6: Creating shareholder value through growth
Creating shareholder value through growth Optimizing portfolio Increasing focus Generating $35B of to drive sustainable and agility to better free cash flow over mid-single digit serve clients the next 3 years to revenue growth enable investments 1 2 3 6
Slide 7: IBM's hybrid cloud and AI platform approach
IBM’s hybrid cloud and AI platform approach IBM Consulting Business Transformation • Technology System Integrator Partners Consulting • Application Operations IBM Software Automation • Data & AI • Security • Software and SaaS Partners IBM Cloud Paks Transaction Processing Red Hat Hybrid Cloud Platfo
Slide 8: Investments and actions to drive performance
Investments and actions to drive performance Optimizing Increasing Simplifying Expanding Aligning Advancing portfolio investments go-to-market ecosystem incentives culture model to growth and growth priorities mindset 8
Slide 9: Creating shareholder value through growth
Creating shareholder value through growth Optimizing portfolio Increasing focus Generating $35B of to drive sustainable and agility to better free cash flow over mid-single digit serve clients the next 3 years to revenue growth enable investments 1 2 3 9
Slide 10: Software
Software IBM Investor Briefing 2021 — Red Hat Paul Cormier President and Chief Executive Officer, Red Hat Software Tom Rosamilia Senior Vice President, Cloud and Cognitive Software
Slide 11: Red Hat
IBM Red Hat Investor Briefing 2021 — Paul Cormier President and Chief Executive Officer, Red Hat F25426
Slide 12: Red Hat is the world's leading provider of open source enterprise IT solutions
Red Hat is the world’s leading provider of open source enterprise IT solutions More than Red Hat was the 94% 175 first and only multi-billion of the Fortune 500 use Global reach through IBM Red Hat countries of operation open source company products and solutions1 in the world2 Be the trusted choice
Slide 13: Hybrid, Multi-Cloud Evolution
Hybrid, Multi-Cloud Evolution Yesterday-Today-Tomorrow Today-Tomorrow Future Private Datacenter to Public Cloud Public Cloud to Hybrid Cloud and Hybrid, Multi-Cloud extends to Multi-Cloud Enterprise Edge Infrastructure DATACENTER-CENTRIC SERVICES-CENTRIC SERVICES ON IT SOLUTIONS DISTRIBUTED EDGE Del
Slide 14: Red Hat addresses the challenges of Hybrid, Multi-Cloud
Red Hat addresses the challenges of Hybrid, Multi-Cloud Hybrid, Multi-Cloud Architectures Challenges and Red Hat Value Compliance & Security Certified and compliant Platform, Kubernetes 95% of customers have both and Linux native security, decades of proof public and private cloud environments insta
Slide 15: Building hybrid, multi-cloud on OpenShift and Cloud Paks
Building hybrid, IBM Consulting IBM Consulting multi-cloud on IBM Software OpenShift and Cloud paks SI ecosystem with partners Cloud services ISV ecosystem OpenShift Partner Red Hat services Enterprise Linux Red Hat Ansible Marketplace cloud.redhat.com On Premise Edge AWS Azure Google Alibaba IBM Cl
Slide 16: IBM and Red Hat hybrid, multi-cloud customer success
IBM and Red Hat hybrid, multi-cloud customer success Schlumberger’s cloud-based solution, Red Hat powered innovation across Adobe Experience Manager 6.5, part built exclusively on Red Hat Telefonica units for Open RAN, Cloud of Adobe Experience Cloud, on Red OpenShift, integrated by IBM Garden platf
Slide 17: Four objectives to grow customer value and scale the enterprise
Four objectives to grow customer value and scale the enterprise Scale Our Core Extend Red Hat Evolve Customer Foster Our Open, Business to Cloud Services Success Inclusive Culture and Edge Expanding our reach Providing easy to use Ensuring consistent, Creating the best place via digital engagement,
Slide 18: Red Hat Summary
Red Hat Summary Red Hat uniquely positioned to capture the significant hybrid, multi-cloud opportunity, extending to Edge Aligned execution into the opportunity across Red Hat, with a maniacal focus on customer success Delivering high teens revenue growth, accelerated by leveraging partner ecosystem
Slide 19: Software
Software IBM Investor Briefing 2021 — Tom Rosamilia Senior Vice President, Cloud and Cognitive Software
Slide 20: IBM Software incumbency establishes a strong foundation for growth
IBM Software incumbency establishes a strong foundation for growth 65%+ 40,000+ 77% of Fortune 100 rely on IBM Watson client engagements of Gartner Magic Quadrants feature WebSphere IBM software in Leadership or Challenger positions 20 150B+ industries are modernizing security events managed per day
Slide 21: Software's role in IBM's Strategy
Software’s role in IBM's Strategy IBM Consulting System Integrator Partners Help clients address need for flexible deployment with software built on Red Hat to maximize value for hybrid cloud IBM Software (IBM Cloud Paks) Software and Commercialize innovation together with IBM Automation • Data and
Slide 22: Investing in software capabilities to architect clients' digital transformations
Investing in software capabilities to architect our clients’ complex digital transformations Predict Automate Secure Modernize Empower data-driven Make tasks and experiences Create a risk-aware, secure Achieve greater business decisions and predictability more productive with AI- business by gaining
Slide 23: Focused on growth in the most innovative areas
Focused on growth in the most innovative areas Predict Automate Secure Modernize Intelligent Data Fabric to Achieving scale through Zero Trust to secure Delivered via Cloud Paks on predict outcomes in a intelligent automation and everything Red Hat OpenShift across complex and siloed data AIOps hybr
Slide 24: Predict outcomes with data fabric
Predict outcomes with data fabric Key Differentiators Speed and Cost Industry’s fastest data warehouse – up to 8x A data fabric is the one New Data Fabric innovations enable clients to: faster at nearly ½ the cost architectural approach that can address the extreme levels of diversity, distribution,
Slide 25: Automate at scale with AI
Automate at scale with AI Key Differentiators End-to-End Capabilities Most comprehensive AI- driven automation Automation empowers people Addressing client pain points with AI-driven capabilities for business to focus on higher value activity, Automation processes and IT improves experiences and spe
Slide 26: Secure everything with Zero Trust
Secure everything with Zero Trust Key Differentiators Deep Expertise 8K global security experts, 19K clients; 10K+ patents IBM delivers an open, modern Align security strategy to the business to Zero Trust approach, with drive better understanding, quantification security around every user, and mana
Slide 27: Modernize and Innovate with Cloud Paks
Modernize and Innovate with Cloud Paks Key Differentiators Run Anywhere Run cloud-native / cloud- ready applications across IBM Cloud Paks hybrid, multi-cloud AI-powered software environments designed to enable modularity, customization, Pre-Integrated ease of deployment, Cloud Paks for Bundled suit
Slide 28: Driving client value and IBM growth
Driving client value and IBM growth Predict Automate Secure Modernize Thousands of customer 15% improvement in 300% reduction in false 15 weeks to a new call compliance audits resource utilization by positive alerts check-in solution handled per month with automating VM placement connecting 12 major
Slide 29: Software's Investment Priorities
Software’s Investment Priorities Key Acquisitions Strategic Modern Cloud Go-to-market Client Success innovations to scale partnerships Pak solutions focus on Managers in our products capabilities in to expand the to build once technology to support and services automation, reach of key and run exper
Slide 30: Our Path Forward
Our Path Forward Software Double-digit growth in hybrid cloud opportunity Revenue Hybrid Platform for Software & Solutions 38% TTM Hybrid Cloud revenue growth Transaction Red Hat Processing 3,200 clients on IBM hybrid cloud platform Automation Health 4 pts software revenue growth driven by Red Hat S
Slide 31: IBM Software Summary
IBM Software Summary Software core to clients’ digital transformation Focus on key growth areas including Red Hat, data fabric, automation and security Deliver Cloud Paks with domain-specific and AI capabilities to accelerate application modernization Maximize the value of applications, business pro
Slide 32: Consulting
Consulting IBM Investor Briefing 2021 — Mark Foster Senior Vice President, Global Business Services Kelly Chambliss Senior Vice President, Americas and Strategic Sales, Global Business Services John Granger Senior Vice President, Hybrid Cloud Services and Chief Operating Officer, Global Business Ser
Slide 33: IBM Consulting is a leading player in the growing global consulting sector
IBM Consulting is a leading player in the growing global consulting sector 140K 80K 15K Highly skilled professionals in over Cloud and enterprise application Enterprise strategy and business 150 countries experts design professionals >40 100% #1 Leader rankings in analyst reports Of Top 10 banks, te
Slide 34: Consulting's role in IBM's Strategy
Consulting's role in IBM's Strategy Leading player in the growing global IBM Consulting System Integrator consulting sector Business Transformation • Partners Technology Consulting • Application Operations C-suite thought leadership on industry digital transformation and technology IBM Software Soft
Slide 35: Client Imperatives Market Opportunities
Client Imperatives Market Opportunities 1 Digital Transformation Journey Growth Cost Reduction Productivity Acceleration and Pervasiveness 2 Need for Business Transformation Talent Agility Innovation Execution Vehicles and Trusted Partners 3 Massive Hybrid Cloud and AI Technology Enablement at Scale
Slide 36: Power of IBM Consulting
Power of IBM Consulting Business Technology Consulting Application Operations Transformation ✓ End-to-end Strategy, Experience, ✓ End-to-end Cloud Strategy, Build, ✓ End-to-end Legacy – Hybrid Process, BPO, ERP and Data Migrate and Modernize Cloud Application Management aligned to Buyer Domains – Ne
Slide 37: Bringing it Together at the Client
Bringing it Together at the Client Accelerate Industry Business Transformation and Hybrid Cloud Journey IBM Technology Red Hat OpenShift Cloud Paks IBM Cloud Watson AI Maximo Application Suite Security Software Sterling Supply Chain IBM Quantum Modernize Engage and Manage Transform Modernize Manage
Slide 38: IBM Garage
IBM Garage Co-Create Co-Execute Co-Operate Partnering with Enterprise Design Purposeful agility and Technology that scales our clients to Thinking and agile skills transformation through open drive results by and knowledge transfer approaches architectures leveraging modern ways of Bring together th
Slide 39: Consulting's Investment Priorities
Consulting’s Investment Priorities Continuous Acquisitions New offerings Assets and Brand Identity Strategic hiring and to scale and practices platforms to reinforce our partnerships skilling capabilities in to align with to accelerate differentiation to offer deep of talent cloud, data, key domains
Slide 40: Driving Client Value with our Strategic Partners
Driving Client Value with our Strategic Partners #1 Certified Global Platinum Partner Global Platinum Partner #1 Services Integrator Partner partner 1,200 certifications 10,000 certifications 38,000+ global 1000+ shared client consultants AEM on Red Hat AI services with Einstein footprint OpenShift
Slide 41: IBM Consulting in Action: Delta Airlines
IBM Consulting in Action: Delta Airlines As part of its digital transformation, Delta is migrating most of its data and applications to the cloud for improved customer experience and greater efficiency across its business. Strategic Elements – Business transformation to improve passenger 90% 30% 100
Slide 42: Our Path Forward
Our Path Forward Consulting Double-digit growth in hybrid cloud opportunity Revenue for Consulting >1.1 book-to-bill over the last 12 months Application Application +20% TTM Hybrid Cloud revenue growth Business Business Operations Operations Transformation Transformation Investing in skills, acquisi
Slide 43: IBM Consulting Summary
IBM Consulting Summary Partner to drive global industry transformations and develop technology-led business strategies Deliver client value with skills and offerings in the highest growth markets of hybrid cloud and intelligent workflows Pull through IBM technology and establish IBM’s hybrid cloud p
Slide 44: IBM Consulting
IBM Consulting Strategy Experience Technology Operations
Slide 45: Infrastructure
Infrastructure IBM Investor Briefing 2021 — Ric Lewis Senior Vice President, Systems
Slide 46: IBM Infrastructure's expansive install base runs today's digital economy
IBM Infrastructure's expansive install base runs today’s digital economy 45 20K 94% of the world’s top 50 largest banks clients run IBM Power of the Fortune 50 companies use the run on IBM Z IBM Cloud 19B 200K 77K fully encrypted transactions can run storage all-flash array systems Infrastructure Su
Slide 47: Infrastructure's role in IBM's Strategy
Infrastructure’s role in IBM's Strategy IBM Infrastructure and support provide trusted, agile and secure solutions for hybrid cloud IBM Consulting System Integrator IBM Z is the premier transaction processing Partners platform with leading security, resilience and scale IBM Infrastructure is optimiz
Slide 48: Infrastructure innovations deliver differentiated value to IBM clients
Infrastructure innovations deliver differentiated value to IBM clients Infrastructure in Artificial Intelligence Regulatory Clouds Hybrid Cloud IBM Z and Distributed Infrastructure Infrastructure is optimized from silicon IBM Cloud for Regulated Industries is are uniquely positioned for hybrid to ap
Slide 49: IBM Z is essential to hybrid cloud infrastructure and the digital economy
IBM Z is essential to hybrid cloud infrastructure and the digital economy Continuous innovation to an enduring platform… …Driving strong business momentum Enterprise-grade cyber security z15 program revenue >100% of z14 Encryption everywhere with 100% data privacy on prem through first 2 years of pr
Slide 50: IBM Infrastructure optimized with AI delivers new insights
IBM Infrastructure optimized with AI delivers new insights for business and operations Business Challenge Key Differentiators – Real-time AI for data at the point – IBM Telum processor for IBM Z of creation • First processor with on-chip accelerator for – Fast access to data with “AI anywhere” AI at
Slide 51: Significant cloud opportunity exists for Regulated Industries
Significant cloud opportunity exists for Regulated Industries % of Total Market Workloads on Public Cloud Business Challenge – Compliance costs continue to rise due to complexity as: 30% Total Market 25% • Regulators consider third parties an extension of financial 25% institution’s infrastructure 2
Slide 52: IBM Cloud for Regulated Industries lowers clients' risk
IBM Cloud for Regulated Industries lowers Key Differentiators clients’ risk and accelerates time to value Maintain Compliance Pre-configured Only cloud with solutions tailored for financial services controls enable continuous compliance 450+ clients 115 leading ISVs on ~80% of all Financial Accelera
Slide 53: Clients choose IBM for Hybrid Infrastructure
Clients choose IBM for Hybrid Infrastructure Driving digital technological advancement with BNP Paribas, serving nearly 33 million customers BNPP and IBM are creating a Financial Institution Platform to meet complex security and regulatory mandates while maintaining a premier client experience for B
Slide 54: Our Path Forward
Our Path Forward Infrastructure Double-digit growth in hybrid cloud opportunity Revenue Hybrid for Infrastructure Infrastructure Capture new workloads and improve IBM Z IBM Z program-to-program performance with continuous innovation and modernization Infrastructure Support Significant opportunity fo
Slide 55: IBM Infrastructure Summary
IBM Infrastructure Summary IBM Infrastructure is uniquely optimized for critical workloads enabling clients to thrive in today’s digital economy IBM Z is the core enterprise platform where industry leaders are growing deployments of mission-critical business applications and data Innovations in AI a
Slide 56: Financial Model
Financial Model IBM Investor Briefing 2021 — James Kavanaugh Senior Vice President and Chief Financial Officer
Slide 57: IBM's integrated capabilities in a platform-centric model
IBM’s integrated capabilities in a platform-centric model IBM Consulting System Integrator Business Transformation • Partners Trusted digital transformation partner; drives our hybrid Technology Consulting • Application Operations cloud platform adoption and pulls through IBM technology IBM Software
Slide 58: Creating value through focus
Creating value through focus Aligning operating model to Prioritizing capital Improving growth trajectory platform-centric business allocation to investments driven by leading hybrid with increased ability to for growth with sustained cloud & AI capabilities execute shareholder returns 58
Slide 59: Simplified segment reporting aligned to platform-centric model
Simplified segment reporting aligned to platform-centric model New Segment Reporting IBM Consulting System Integrator Consulting 2020 Revenue: ~$16B Business Transformation • Partners – Business Transformation Technology Consulting • – Technology Consulting Application Operations – Application Opera
Slide 60: Focused Hybrid Cloud and AI company post separation
Focused Hybrid Cloud and AI company post separation IBM IBM Pre separation Post separation * $B Incremental External ~$2.5 Increased focus on hybrid cloud Kyndryl platform strategy $73.6 Sales ~ $55 2020 Clear trajectory for accelerated Revenue Continuing revenue and free cash flow Operations growth
Slide 61: Superior portfolio mix post separation with greater exposure to growth areas
Superior portfolio mix post separation with greater exposure to growth areas 2020 Revenue Mix 2020 Recurring Revenue Increased mix to higher-growth IBM maintains >50% of recurring revenue, software and consulting with a higher-value composition Pre Separation Post Separation Pre Separation Post Sepa
Slide 62: Value creation driven by improved revenue and free cash flow growth
Value creation driven by improved revenue and free cash flow growth IBM Mid-term Model (2022– 2024) Revenue Growth Free Cash Flow Growth* Mid-Single Digit High Single Digit ~$750M growth/year ~$3B Add what thisgrowth/year drives per year? Or mid- Add what this drives per year? Or mid- term? ~$35B cu
Slide 63: Sustainable mid single-digit revenue growth supported by significant actions
Sustainable mid single-digit revenue growth supported by significant actions to accelerate change Mid-term Model Mid-term Model Revenue Growth Points Contribution Ability to Execute Platform-centric business model Consulting High Single Digit 2 pts Redesigned go-to-market and incentive structures Ex
Slide 64: Key performance metrics provide enhanced transparency
Key performance metrics provide enhanced transparency Mid-term Model Revenue Growth Performance Metrics – Hybrid Cloud Revenue – Service line growth Consulting High Single Digit – Signings – Hybrid cloud platform engagements – Book-to-Bill – Human capital metrics Mid-Single Digit – Hybrid Cloud Reve
Slide 65: External relationship with Kyndryl adds three points of one-time revenue growth
External relationship with Kyndryl adds three points of one-time revenue growth in 2022 above mid-term model 2022 Net Yr/Yr IBM Segment Revenue Contribution Points of Growth Points of Growth Segment Type of Kyndryl Purchases ~$2B ~3 pts Business Transformation, Technology Consulting -- -- -- Consult
Slide 66: Higher-value portfolio mix drives margin expansion and cash flow growth
Higher-value portfolio mix drives margin expansion and cash flow growth Mid-term Model Mid-term Model Mid-term Model Revenue Growth Pre-tax Profit Margin Contribution to Cash Growth Consulting High Single Digit Low Teens ~25% Mid-Single Digit Approaching 30% ~75% Software including Red Hat high-teen
Slide 67: Strong free cash flow generation enables incremental financial flexibility
Strong free cash flow generation enables incremental financial flexibility IBM Model Annual Growth 2022-2024 Sources 2022-2024 Uses ~$40B ~$3B Incremental Debt Capacity Revenue Growth Available for Mid-single digits Investment ~$750M Free Cash Flow Shareholder Free Cash Flow Growth* Returns High sin
Slide 68: Capital allocation supports investment for growth and shareholder returns
Capital allocation supports investment for growth and attractive shareholder returns 2022-2024 Uses Reinvesting our growth – Hybrid cloud & AI Leadership Available for Investment – Emerging technologies – Ecosystem Attractive shareholder returns with initial combined dividend expected to be no less
Slide 69: Creating shareholder value through growth
Creating shareholder value through growth Sustainable mid-single digit revenue growth, with superior business mix ~$35B of cumulative free cash flow generation over the mid-term horizon Simplified structure with improved ability to execute and increased transparency 69
Slide 70: Q&A
Q&A IBM Investor Briefing 2021 Arvind Krishna Chairman and Chief Executive James Kavanaugh Senior Vice President and Chief Financial Officer Paul Cormier President and Chief Executive Officer, Red Hat Mark Foster Senior Vice President, Global Business Services Tom Rosamilia Kelly Chambliss Senior Vi
Slide 71: IBM Investor Briefing
IBM Investor Briefing 2021
Slide 72: Our Path Forward
Our Path Forward Leveraging a Improved Growth Operating Model Increased Ability to Prioritized Capital Strong Foundation Profile Alignment Execute Allocation – Hybrid cloud platform – Aligned to high – Simplified platform- – Leveraging simplified – Investing for growth and AI leadership growth marke
Slide 73: Non-GAAP Supplemental Materials
Non-GAAP Supplemental Materials Reconciliation of IBM Free Cash Flow and Modeled Free Cash Flow Year ended December 31, 2020 Net Cash from Operations per GAAP $18.2 Less: change in Global Financing (GF) Receivables 4.3 Capital Expenditures, Net (3.0) Free Cash Flow $10.8 Less: Kyndryl Modeled Free C
Slide 74: Non-GAAP Supplemental Materials
Non-GAAP Supplemental Materials Reconciliation of Kyndryl Free Cash Flow and Modeled Free Cash Flow Year ended December 31, 2020 Net Cash from Operations per GAAP $0.6 Capital Expenditures, Net (0.9) Free Cash Flow ($0.3) New Commercial Pricing Arrangements and 0.5 Contract Scope Changes* Shared Ser
Slide 75: IBM Investor Briefing
IBM Investor Briefing 2021