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Opportunities in Challenging Times
                                Steve Robinson
                                 Vice President
                              IBM Rational Software




© 2009 IBM Corporation
IBM Rational Software Conference 2009


What customers are saying…

                                          Corporate Strategy
                         CFO




          Programmers                             Lines of Business




                       Project Managers      Auditors




                                                                      2
IBM Rational Software Conference 2009


Tough times ahead
 Sequoia Capital: “RIP: Good Times”
    Survival of Quickest: Cut Deep and Fast
    Engineering: Decrease Headcount for Next Version
    Product: What Features are Absolutely Necessary?
    Spend Every Dollar As If It Were Your Last
    Get Cash Flow Positive (Cash is King)
    Focus on Quality
    Lower Risk
    The Recovery Will Be Long




                                                       3
IBM Rational Software Conference 2009

Survival of the quickest




                             This is what customers are expecting from IBM

        “No one ever saved their way out of a downturn….it takes innovation...”
                                                      Craig Barrett, CEO Intel Corporation

                                                                                             4
IBM Rational Software Conference 2009


Current Rational opportunity




                                        *All numbers use Plan Rates


                                                                      5
IBM Rational Software Conference 2009


The focus for solutions delivery has shifted
 Efficiency………Operational Stability………Innovation


    1. Reducing Labour Rates
    2. Process Maturity and Consistency
                                               Competitive Necessity
    3. Rigorous Governance and Management




    4. Asset and Service Reuse
    5. Increasing Levels of Automation
                                               Competitive Advantage
    6. Flexible Sourcing – component level
    7. Delivering Capabilities not resources
    8. Software as a Service




                                                                       6
IBM Rational Software Conference 2009

SwissRe




                                        7
IBM Rational Software Conference 2009

SwissRe




                                        8
IBM Rational Software Conference 2009


                    Services development model
                                        Custom
                                        bridge
                                                                                                     BOM, IDM as UML
      MODEL                                                    IFW in M1                               class diagrams
     MANAGER     MODEL REPOSITORY            APM

                                                                     WSDL,
                 PROCESS MODELLING                                    XSD
                 AND USE CASE                                                                              SERVICE
                 ANALYSIS        DPM                                                                 UML   DESIGN
                                                                                                           (SOMA, BOM &
    BUSINESS                                                                                               IDM
     ANALYST                             Websphere                                                         Customizations)
                                                                                Rational
                 PROCESS               Business Modeler            WSDL,   Software Architect
                 SIMULATION    BPEL,                                                                                     SOLUTION
                                                                    XSD
                                SCA                                                                                      ARCHITECT



                                DPM
   INTEGRATION
    DEVELOPER    PROCESS                    Websphere                              Rational                                JAVA
                 DEVELOPMENT           Integration Developer                 Application Developer                       DEVELOPER




   DEPLOYMENT
    ENGINEER     DEPLOYMENT      Websphere                  Websphere              Websphere
                               Business Monitor           Process Server        Application Server



                                                                                                                                     9
IBM Rational Software Conference 2009

The shift from IDE to ALM
                                         Short Term
                                  Development Efficiency
                                Realize savings in <120 days
                    • Build and release management
                    • Test automation
                    • Agile project methodologies
                                          Medium Term
                                        Operational Control
                                 Realize savings < 9 months
                    • Cost avoidance
                    • Globally distributed development
                                           Longer Term
                                          Business Value
                                Realize savings < 18 months
                    • Legacy application modernization
                    • Effective asset management and reuse
                    • Requirements management

                                                               10
IBM Rational Software Conference 2009


Significant growth potential exists within our client base
70% of our customers own less than 30% of our lifecycle portfolio

                                                                                                 Owns only Legacy
                                                                                                 products
                                           All Rational
                                                                             6384
                                           customers:                 7887
                                                                                                 Also owns one or
                                              14,271                                             more Strategic Core
                                                                                                 products




 Upper-bound Cross-sell opportunity:                                                 Lower-bound Cross-sell opportunity:
                                                        Revenue                     Cross-sell one new Strategic                                 Revenue
                             # Customers                                                                               # Customers
                                                       Opportunity*                      Core offering to…                                      Opportunity*

  Cross-sell one                                                                …Each customer with at least
  new deal per                                                                  one** Strategic Core product
                                                                                                                           6,384                  $165M
  customer for all
                                14,271                   $369M
  customers                                                                     …20% of customers with at
                                                                                least one Strategic Core product
                                                                                                                           1,277                   $33M
                    *Using average deal size - 4qt rolling average: $25.9k
                                                                                                            *Using average deal size - 4qt rolling average: $25.9k




                                                                                                  **Our largest/corporate account customers
Strategic Core: BuildForge, CC, CQ, EGL Cobol, RAD, RQM,RFT, RPT,RAM, RRC,                        own 12+ Strategic Core products
RSAR, RTC, RTLM, RSA, RSM, RSD, Tara, Test Mgr, Vega, Watchfire



                                                                                                                                                               11
IBM Rational Software Conference 2009


Business and product innovation today require a
significant investment in software
     For businesses and institutions everywhere,
     there have never been so many new possibilities

     Imagine the amount of software necessary to:
        Deliver a green world
        Take advantage of information base explosion
        Communicate with a trillion devices
        Drive on-going product differentiation
        Seize new global market opportunities

     Leaders everywhere are deploying increasingly
     intelligent software, systems and products

     Accelerating innovation and enabling effective
     change is highly dependent on the ability
     to manage effective software delivery

                                                       12
IBM Rational Software Conference 2009


  Rational expands into smarter products




*All numbers use Plan Rates


                                           13
IBM Rational Software Conference 2009

Hydraulic hybrid delivery vehicles
Eaton Corporation and UPS
                                         What’s Smart?
                                          Innovative technology for urban delivery
                                          trucks in stop-and-go traffic
                                          Smart software to optimize energy usage
                                          and reduce greenhouse gases

                                         Smarter Business Outcomes
                                          60-70% increase in fuel economy,
                                          according to EPA
                                          40% reduction in CO2 emissions

       “The suite of Rational tools,     How Rational Software Enables
      including Rhapsody, DOORS,         Smarter Products
       ClearCase and ClearQuest,
       provides Eaton an integrated       Software modeling to optimize system
    software framework that allows us     performance
   to deliver innovative products more    Automatic generation of in-vehicle
          quickly and efficiently.”       software code

                                                                                     14
IBM Rational Software Conference 2009

Mobile access to medical images
Merge Healthcare
                                            What’s Smart?
                                             Provides medical professionals access to
                                             complex medical images on mobile devices
                                             Helps facilitate prompt access to medical
                                             imaging data– anytime or anywhere*

                                            Smarter Business Outcomes
                                             Reduced hospital operations costs
                                             Reliable, secure, scalable delivery of
                                             medical images and reports


  “We rely on Synergy and Change to         How Rational Software Enables
      manage the complexity of the          Smarter Products
     software and to ensure that our         Collaboration across globally distributed
   global development teams operate          development teams
    as one, for the best result to our       Change management across the end-
  customers. This software from IBM is       to-end software lifecycle
   part of our livelihood; it's our DNA.”                                     **Product not yet released


                                                                                                           15
IBM Rational Software Conference 2009

The innovation wave is going mainstream




                                          16
IBM Rational Software Conference 2009


 Selling in this new environment

   Lessons Learned:

   1. Current client relationships – our most valued asset
   2. New buying behaviors emerging
   3. Provocative value propositions essential
   4. One-year cost savings mandatory
   5. Approval and sign-off processes have changed


                           “Barn’s burnt down…now I can see the moon”
                                                            Mizuta Masahide

                                                                              17
IBM Rational Software Conference 2009




© Copyright IBM Corporation 2009. All rights reserved. The information contained in these materials is provided for informational purposes only, and is provided AS IS without warranty of any kind,
express or implied. IBM shall not be responsible for any damages arising out of the use of, or otherwise related to, these materials. Nothing contained in these materials is intended to, nor shall have
the effect of, creating any warranties or representations from IBM or its suppliers or licensors, or altering the terms and conditions of the applicable license agreement governing the use of IBM
software. References in these materials to IBM products, programs, or services do not imply that they will be available in all countries in which IBM operates. Product release dates and/or capabilities
referenced in these materials may change at any time at IBM’s sole discretion based on market opportunities or other factors, and are not intended to be a commitment to future product or feature
availability in any way. IBM, the IBM logo, Rational, the Rational logo, Telelogic, the Telelogic logo, and other IBM products and services are trademarks of the International Business Machines
Corporation, in the United States, other countries or both. Other company, product, or service names may be trademarks or service marks of others.


                                                                                                                                                                                                18

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Opportunities in challenging_times-steve_robinson

  • 1. Opportunities in Challenging Times Steve Robinson Vice President IBM Rational Software © 2009 IBM Corporation
  • 2. IBM Rational Software Conference 2009 What customers are saying… Corporate Strategy CFO Programmers Lines of Business Project Managers Auditors 2
  • 3. IBM Rational Software Conference 2009 Tough times ahead Sequoia Capital: “RIP: Good Times” Survival of Quickest: Cut Deep and Fast Engineering: Decrease Headcount for Next Version Product: What Features are Absolutely Necessary? Spend Every Dollar As If It Were Your Last Get Cash Flow Positive (Cash is King) Focus on Quality Lower Risk The Recovery Will Be Long 3
  • 4. IBM Rational Software Conference 2009 Survival of the quickest This is what customers are expecting from IBM “No one ever saved their way out of a downturn….it takes innovation...” Craig Barrett, CEO Intel Corporation 4
  • 5. IBM Rational Software Conference 2009 Current Rational opportunity *All numbers use Plan Rates 5
  • 6. IBM Rational Software Conference 2009 The focus for solutions delivery has shifted Efficiency………Operational Stability………Innovation 1. Reducing Labour Rates 2. Process Maturity and Consistency Competitive Necessity 3. Rigorous Governance and Management 4. Asset and Service Reuse 5. Increasing Levels of Automation Competitive Advantage 6. Flexible Sourcing – component level 7. Delivering Capabilities not resources 8. Software as a Service 6
  • 7. IBM Rational Software Conference 2009 SwissRe 7
  • 8. IBM Rational Software Conference 2009 SwissRe 8
  • 9. IBM Rational Software Conference 2009 Services development model Custom bridge BOM, IDM as UML MODEL IFW in M1 class diagrams MANAGER MODEL REPOSITORY APM WSDL, PROCESS MODELLING XSD AND USE CASE SERVICE ANALYSIS DPM UML DESIGN (SOMA, BOM & BUSINESS IDM ANALYST Websphere Customizations) Rational PROCESS Business Modeler WSDL, Software Architect SIMULATION BPEL, SOLUTION XSD SCA ARCHITECT DPM INTEGRATION DEVELOPER PROCESS Websphere Rational JAVA DEVELOPMENT Integration Developer Application Developer DEVELOPER DEPLOYMENT ENGINEER DEPLOYMENT Websphere Websphere Websphere Business Monitor Process Server Application Server 9
  • 10. IBM Rational Software Conference 2009 The shift from IDE to ALM Short Term Development Efficiency Realize savings in <120 days • Build and release management • Test automation • Agile project methodologies Medium Term Operational Control Realize savings < 9 months • Cost avoidance • Globally distributed development Longer Term Business Value Realize savings < 18 months • Legacy application modernization • Effective asset management and reuse • Requirements management 10
  • 11. IBM Rational Software Conference 2009 Significant growth potential exists within our client base 70% of our customers own less than 30% of our lifecycle portfolio Owns only Legacy products All Rational 6384 customers: 7887 Also owns one or 14,271 more Strategic Core products Upper-bound Cross-sell opportunity: Lower-bound Cross-sell opportunity: Revenue Cross-sell one new Strategic Revenue # Customers # Customers Opportunity* Core offering to… Opportunity* Cross-sell one …Each customer with at least new deal per one** Strategic Core product 6,384 $165M customer for all 14,271 $369M customers …20% of customers with at least one Strategic Core product 1,277 $33M *Using average deal size - 4qt rolling average: $25.9k *Using average deal size - 4qt rolling average: $25.9k **Our largest/corporate account customers Strategic Core: BuildForge, CC, CQ, EGL Cobol, RAD, RQM,RFT, RPT,RAM, RRC, own 12+ Strategic Core products RSAR, RTC, RTLM, RSA, RSM, RSD, Tara, Test Mgr, Vega, Watchfire 11
  • 12. IBM Rational Software Conference 2009 Business and product innovation today require a significant investment in software For businesses and institutions everywhere, there have never been so many new possibilities Imagine the amount of software necessary to: Deliver a green world Take advantage of information base explosion Communicate with a trillion devices Drive on-going product differentiation Seize new global market opportunities Leaders everywhere are deploying increasingly intelligent software, systems and products Accelerating innovation and enabling effective change is highly dependent on the ability to manage effective software delivery 12
  • 13. IBM Rational Software Conference 2009 Rational expands into smarter products *All numbers use Plan Rates 13
  • 14. IBM Rational Software Conference 2009 Hydraulic hybrid delivery vehicles Eaton Corporation and UPS What’s Smart? Innovative technology for urban delivery trucks in stop-and-go traffic Smart software to optimize energy usage and reduce greenhouse gases Smarter Business Outcomes 60-70% increase in fuel economy, according to EPA 40% reduction in CO2 emissions “The suite of Rational tools, How Rational Software Enables including Rhapsody, DOORS, Smarter Products ClearCase and ClearQuest, provides Eaton an integrated Software modeling to optimize system software framework that allows us performance to deliver innovative products more Automatic generation of in-vehicle quickly and efficiently.” software code 14
  • 15. IBM Rational Software Conference 2009 Mobile access to medical images Merge Healthcare What’s Smart? Provides medical professionals access to complex medical images on mobile devices Helps facilitate prompt access to medical imaging data– anytime or anywhere* Smarter Business Outcomes Reduced hospital operations costs Reliable, secure, scalable delivery of medical images and reports “We rely on Synergy and Change to How Rational Software Enables manage the complexity of the Smarter Products software and to ensure that our Collaboration across globally distributed global development teams operate development teams as one, for the best result to our Change management across the end- customers. This software from IBM is to-end software lifecycle part of our livelihood; it's our DNA.” **Product not yet released 15
  • 16. IBM Rational Software Conference 2009 The innovation wave is going mainstream 16
  • 17. IBM Rational Software Conference 2009 Selling in this new environment Lessons Learned: 1. Current client relationships – our most valued asset 2. New buying behaviors emerging 3. Provocative value propositions essential 4. One-year cost savings mandatory 5. Approval and sign-off processes have changed “Barn’s burnt down…now I can see the moon” Mizuta Masahide 17
  • 18. IBM Rational Software Conference 2009 © Copyright IBM Corporation 2009. All rights reserved. The information contained in these materials is provided for informational purposes only, and is provided AS IS without warranty of any kind, express or implied. IBM shall not be responsible for any damages arising out of the use of, or otherwise related to, these materials. Nothing contained in these materials is intended to, nor shall have the effect of, creating any warranties or representations from IBM or its suppliers or licensors, or altering the terms and conditions of the applicable license agreement governing the use of IBM software. References in these materials to IBM products, programs, or services do not imply that they will be available in all countries in which IBM operates. Product release dates and/or capabilities referenced in these materials may change at any time at IBM’s sole discretion based on market opportunities or other factors, and are not intended to be a commitment to future product or feature availability in any way. IBM, the IBM logo, Rational, the Rational logo, Telelogic, the Telelogic logo, and other IBM products and services are trademarks of the International Business Machines Corporation, in the United States, other countries or both. Other company, product, or service names may be trademarks or service marks of others. 18