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TietoEnator Oyj TietoEnator Corporation Stock Exchange Release 18 July 2008, 8.00 am EET
TietoEnator has carried out a thorough strategy process during the spring, and the company's Board of Directors has now approved the new strategy which repositions the company with an increased focus on growth and efficiency.
TietoEnator aims to be the leading IT service company in Northern Europe, with a significant presence in Russia. The company's competitive advantage will be based on customer-focused operations that are supported by a new way of working, efficient global delivery of services and a unique combination of capabilities in IT, R&D and digital services.
TietoEnator will continue to make significant investments in people development to strengthen its competitiveness and to support its transformation. By executing the new strategy, the company aims to deliver an EBIT level of over 10%.
Need for change The IT industry has changed and competition has intensified during the past several years. Today, the IT industry is being shaped by rapid globalization and industrialization of services as well as emerging new delivery models such as Software as a Service (SaaS) and Business Process Outsourcing (BPO). Consumer-driven technological innovations have an important role for all industries and customers. At the same time, the reliability of basic IT is more critical than ever for all customers.
TietoEnator's past strategic choices have not addressed the changes in the industry and the competitive landscape fast enough. Furthermore, the company has not been able to utilize its competencies and assets in an optimal way, partly due its fragmented structure. All this has led to the weakened financial performance of the company in the recent years.
In October 2007, TietoEnator's Board of Directors reviewed the strategy with the aim of improving the company's position in the industry and enhancing profitability. The process has continued since then, and the Board has now approved the new strategy for 2009-2011.
Sharper business focus - leading IT service company in Northern Europe by 2011 TietoEnator is a professional service company providing IT, R&D and consulting services. The company focuses on large- and medium-sized organizations in its main markets - Nordic countries, Germany and Russia. In telecom, forest, oil and gas as well as digital services, the company will, however, serve customers globally. In addition, TietoEnator will have industry-specific activities in selected countries.
In the telecom industry, TietoEnator is striving for a position as the world-leading telecom R&D partner, and a recognized expert in the telecom value chain, seeking substantial growth with net sales increasing from current EUR 650 million to close to EUR 1 billion.
The company has a special growth initiatives planned for Sweden and Russia. In Sweden, organic growth is targeted to exceed EUR 100 million by leveraging the current and new offerings and seeking growth actively from new market segments. In Russia, TietoEnator aims at annual sales in excess of EUR 100 million by serving its European key customers as well as expanding to new Russian customers operating in TietoEnator's areas of expertise. To enhance its services to customers in Russia, TietoEnator will open a data-centre in St Petersburg by the end of 2008 and introduce a new managed service concept, based on co-operation with world leading technology partners.
Today, investment decisions are largely made by individual business areas. TietoEnator will reallocate investments to ensure that they are aligned with the new strategy and support growth in telecom, Sweden and Russia as well as other selected areas. The company will continue to develop a more focused portfolio of solutions to support its service business.
TietoEnator's Nordic expertise especially in telecom and digital self-services sets the company apart from the competitors. By utilizing its experience, competencies and market position TietoEnator aims to become a leading advisor of digital transformation in its key markets.
Customer centricity as the main source of competitive advantage TietoEnator differentiates itself from its competitors through superior customer centricity resulting from a deep understanding of its customers' businesses and needs. The company will further strengthen its sales and customer service organization by combining country- and industry-level resources.
Horizontal integration to ensure growth and efficiency TietoEnator is transforming into a horizontally integrated company with fewer organizational units and stronger company-wide competence centres, e.g. testing, Enterprise Resource Planning (ERP), business intelligence and Applications Services Management (ASM). In 2009, the company will invest in the development of the global delivery model, which will bring cost-efficiencies offsetting overall wage inflation in TietoEnator. The ramp-up of global delivery capacity will be accelerated, especially in India and China.
From the beginning of 2009, the company will have a new structure with a stronger focus on countries. This new organization will drive higher growth and profitability as well as customer value and quality. The organization, including key positions, will be defined during the autumn.
Substantial investments in people and competence development To support the on-going change, TietoEnator is creating and executing competence transformation plans to ensure the move to more high-value competence profiles, such as systems architects, consultants, project managers and technical experts. Today, approximately 3% of working hours are used for competence development, and these investments will be increased going forward.
Three-year execution plan targeting over 10% EBIT Implementation of the strategy and change will be orchestrated through a transformation programme spreading over a three-year period. In 2009, the focus will be on the implementation of the new organization and the development of the global delivery model. Delivery quality is high on the management agenda.
By executing this strategy, TietoEnator is targeting an EBIT level of over 10%, which is in line with the long-term financial targets set in July 2007.
Main drivers for profitability improvement Completing the Performance Improvement Programme that was initiated in January 2008 lays the foundation for continuous profitability improvement. The programme aims at EUR 130 million annualized savings from the end of 2009. The programme is progressing well, and by the end of June 2008, the company had achieved annualized cost savings of EUR 71 million.
Through this programme TietoEnator is
* improving utilization by reducing administrative costs through moving resources from unbillable work to billable tasks, * discontinuing or divesting underperforming or unsustainable operations and projects, * accelerating global sourcing, * increasing the focus on the quality of services, and * aiming for better purchasing conditions.
The new strategy will complement the Performance Improvement Programme and drive improved profitability through
* a new operating model and a more integrated structure will improve the use of resources across industries, countries and global competence centres, * a global delivery model that focuses on the efficiency and quality of deliveries and better utilization of global competencies, * major investments in offering and competence development that will result in more productized services and more added value to customers and the company.
"The Performance Improvement Programme creates a solid foundation for our new strategy. With the new structure, investments in people, and the implementation of the global delivery model we can restore TietoEnator's position as a high performing company. Sustainable business practices and competent people ensure the success of TietoEnator," says Hannu Syrjälä, President and CEO.
For further information, please contact: Hannu Syrjälä, President and CEO, tel. +358 2072 68729 Åke Plyhm, Deputy CEO, tel. +46 10 481 3321, +46 705 65 86 31, ake.plyhm@tietoenator.com Reeta Kaukiainen, Executive Vice President, Communications and Investor Relations, tel. +358 2072 68711, +358 50 522 0924
TIETOENATOR CORPORATION
DISTRIBUTION Helsinki Stock Exchange Stockholmsbörsen Principal Media
TietoEnator is among the leading architects in building a more efficient information society and one of the largest IT services providers in Europe. TietoEnator specializes in consulting, developing and hosting its customers' business operations in the digital economy. The Group's services are based on a combination of deep industry-specific expertise and the latest information technology. TietoEnator has about 16 000 experts in close to 30 countries. www.tietoenator.com
