Rethink IT Reinvent Business Five Cloud Essentials for

Rethink IT. Reinvent Business. Five Cloud Essentials for the Boardroom What Banking & Financial Markets Executives Need To Know About Cloud Computing David Zimmerman Global Solutions Executive, WW Cloud Leader IBM Banking and Financial Markets davidzim@us. ibm. com Page 1 © 2013 IBM Corporation

Rethink IT. Reinvent Business. Five Cloud Essentials for the Boardroom Cloud 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? Page 2 © 2013 IBM Corporation

Rethink IT. Reinvent Business. 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 Clients have rapidly evolving expectations for offerings and services. Radically increased oversight is driving investment in risk management technology. $ Mature and emerging market segments are focus on optimizing use of capital. Cloud helps address The Boardroom Paradox: “How do we cut costs today, while still investing in future growth? ” Page 3 © 2013 IBM Corporation

Rethink IT. Reinvent Business. 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 Substantially Implemented +215% Source: IBM/The Economist Cloud-enabled Business Model Survey of 572 leaders Page 4 © 2013 IBM Corporation

Rethink IT. Reinvent Business. 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 Page 5 © 2013 IBM Corporation

Rethink IT. Reinvent Business. 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 Page 6 © 2013 IBM Corporation

Rethink IT. Reinvent Business. 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 -3 X 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 Page 7 © 2013 IBM Corporation

Rethink IT. Reinvent Business. 3. Cloud “feels” like IT plumbing, very tactical. Impact on my overall strategy? Cloud’s Six potentially “game-changing” business enablers Business Scalability So cia l. M • Provides limitless, costeffective computing capacity to support growth n co r pe 2 edi a Cloud’s Business Enablers Mobile Banking & Ecosystem Connectivity • New value nets • Potential new businesses • Enables rapid simulation and development ity bil o M 3 1 4 6 5 Context-driven Variability ne Hy Cost Flexibility • Shifts fixed to variable cost • Pay as and when needed y vit i t c Market Adaptability • Faster time to market • Quickly adapt to regulatorydriven changes • Seasonal & special projects • Rapid product, pricing and services innovation Simple Self Service • Hides IT complexity Big Da ta • User-defined experiences • Increases relevance Source: IBV Analysis Page 8 © 2013 IBM Corporation

Rethink IT. Reinvent Business. Cloud’s Impact on my overall strategy? Disruptive Leapfrogging: Cloud’s Strategic Impact Cloud Enablement Framework Transform Improve Value Chain Create Disruptors Innovators Optimizers Enhance Extend Customer Value Proposition Invent 1. Disruptors create radically different value propositions: New Asian Mobile Banking provider implements Cloud plus 10, 000 agents. Accelerates growth 2. Innovators significantly extend customer value proposition: Cloud accelerated Global Bank’s results “From 45 -days to 20 minutes” for their 20, 000 developers 3. Optimizers use the cloud to improve organizational efficiency: Cloud drives European Bank’s 10 -month ROI Five Executives discuss Cloud’s disruptive leapfrogging… http: //www. youtube. com/watch? v=C D_el. WBD 1 Zk The Power of Cloud -- IBV Po. V and Executive Report Page 9 © 2013 IBM Corporation

Rethink IT. Reinvent Business. Competitive Insights: Getting started is easier than you might think. Cloud computing is already transforming the financial services industry Analytics Business services Allows integration of customer data across banking silos to enable near-real-time insight Enables application and service management, customer relationship management, and client and market analytics Banking & Financial Markets Solutions Infrastructure compute Provides more flexible and elastic on-demand compute resources for variable application scaling • Cloud & Payments • Cloud & Retail Banking • Cloud & Financial Markets • Cloud & Mobile Banking • Cloud & Risk Management (Basel III, Solvency II), etc. Page 10 Collaboration Provides communications and collaboration tools and solutions to enable employees to share information almost seamlessly Desktop and devices Infrastructure storage Managed backup Enables high availability through more rapid backup and recovery services Ensures that the near-real -time demands of today's trading and analytics processes are maintainable through scalable storage solutions 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 Security Enforces security and endpoint management to help ensure compliance of corporate governance and IT policies © 2013 IBM Corporation

Rethink IT. Reinvent Business. 4. What are Cloud’s risks and “hidden costs”? . . . For starters. . . one size does not fit all. . . 11 Page 11 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. © 2013 IBM Corporation

Rethink IT. Reinvent Business. Cloud risks and “hidden costs”: Projects can fail for many reasons Underdeveloped Transformation Strategy Unrealistic Expectations Performance Issues Security, Data Protection, Migration, Governance. . . Business Case Poor Due Diligence . . . How do I mitigate Cloud risks? 12 Page 12 © 2013 IBM Corporation

Rethink IT. Reinvent Business. Cloud’s risks and “hidden costs”? Cloud Strategy is Important “Getting it right, the first time” covers four key dimensions for cloud adoption üA Cloud strategy needs to incorporate four key dimensions in order to fully address the transformation opportunity for the business. üOur guidance builds on a core set of time-based transformative practices, including roadmaps, business and technology architecture, and investment cases. Innovate and Integrate Broad 2 Performance Impact 1 Enterprise Cloud Strategy Governance integrating with other providers 4 Data Platforms Narrow High Tech Page 13 Real time product changes in market Business Models Strategic Focus 3 Innovate and Integrate Building cloudnative apps on cloud Application and Delivery Platforms Big data feeding the business model High Biz © 2013 IBM Corporation

Rethink IT. Reinvent Business. What are Cloud’s risks and “hidden costs”? Cloud Strategy is Important The “right” Cloud Strategy drives your cloud transformation roadmap • • • • • Brutal Efficiency Testing & Development Services for Cloud Mobile Innovation in the Cloud Application Modernization ADaa. S (Application Development as a Service) API Centric Architecture & 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 Page 15 Profitable Growth Cloud business-model ecosystem: customers, partners, suppliers. . . Governance, Organization and Service impact of cloud • 2 1 4 3 • • • Predictive Cloud-enabled Analytics Data protection & Privacy Cloud disaster back-up & recovery © 2013 IBM Corporation

Rethink IT. Reinvent Business. Cloud risks and “hidden costs” : Deliver Enterprise class, production applications such as SAP & Oracle via IBM’s Smart. Cloud platform with subscription-based pricing Build it yourself? vs. IBM’s One-stop shopping Services Client defined services 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 Industry services Business Analytics Services Workplace Services Security Services Resilience Services Enterprise applications Partner services Unprecedented choice in the deployment and management of applications on the IBM Smart. Cloud platform Application Services Application Lifecycle Application Resources Application Environments Enterprise Infrastructure Platform Management and Support Enterprise data center Managed private cloud Application Management Integration Enterprise+ Security and Compliance Payment and Billing Enterprise A Hosted private cloud Availability and Performance B The most complete set of automated and integrated application services to support enterprise applications Open standards based platform for portability across Cloud environments Shared cloud services Multiple delivery models allow clients to optimize against economics, integration, security and control. Page 16 © 2013 IBM Corporation

Rethink IT. Reinvent Business. Cloud risks and “hidden costs” : Workload is Important Key Takeaway: Not all workloads may be suited for Cloud Ready for cloud Healthcare Payments Analytics Infrastructure Storage Information intensive Sensitive Data New growth workloads made possible by cloud Collaborative Care Isolated workloads Highly customized Banking & Financial Markets Solutions Collaboration Mature workloads Not yet virtualized 3 rd party SW Evaluate: May. . . or may not. . . be ready for Cloud based on their attributes or maturity Page 17 Wealth Management Complex processes & transactions Risk Management Workplace, Mobile, Desktop & Devices Preproduction systems Business Processes Disaster Recovery Batch processing Regulation sensitive Development & Test Infrastructure Compute © 2013 IBM Corporation

Rethink IT. Reinvent Business. Cloud risks and “hidden costs”: Architecture is Important Ne w Get it right, the first time: Cloud! Architecture is Important: Foundation Platform as a Service Technologies Lifecycle Resources Environments Applications IBM joins the new Open. Stack Foundation as Platinum Sponsor Integration Objectives Infrastructure as a Service Technologies Infrastructure Administration Linked. Data, OSLC*, TOSCA* Cloud Standards Customer Council (CSCC) Performance Security Usage • Continues IBM strategy to leverage standards (Linked. Data, CCRA, TOSCA, etc. ) that accelerate clients’ success with cloud Open. Stack Open Source Reference IBM’s Cloud Computing Reference Architecture (CCRA) IBM’s Ecosystem approach to standards Page 18 • Contribute to open source projects and provide resources to help shape and promote the organization * • Work with 180 companies to focus the industry around an ubiquitous Infrastructure as a Service (Iaa. S) 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 Open Services for Lifecycle Collaboration; Topology and Orchestration Specification for Cloud Applications © 2013 IBM Corporation

Rethink IT. Reinvent Business. Cloud risks and “hidden costs”: Security is Important IBM’s history with Cloud Computing in Defense A Security Framework developed through real-world operational experience Mission Value § 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 § Through the NCOIC*, IBM demonstrates a clouddelivered Common Operational Picture integrating real-time track data across nine worldwide nodes. *NETWORK CENTRIC OPERATIONS INDUSTRY CONSORTIUM 2009 2010 Time & Innovation Page 19 Best Cloud 2013+ Computing Security © 2013 IBM Corporation

Rethink IT. Reinvent Business. Cloud risks and “hidden costs”: Migration & Applications are Important Cloud Application Modernization requires a factory model for migration/modernization of applications to Cloud. . . Step 1: How to get there Strategy Step 3: Tool Output Design, Development and Integration Rebuild candidates Migration / Deployment Migration candidates Migrate 1. N-Tier loosely coupled architecture 2. Open standards based (JEE) 3. Web. Services with SOAP protocols 4. Data communications through standard protocols (JDBC/ODBC) 5. Remedy latest version capable of running on Cloud / Virtualized Platform Transformation candidates Analysis / Implementation Planning Design Transform Deploy Cloud Deploy Models Step 2: Tools Cloud Transformation Tool Workload Analysis Tool § 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 Page 20 © 2013 IBM Corporation

Rethink IT. Reinvent Business. 5. Cloud Economics: Board-level Considerations Pros: • Growth: How to reduce time to market for new products, services & segments. . . while also reducing Cost/Income ratio? Cons: • • • 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? Page 21 • 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 © 2013 IBM Corporation

Rethink IT. Reinvent Business. Summary: Cloud is driving disruptive leapfrogging and business-model transformation. Getting started is easier than you might think. . . www. ibm. com/cloud Page 22 © 2013 IBM Corporation