International Business Machines Corporation · NYSE:IBM
International Business Machines — Investor Day (October 2021)
75 slides from International Business Machines's investor day presentation, Oct 4, 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: Agenda
IBM Investor Briefing 2021 Agenda Arvind Krishna, Chairman and Chief Executive Officer Paul Cormier, President and Chief Executive Officer, Red Hat Tom Rosamilia, Senior Vice President, Cloud and Cognitive Software Mark Foster, Senior Vice President, Global Business Services Kelly Chambliss, Senior
Slide 4: Forward-looking statements and non-GAAP information
Forward-looking statements and non-GAAP information Certain comments made in this presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company’s current assumptions regarding future business and f
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 6 Optimizing portfolio to drive sustainable mid-single digit revenue growth 1 Generating $35B of free cash flow over the next 3 years to enable investments 3 Increasing focus and agility to better serve clients 2
Slide 7: IBM's hybrid cloud and AI platform approach
IBM’s hybrid cloud and AI platform approach IBM Consulting Business Transformation • Technology Consulting • Application Operations IBM Software IBM Cloud Paks Automation • Data & AI • Security • Transaction Processing IBM Infrastructure IBM Z • Distributed Infrastructure (IBM Cloud, Power, Storage)
Slide 8: Investments and actions to drive performance
Investments and actions to drive performance 8 Aligning incentives to growth priorities Advancing culture and growth mindset Optimizing portfolio Expanding ecosystem Simplifying go-to-market model Increasing investments
Slide 9: Creating shareholder value through growth
Creating shareholder value through growth 9 Optimizing portfolio to drive sustainable mid-single digit revenue growth 1 Generating $35B of free cash flow over the next 3 years to enable investments 3 Increasing focus and agility to better serve clients 2
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
Red Hat IBM 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 enterprise IT solutions of open source More than 94% of the Fortune 500 use Red Hat was the first and only multi-billion open source company in the world2 175 Global reach through IBM countries of operation Red Hat products and solutions1 Sources: 1-Red Hat cl
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 Multi-Cloud Hybrid, Multi-Cloud extends to Enterprise Edge Infrastructure DATACENTER-CENTRIC IT SERVICES-CENTRIC SOLUTIONS SERVICES ON DISTRIBUTED EDGE Red
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 Certified and compliant Platform, Kubernetes and Linux native security, decades of proof Compliance & Security of customers have both public and private cloud environments installed
Slide 15: Building hybrid, multi-cloud on OpenShift and Red Hat
Building hybrid, multi-cloud on OpenShift and IIBM CCoonnssuullttiinngg IBM Software SI ecosystem Cloud paks with partners Cloud services ISV ecosystem OpenShift Partner services Red Hat Enterprise Linux Ansible Red Hat Marketplace 15 cloud.redhat.com On PremiseEdgeAWSAzureGoogleAlibaba IBM Cloud
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, built exclusively on Red Hat OpenShift, integrated by IBM Consulting Red Hat powered innovation across Telefonica units for Open RAN, Cloud Garden platform, 5G Services deployments; leveraging IBM Cloud Pak for
Slide 17: Four objectives to grow customer value and scale the enterprise
Four objectives enterprise to grow customer value and scale the 17 Expanding our reach via digital engagement, ecosystem transformation and achieving synergy and scale with IBM Creating the best place to make a difference together through increasing organizational capabilities and strengthening our
Slide 18: Red Hat Summary
Red Hat Summary 18 Delivering high teens revenue growth, accelerated by leveraging partner ecosystem, industry partnerships, and scale with IBM Aligned execution into the opportunity across Red Hat, with a maniacal focus on customer success Red Hat uniquely positioned to capture the significant hybr
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 for growth a strong foundation 65%+ of Fortune 100 rely on IBM WebSphere 40,000+ Watson client engagements 77% of Gartner Magic Quadrants feature IBM software in Leadership or Challenger positions 20 industries are modernizing applications with IBM Cloud Paks 150B
Slide 21: Software's role in IBM's Strategy
Software’s role in IBM's Strategy Help clients address need for flexible deployment with software built on Red Hat to maximize value for hybrid cloud Commercialize innovation together with IBM Research Deliver innovative and pre-integrated capabilities via IBM Cloud Paks for consistent client experi
Slide 22: Investing in software capabilities to architect digital transformations
Investing in software capabilities to architect our clients’ complex digital transformations Empower data-driven decisions and predictability by connecting the right data to the right people at the right time, infusing AI throughout the business Make tasks and experiences more productive with AI-dri
Slide 23: Focused on growth in the most innovative areas
Focused on growth in the most innovative areas *Values reflect CAGR from 2021-2025 | Sources: IBM MD&I Forecast, IDC 23 Vast install base of clients needing help to modernize Data Fabric Opportunity* $7.6B, cloud growing at 27% CAGR Zero Trust Opportunity* $23B growing at 19% CAGR Automation Softwar
Slide 24: Predict outcomes with data fabric
Predict outcomes with data fabric Key Differentiators A data fabric is the one architectural approach that can address the extreme levels of diversity, distribution, scale and complexity in today’s siloed data landscapes New Data Fabric innovations enable clients to: Collect Data Analyze Data IBM Cl
Slide 25: Automate at scale with AI
Automate at scale with AI Key Differentiators Automation empowers people to focus on higher value activity, improves experiences and speed business outcomes Addressing client pain points with AI-driven Automation Reduce customer service disruptions Reduce supply chain challenges IBM Cloud Pak for Bu
Slide 26: Secure everything with Zero Trust
Secure everything with Zero Trust Key Differentiators IBM delivers an open, modern Zero Trust approach, with security around every user, every device, every connection — every time. Align security strategy to the business to drive better understanding, quantification and management of risk and compl
Slide 27: Modernize and Innovate with Cloud Paks
Modernize and Innovate with Cloud Paks Key Differentiators IBM Cloud Paks AI-powered software designed to enable modularity, customization, ease of deployment, integration and management, built on Red Hat OpenShift to run anywhere. 40% Of Fortune 500 companies have purchased IBM Cloud Paks 27 Open a
Slide 28: Driving client value and IBM growth
Driving client value and IBM growth check-in solution systems 28 Modernize 15 weeks to a new connecting 12 major Secure 300% reduction in false positive alerts Automate 15% improvement in resource utilization by automating VM placement with Turbonomic Predict Thousands of customer call compliance au
Slide 29: Software's Investment Priorities
Software’s Investment Priorities 29 Go-to-market focus on technology expertise and experiential selling Modern Cloud Pak solutions to build once and run anywhere Client Success Managers to support adoption and deployment of hybrid cloud and AI solutions Key innovations in our products and services t
Slide 30: Our Path Forward: Software
Our Path Forward Software Revenue Double-digit growth in hybrid cloud opportunity for Software Hybrid Platform & Solutions 38% TTM Hybrid Cloud revenue growth Red Hat Transaction Processing 3,200 clients on IBM hybrid cloud platform Automation 4pts software revenue growth driven by Red Hat Health Se
Slide 31: IBM Software Summary
IBM Software Summary 31 Drive adoption through strong strategic partnerships, go-to-market investments and a focus on client success Maximize the value of applications, business processes, and data across secure hybrid multi-cloud environments via IBM Software and Research innovations Deliver Cloud
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 consulting sector leading player in the growing global 140K Highly skilled professionals in over 150 countries 80K Cloud and enterprise application experts 15K Enterprise strategy and business design professionals >40 Leader rankings in analyst reports across our business transfo
Slide 34: Consulting's role in IBM's Strategy
Consulting's role IBM's Strategy in Leading player in the growing global consulting sector C-suite thought leadership on industry digital transformation and technology IBM Software Trusted partner for client digital transformation journeys Pull through IBM technology with hybrid cloud platform and A
Slide 35: Client Imperatives and Market Opportunities
Client Imperatives Market Opportunities 1 Digital Transformation Journey Acceleration and Pervasiveness 2 Need for Business Transformation Execution Vehicles and Trusted Partners 3 Massive Hybrid Cloud and AI Technology Enablement at Scale 35 Growth Cost Reduction Productivity Talent Agility Innovat
Slide 36: Power of IBM Consulting
Power of IBM Consulting 9 End-to-end Strategy, Experience, Process, BPO, ERP and Data aligned to Buyer Domains – Customer, Finance & Supply Chain, Talent, Core Industry Workflows Deep Strategic Partnerships with “backbone” ISVs – SAP, Adobe, Salesforce, Workday, ServiceNow Deep Alliance with IBM Sof
Slide 37: Bringing it Together at the Client
Bringing it Together at the Client IBM Technology Red Hat OpenShift IBM Cloud Maximo Application Suite Sterling Supply Chain Cloud Paks Watson AI Security Software IBM Quantum Strategic Partnerships 37 Executed by IBM Garage Accelerated through Dynamic Delivery Modernize Enterprise Data & Scale AI M
Slide 38: IBM Garage
IBM Garage Partnering with our clients to drive results by leveraging modern ways of working to execute on our joint vision… …all while maximizing speed to value through an iterative process 400 New clients in 1H’21 alone 4,000+ Active garage engagements in 2021 82 Client NPS 38 Co-Create Enterprise
Slide 39: Consulting's Investment Priorities
Consulting’s Investment Priorities 39 Brand Identity to reinforce our differentiation in the marketplace with key buyers and talent Strategic partnerships to offer deep industry-specific expertise on Enterprise scale platforms Continuous hiring and skilling of talent Assets and platforms to accelera
Slide 40: Driving Client Value with our Strategic Partners
Driving Client Value with our Strategic Partners partner footprint Cloud 40 35+ year Oracle partner 2,000+ certifications IBM RapidMove for Oracle Global Elite Partner 1,000+ certifications Watson AIOps for ServiceNow Top 3 among GSIs 6,300 certifications Red Hat OpenShift on AWS Gold Partner 20,500
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 Ă Business transformation to improve passenger experience
Slide 42: Our Path Forward: Consulting
Our Path Forward Consulting Revenue Double-digit growth in hybrid cloud opportunity for Consulting >1.1 book-to-bill over the last 12 months +20% TTM Hybrid Cloud revenue growth Investing in skills, acquisitions, and ecosystem partners Application Operations Business Transformation ~2pts acquisition
Slide 43: IBM Consulting Summary
IBM Consulting Summary 43 Scale impact with deep ecosystem partnerships Pull through IBM technology and establish IBM’s hybrid cloud platform Deliver client value with skills and offerings in the highest growth markets of hybrid cloud and intelligent workflows Partner to drive global industry transf
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 digital economy expansive install base runs today’s 45 of the world’s top 50 largest banks run on IBM Z 20K clients run IBM Power 94% of the Fortune 50 companies use the IBM Cloud 19B fully encrypted transactions can run on an IBM Z system per day 200K storage all-flash array sy
Slide 47: Infrastructure's role in IBM's Strategy
Infrastructure’s IBM's Strategy role in IBM Infrastructure and support provide trusted, agile and secure solutions for hybrid cloud IBM Z is the premier transaction processing platform with leading security, resilience and scale IBM Infrastructure is optimized for infusing AI into mission-critical t
Slide 48: Infrastructure innovations deliver differentiated value to IBM clients
Infrastructure innovations deliver differentiated value to IBM clients IBM Z and Distributed Infrastructure are uniquely positioned for hybrid cloud, meeting client demands for scalability, security, and capacity - tightly integrated with Red Hat OpenShift Infrastructure is optimized from silicon to
Slide 49: IBM Z is essential to hybrid cloud infrastructure and the digital economy
IBM Z is essential to hybrid economy cloud infrastructure and the digital Continuous innovation to an enduring platform… …Driving strong business momentum Enterprise-grade cyber security Encryption everywhere with 100% data privacy on prem and in the cloud Cloud-native and capturing new workloads Bu
Slide 50: IBM Infrastructure optimized with AI delivers new insights
IBM Infrastructure optimized with AI delivers new insights for business and operations IBM Telum 50 Key Differentiators Ă IBM Telum processor for IBM Z • First processor with on-chip accelerator for AI at scale, leveraging Research innovation • Focus on real-time, in-transaction AI inferencing to ha
Slide 51: Significant cloud opportunity exists for Regulated Industries
Significant cloud opportunity exists for Regulated Industries Total Market 25% Financial Services Market Source: Boston Consulting Group, Gartner, CIO Surveys Equity Analyst Research, Banking Authority, Office of Superintendent of Financial Institutions, Financial Stability Board, Federal Financial
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 Only cloud with solutions tailored for financial services 450+ clients on Financial Services Cloud 115 leading ISVs on Financial Services Cloud ~80% of all Financial Services software consumptio
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: Infrastructure
Our Path Forward Infrastructure Revenue Double-digit growth in hybrid cloud opportunity for Infrastructure Hybrid Infrastructure Capture new workloads and improve IBM Z program-to-program performance with continuous innovation and modernization IBM Z Infrastructure Support Significant opportunity fo
Slide 55: IBM Infrastructure Summary
IBM Infrastructure Summary 55 Infrastructure Support works across technology environments providing a uniquely integrated support experience for clients IBM Cloud well positioned to capitalize on workloads from regulated industries including financial services Innovations in AI at the core drive rea
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 Trusted digital transformation partner; drives our hybrid cloud platform adoption and pulls through IBM technology IBM Software (IBM Cloud Paks) Automation • Data and AI • Security • Transaction Processing Modernized software integrated with
Slide 58: Creating value through focus
Creating value through focus 58 Improving growth trajectory driven by leading hybrid cloud & AI capabilities Prioritizing capital allocation to investments for growth with sustained shareholder returns Aligning operating model to platform-centric business with increased ability to execute
Slide 59: Simplified segment reporting aligned to platform-centric model
Simplified segment reporting aligned to platform-centric model New Segment Reporting Consulting 2020 Revenue: ~$16B Ă Ă Ă Business Transformation Technology Consulting Application Operations IBM Software (IBM Cloud Paks) Automation • Data and AI • Security • Transaction Processing Software 2020 Reve
Slide 60: Focused Hybrid Cloud and AI company post separation
Focused Hybrid Cloud and AI company post separation IBM Post separation * IBM Pre separation $B Incremental Increased focus on hybrid cloud platform strategy External Kyndryl Sales 2020 Revenue Clear trajectory for accelerated revenue and free cash flow growth Greater financial flexibility to increa
Slide 61: Superior portfolio mix with greater exposure to growth areas post separation
Superior portfolio to growth areas mix post separation with greater exposure Software Systems Software Software 61 2020 Revenue Mix Increased mix to higher-growth software and consulting 2020 Recurring Revenue IBM maintains >50% of recurring revenue, with a higher-value composition Pre SeparationPos
Slide 62: Value creation driven by improved revenue and free cash flow growth
Value creation driven by improved revenue and free cash flow growth Add what this drives per year? Or mid-62 * Free Cash Flow is a non-GAAP measure ~$750M growth/year term~?$35B cumulative free cash flow Add w~h$a3t tBhisgdrorivesthp/eryyeeaar? Or mid-term? Free Cash Flow Growth* High Single Digit R
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 Revenue Growth Mid-term Model Points Contribution Ability to Execute Platform-centric business model High Single Digit Redesigned go-to-market and incentive structures Expanding ecosystem
Slide 64: Key performance metrics provide enhanced transparency
Key performance metrics provide enhanced transparency Mid-term Model Revenue Growth Performance Metrics High Single Digit Ă Annual Recurring Revenue Ă Hybrid cloud platform clients 64 Consulting Ă Hybrid Cloud RevenueĂ Service line growth Ă SigningsĂ Hybrid cloud platform engagements Ă Book-to-Bill
Slide 65: External relationship with Kyndryl adds three points of one-time revenue growth in 2022
External relationship with Kyndryl adds three points of one-time revenue growth in 2022 above mid-term model 2022 Net Yr/Yr Revenue Contribution IBM Points of Growth Segment Points of Growth 65 Business Transformation, Technology Consulting, Application Operations ---- --Red Hat, Automation, Data &
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 Revenue Growth Mid-term Model Pre-tax Profit Margin Mid-term Model Contribution to Cash Growth High Single Digit 66 Consulting Low Teens ~25% Software Mid-Single Digit including Red Hat high-teens growth Approachi
Slide 67: Strong free cash flow generation enables incremental financial flexibility
Strong free cash flow generation enables incremental financial flexibility Debt Capacity Returns 67 * Free Cash Flow is a non-GAAP measure 2022-2024 Uses Available for Investment Shareholder 2022-2024 Sources ~$40B Incremental Free Cash Flow IBM Model Annual Growth ~$3B Revenue Growth Mid-single dig
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 Ă Hybrid cloud & AI Leadership Available for Investment Ă Emerging technologies Ă 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 69 Simplified structure with improved ability to execute and increased transparency ~$35B of cumulative free cash flow generation over the mid-term horizon Sustainable mid-single digit revenue growth, with superior business mix
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 Kelly Chambliss Senior Vice President,
Slide 71: IBM Investor Briefing 2021
IBM Investor Briefing 2021
Slide 72: Our Path Forward: Creating shareholder value through growth
Our Path Forward shareholders and liquidity Creating shareholder value through growth 72 Prioritized Capital Allocation Ă Investing for growth Ă Attractive return to Ă Strong balance sheet Leveraging a Strong Foundation Ă Hybrid cloud platform and AI leadership Ă Heritage of innovation and R&D excel
Slide 73: Reconciliation of IBM Free Cash Flow and Modeled Free Cash Flow
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: Reconciliation of Kyndryl Free Cash Flow and Modeled Free Cash Flow
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 Contract Scope Changes* 0.5 Shared Ser
Slide 75: IBM Investor Briefing 2021
IBM Investor Briefing 2021
International Business Machines — Investor Day (October 2021) on 6ix