Tieto launches new strategy to accelerate innovation and growth
Tieto Corporation STOCK EXCHANGE RELEASE 17 March 2016, 9.00 EET
With its new strategy for 2016–2020, Tieto aims to become customers’ first choice for business renewal as the leading Nordic software and services company. Building on the solid achievements of its prior strategy, Tieto will continue to accelerate innovation and growth in the Nordics and beyond. While increasing investments, especially in software-centric businesses, the company expects its positive financial development to continue and maintains its attractive dividend policy.
Tieto envisions a future in which information is the biggest driver of continuously increasing social and economic value. Tieto seeks a pivotal role in this change and is announcing a new strategy to pursue the significant opportunities of the future data-driven world.
As digitalization gains speed, demand for new data-driven innovations and the renewal of customers’ business and IT increases rapidly. Tieto will advance its competitiveness and growth through three strategic choices:
- Services to accelerate customer value
- Nordic leadership and international expansion
- Active participation in open ecosystems and co-innovation.
Tieto’s new strategy builds upon a strong foundation of differentiating industry software and insight, full life-cycle services, industrialized service delivery and efficient, focused operations.
"Since our strategy launch in 2012 we have actively renewed our company and are now ready to accelerate innovation and growth. We have increased our investments in future growth businesses, recruited new competencies and established three in-house startups. While we are increasing investments to support our higher growth ambitions, we will continue to drive positive financial development,” says Kimmo Alkio, President and CEO.
“Our ambition is to be the leading Nordic software and services company. With advanced technologies, software and ways of working, we provide customers with exciting new opportunities to both renew their businesses and co-create future innovations,” Alkio concludes.
Services to accelerate customer value
Due to the unlimited possibilities opened up by changing consumer behavior and technology, Tieto’s customers are faced with a dual agenda: to run their existing businesses efficiently while innovating new services.
Tieto supports customers with:
- End-to-end industry solutions based on leading industry software products, system integration capabilities and partnerships. By taking a larger role in customers’ value chain, Tieto helps them to optimize their business processes and drive speed. A dynamic portfolio of industry solutions forms the basis for Tieto’s differentiation and covers all industry groups.
- Active modernization of customers’ technology landscapes in the rapidly changing business environment. Through standard service architecture, service integration and management (SIAM), cognitive technologies and cloud, Tieto fosters continuous efficiency in customers’ business, faster technology adoption and high return on investment.
- Co-innovation of new data-driven businesses, capturing the opportunities provided by the data-driven economy. This creates new businesses beyond the scope of the customers’ current operations.
Nordic leadership and international expansion of industry solutions proven in current markets
Focusing on Nordic enterprises and the public sector, Tieto seeks to grow by further increasing its market share in the Nordics, especially in Sweden. Growth will also be supported by international expansion of selected industry solutions that have proven to be effective in current markets. Larger-scale expansion to adjacent markets, including the full scope of services, will be considered towards the end of the strategy period.
Investments in co-innovation and global talent networks
Tieto invests in work practices and technologies to actively co-innovate with partners, customers and open, global knowledge networks as well as to enhance continuous competence development. This will promote faster time to market for solutions, added development opportunities for employees and efficient management of competence demand and supply, reducing the level of restructuring costs.
Product Development Services continues to drive R&D speed and efficiency
Product Development Services (PDS) drives R&D speed and efficiency for its world-leading customers in telecom network equipment, semiconductors and consumer electronics. PDS is also expanding into new R&D domains with digitalization and connectivity technologies. The segments where digitalization is progressing the fastest are connected equipment and connected traffic. PDS represents some 10% of Tieto’s sales.
Dividend policy unchanged – attractive profitability ambition and increased focus on growth
Tieto’s long-term financial objectives aim to ensure continued attractive shareholder returns:
- IT services revenue growth above the market (CAGR)
- 10% reported operating margin (EBIT)
- Aim is to increase dividends annually in absolute terms
- Net debt/EBITDA: upper limit at 1.5 in the long run.
Tieto aims to grow faster than the market, organically at least at market rate. In addition to current high-growth businesses, a dynamic portfolio starting from over ten industry solutions proven in current markets will drive growth. Profitability improvement is expected to continue based on the combination of adjusted margin sustainably above 10% and gradually normalizing restructuring. Margin improvement is mainly driven by growth, continued productivity gains and business mix change. Investments in offering development, fully expensed, are expected to be below 5% of sales, somewhat up from previous years. Capital expenditure is expected to remain below 4% of sales.
New structure aligned to strategy
To execute its new strategy, Tieto will adjust its operating structure as of 1 July. The structure is based on industry groups driving go-to-market activities and service lines as the primary reporting segment. The third-quarter interim report will be prepared in accordance with the new reporting structure.
- Financial services
- Public, Healthcare and Welfare
- Industrial and Consumer Services
- Technology Services and Modernization
- Industry Solutions, including data-driven businesses organized independently of other businesses – virtual service line of businesses organized in each industry group
- Business Consulting and Implementation – virtual service line of businesses organized in each industry group
- Product Development Services – independent unit pursuing global opportunities.
New Leadership Team appointed
Tieto’s Leadership Team will consist of the following persons as of 1 July 2016:
Kimmo Alkio, President and CEO
Håkan Dahlström, Technology Services and Modernization
Lasse Heinonen, Chief Financial Officer
Per Johanson, Financial Services
Ari Järvelä, New Data-driven Businesses
Ari Karppinen, Chief Technology Officer
Satu Kiiskinen, Industrial and Consumer Services
Katariina Kravi, Human Resources
Tom Leskinen, Product Development Services
Cristina Petrescu, Public, Healthcare and Welfare
Cristina Petrescu will join Tieto’s Leadership Team from her current position as Vice President, Head of Energy Utilities. Cristina (M.Sc, born 1968) has a long background in various leadership roles, being with Tieto since 2002. “Cristina has demonstrated her capability to renew businesses across various industries, comprising both software and services. Her strong leadership skills and background in the company will bring value in the public and healthcare sector across the Nordics. I am very pleased to welcome her to the Leadership Team,” says Kimmo Alkio.
“I look forward to accelerating the digitalization of the public, healthcare and welfare sector. In accordance with Tieto’s strategy, we will increasingly embrace the opportunities of co-innovating with our customers and partners, which opens new possibilities to create value to the everyday lives of literally millions of people in the Nordics”, Petrescu says.
The current composition of the Tieto Leadership Team will remain valid until 30 June 2016 and can be found at tieto.com.
For further information, please contact
Investors: Lasse Heinonen, CFO, tel.+358 2072 66329, +358 50 393 4950, lasse.heinonen(at)tieto.com
Media: Kia Haring, Head of Global Communications, tel. +358 40 7653700, kia.haring(at)tieto.com
Tieto aims to capture the significant opportunities of the data-driven world and turn them into lifelong value for people, business and society. We aim to be customers’ first choice for business renewal by combining our software and services capabilities with a strong drive for co-innovation and ecosystems.
Headquartered in Finland, Tieto has over 13,000 experts in close to 20 countries. Tieto’s turnover is approximately EUR 1.5 billion and shares listed on NASDAQ in Helsinki and Stockholm. www.tieto.com