INVESTOR & ANALYST DAY. 29 September 2010

Transcription

1 INVESTOR & ANALYST DAY 29 September 2010

2 AGENDA 8.30am Coffee 9.00am Welcome and introduction Tim Brill 9.10am Overview areas of progress, areas of focus and the new team Nigel Clifford 9.30am The market, the customer and Micro Focus Stuart McGill 10.00am How the portfolio works together Neil Fowler 10.30am Coffee break & Demos 11.00am Application migration in the field Andrew Wickett 11.20am Connecting our products with customers Malcolm Collins 11.50am Q&As Management team 12.15pm Summary Nigel Clifford 12.30pm Lunch & Demos 2

3 SAFE HARBOUR STATEMENT The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated ( relevant persons ). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in Micro Focus International plc (the Company ) or any company within the Micro Focus Group. The release, publication or distribution or this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions. Certain statements contained in this presentation constitute forward-looking statements. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding the Company s financial condition, business strategy, plans and objectives, are forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms believes, estimates, anticipates, expects, intends, may, will, or should or, in each case, their negative or other variations or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forwardlooking statements are based on numerous assumptions regarding the Company s present and future business strategies and the environment in which the Company will operate in the future. Such risks, uncertainties and other factors include, among others: the level of expenditure committed to development and deployment applications by organisations; the level of deployment-related turnover expected by the Company; the degree to which organisations adopt web-enabled services; the rate at which large organisations migrate applications from the mainframe environment; the continued use and necessity of the mainframe for business critical applications; the degree of competition faced by the Company; growth in the information technology services market; general economic and business conditions, particularly in the United States; changes in technology and competition; and the Company s ability to attract and retain qualified personnel. These forward-looking statements speak only as at the date of this presentation. Except as required by the Financial Services Authority, or by law, the Company does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. 3

4 OVERVIEW Nigel Clifford, CEO

5 5 TAKEAWAYS FROM TODAY Micro Focus has a strong: 1. Market opportunity 2. Customer offer 3. Product set 4. Focus on operational excellence 5. Team 5

6 OUR STRATEGY Migration Customers Investors Modernisation Cobol Development AMQ 6

7 GROWTH POTENTIAL: $6.4 BILLION MARKET OPPORTUNITY $6.4B Market Opportunity $4B Test/AMQ $1.7B Modernisation & Migration $0.7B COBOL Development Growth Potential 7

8 24 JUNE PRELIMS PERSPECTIVE; FIRST 60 DAYS IMPRESSIONS ON IMPROVEMENT AREAS To Move from Good to Great Aligning the company around the expanded market opportunity Improvements in: High volume, low value transactions Lead generation process Consulting and professional services Maintenance renewals in AMQ Continued focus on cost deployment Investments in: Organic growth, eg improved product management and development Acquisition strategy for growth markets 8

9 CONNECTING PRODUCT TO MARKET Products Channels Customers Product A B C D G E H F I Caliber RDM Silk Test Silk Central Test Manager Silk Performer Cloudburst Analyser Express Studio & Server Enterprise Edition Visual Cobol 9

10 CONNECTING PRODUCT TO MARKET Products Channels Customers D Product A B C E F Marketing - Awareness & Lead Generation Field sales force Telesales Partners L M G H I Web S $ licence $ consulting $ maintenance Leadership team 10

11 A NEW TEAM, BLENDING MICRO FOCUS AND LARGER COMPANY EXPERIENCE Nigel Clifford, CEO Symbian, Nokia, BT, C&W, Tertio, NHS Mike Phillips, CFO Morse, Microgen Malcolm Collins, President Sales Nortel, NCR Julian Critchfield, EVP Product Development Oracle, Microsoft Jim Cassidy, CMO IBM, BEA Stuart McGill, CTO more than 10 years Micro Focus Jane Smithard, Group General Counsel & Company Secretary more than 10 years Micro Focus Paul Rodgers, Group HR Director four years Micro Focus, plus IBM Tim Brill, Group Communications Director three years Micro Focus, plus AT&T 11

12 24 JUNE PRELIMS PERSPECTIVE; FIRST 60 DAYS IMPRESSIONS Good Exciting $6.4B market opportunity Delivering customer value as a result of relevant Micro Focus propositions Leading COBOL market position extensive technology expertise and experience Challenger in AMQ, leader in Modernisation and Migration Growing number of large deals Strong, sustainable margins; robust cash generation Assets Broad geographic reach Multiple partnerships Valued technology and consulting expertise Ambitious company - proven acquisition and integration capability 12

13 5 TAKEAWAYS FROM TODAY Micro Focus has a strong: 1. Market opportunity Stuart McGill 2. Customer offer Stuart McGill, Andrew Wickett 3. Product set Neil Fowler 4. Focus on operational excellence Malcolm Collins 5. Team Q&As delivering outstanding shareholder value 13

14 GLOBAL LEADERS IN MODERNISATION Stuart McGill, CTO

15 GROWTH POTENTIAL: $6.4 BILLION MARKET OPPORTUNITY $6.4B Market Opportunity Market Data Revenue stabilisation before resuming growth Market challenger $4B Test/AMQ Market Forecast +6% CAGR Migration to Micro Focus platform on open systems & cloud Displacement strategy Strengthen leadership position $1.7B Modernisation & Migration Market Forecast >10% CAGR Market leader Resilient business model High maintenance renewals $0.7B COBOL Development Market Forecast Low single digit CAGR Growth Potential Source: Growth rates averaged from Gartner, Forrester, IDC Market Analysis Updated

16 HOW CUSTOMERS BOUGHT FROM US 9 PRODUCT LINES Enterprise View isignt (Modernisation Workbench) Caliber Developer Rumba Silk Enterprise Server VisiBroker Star Team Product Lines 16

17 HOW WE RUN OUR BUSINESS Enterprise View Caliber Test/AMQ Silk VisiBroker Star Team isignt Rumba Enterprise Server Migration Developer COBOL Developer Product Lines 17

18 HOW CUSTOMERS VIEW US ONE SOLUTION Micro Focus Modernisation Enterprise View isignt Caliber Developer Rumba Silk Enterprise Server VisiBroker Star Team Product Lines 18

19 OUR SOLUTION Micro Focus is the global leader in Modernisation. We provide the software innovation and expertise to transform the Enterprise Applications running your business today. We identify the competitive advantage and business value to be enhanced, to take you into the future and to rapidly move your business to wherever you want to be. 19

20 THE ENTERPRISE APPLICATION LANDSCAPE UNIX/Linux C++/Java z/os PL/1 IMS Linux Java CICS COBOL Windows C# COBOL Web Ajax, Flash 20

21 THE MICRO FOCUS MODERNISATION DIFFERENCE PROTECTING AND ENHANCING IP LP to digital Protect IP; Lower Costs; Reduce Risk From mainframe to cloud 240+ billion lines; 50+ million man years of investment in COBOL 21

22 THE MODERNISATION JOURNEY FOR OUR CUSTOMERS Cost 100 Where you are Enterprise Applications on current Operating Platforms Where you want to be today Cloud based Enterprise Applications on New Operating Platforms Agile, efficient managed (SDLC) cloud based development process Current (SDLC) development process Modernised Enterprise Applications on New Operating Platforms Where you want to be in the future Agile, efficient managed (SDLC) development process Time Agile 22

23 A MODERNISATION JOURNEY WITH MICRO FOCUS Cost 100 Transformational Improvement 1 Step 1 Step 2 Transformation Improvement Migrate Move existing Enterprise Applications from the current Operating Platform to a new modern, cost effective and flexible platform from Micro Focus to deliver immediate operating cost savings of up to 85%. Continuous Improvement Modernise Use the cost savings to Modernise the Enterprise Application on the new Micro Focus platform on a continuous basis to meet future business requirements. 2 Continuous Improvement Agile Time 23

24 THE TRADITIONAL APPROACH Cost 100 Transformational Improvement 1 Traditional Approaches Most approaches integrate the incremental change to Enterprise Applications with a change in operating platform. Cost savings are only achieved when a completed project is delivered. Combined with the requirement to continuously improve applications this increases the risk of cost overruns and late delivery. 2 Continuous Improvement Agile Time 24

25 THE MICRO FOCUS ADVANTAGE Cost 100 Transformational Improvement 1 Cost reductions delivered early, improvements accelerated and de-risked 2 Continuous Improvement Agile Time 25

26 THE MICRO FOCUS ADVANTAGE Cost 100 Transformational Improvement 1 Value ($) 2 Continuous Improvement Agile Time 26

27 MIGRATING FROM THE MAINFRAME STARTS THE JOURNEY Cost 100 Mainframe development & deployment 1 Mainframe deployment Micro Focus development Step 1 Step 2 Step 3 Bring mainframe skills to the workstation to increase productivity and double new development capacity for mainframe hosted applications. Deploy mainframe applications on Windows, Unix or Linux to reduce operating costs by up to 90%. Enhance applications for new uses through user interface, integration and data solutions for deployment as web services in.net and J2E. 2 Micro Focus development & deployment Step 4 Enterprise integration Improve software development processes from requirements through testing and delivery to optimise Application Management. Micro Focus Modernisation options UI/Data integration 3 4 Micro Focus AMQ Value Profiling Agility 27

28 COST DIFFERENCES ACROSS MODERN PLATFORMS Cost 100 UNIX/Linux Operating Platform 1 UNIX/Linux deployment Micro Focus Windows development Step 1 Step 2 Step 3 Use the most advanced development skills on Windows to increase productivity and capacity for UNIX/Linux deployed hosted applications. Deploy applications on the Windows platform integrated with SQLServer and Systems Management. Enhance applications for new uses through platform provided analytics and Office integration. 2 Step 4 Improve software development processes from requirements through testing and delivery to optimise Application Management. Micro Focus Windows development & deployment 3 Enterprise integration Micro Focus Windows Integration UI/Data integration 4 Micro Focus AMQ Value Profiling Agility 28

29 CLOUD DEPLOYMENT IS THE NEXT STRATEGIC OPTION Cost 100 Current Operating Platform 1 Cloud deployment Micro Focus development Step 1 Step 2 Step 3 Bring existing development skills to the Cloud to increase productivity and capacity for web hosted applications. Deploy existing applications on Cloud platforms including Azure, Google and Amazon with supporting development practices. Enhance applications for new uses through Application mash-ups integrating Enterprise Applications with external sources and networks. 2 Step 4 Improve software development processes from requirements through testing and delivery to optimise Application Management. Micro Focus Cloud development & deployment 3 Enterprise integration Micro Focus Enterprise Cloud Services UI/Data integration 4 Micro Focus AMQ Value Profiling Agility 29

30 MOVING TO THE MICRO FOCUS PLATFORM 30

31 CONTINUOUS IMPROVEMENT OF THE SOFTWARE DEVELOPMENT LIFECYCLE Caliber i.sight Understand portfolio reality Enterprise / Developer Efficient, modern platform SCTM Validate quality Aligned with business goals SilkPerformer Capture business intent Validate performance Additional Modernisation 31

32 POTENTIAL TO EXTEND THE PLATFORM WITH ACQUISITIONS COBOL and PL/I Developer C/C++ Corba server (Visibroker) COBOL (application) server C/C++ C/C++ Developer Developer Java Application Server RPG Application Server Java Developer Enterprise Server RPG Developer AMQ for SLDC Event Management/ Scheduling Transaction Processing Server Business Process Integration Data Migration Legend Current MF solutions Potential expansion Opportunity $6.4bn Opportunity +c.$6bn 32

33 THE MICRO FOCUS OPPORTUNITY Unique focus on the value of Enterprise Applications Cloud 30 years of technology expertise Delivering customer choice Transforming business Web services Delivering value early Industry partnerships Client server PC Mainframe 33

34 HOW THE PORTFOLIO WORKS TOGETHER Neil Fowler 34

35 CONTINUOUS IMPROVEMENT OF THE SOFTWARE DEVELOPMENT LIFECYCLE Caliber i.sight Understand portfolio reality Enterprise / Developer Efficient, modern platform SCTM Validate quality Aligned with business goals SilkPerformer Capture business intent Validate performance Additional Modernisation 35

36 INVESTOR & ANALYST DAY 29 September 2010

37 CUSTOMER DELIVERY Andrew Wickett

38 CUSTOMER IMPERATIVES Business challenges for the CIO: Save Money Reduce Technology Stack (standardize) Reduce Time on System Support React to Business Faster Reduce Backlog CIO constraints: High Cost of Mainframe Limited Resources / Team too busy Shorter ROI / Payback periods Limited Capital (Investment Funds) Too Many Platforms Don t believe that Migration will work for them 38

39 OUR APPROACH TO THE CUSTOMER Understanding the customer Tailoring the Micro Focus solution to the customer s needs: Reduce Production costs by 50+% With MINIMAL change NO impact to Business Business Case & ROI Why it s better than other options Partner validation Microsoft, Accenture Industry analysts validation Gartner, Forrester, IDC Value Chart (save money faster, less investment) Case Studies 39

40 HOW WE MANAGE THE PROJECT Detailed Statement of Work (SOW) Customer, Partner(s) & Micro Focus Roles/Responsibilities Timeline & Deliverables NOT just the Migration tasks Engaged Customer Team; Engaged Partner Team Steering Committee Ability to escalate & get timely decision Regular (Bi-Weekly) Status reports Issues Review (solutions & impact) + Risk Management (plan & owners Look Forward Review (what s next & are we ready) 40

41 THE BENEFITS TO THE CUSTOMER Reduced Costs Improve Productivity AND Quality Ability to take advantage of distributed environment Ability to reinvest the Savings in other Modernisation initiatives Lower Current AND Future costs Eliminate duplication of data (e.g. Mainframe data copied to distributed environment) Staff Satisfaction 41

42 OWENS & MINOR CUSTOMER CASE STUDY Corporate Profile: $8 billion revenue in FY2009 Founded in 1882, headquartered in Richmond, Virginia, US 4,800 employees Market leader in the sales & distribution of medical and surgical supplies to hospitals 4,600 healthcare provider customers Business challenge: Custom ERP system running on mainframe Decades of O&M s business processes in applications containing 10 million lines of COBOL code Escalating annual operating costs Scarce capacity for technology R&D 42

43 OWENS & MINOR CUSTOMER CASE STUDY Migration Benefits: Preserve O&M custom systems and business rules Estimated $150 million cost estimate for alternative package or rewrite options 10 million lines of COBOL code moved easily with Micro Focus Significant, ongoing operating expense savings from the new platform; savings fund modernisation of user interfaces and data 100% more capacity for technology R&D 4X faster processing of orders Significant increases in developer productivity and data more available to all employees for quicker response times to customers Faster to market with new services and technology Support to O&M company growth without additional IT operating expense Craig Smith, CEO: 43

44 CONNECTING OUR PRODUCTS WITH CUSTOMERS Malcolm Collins

45 BIOGRAPHY Prior to joining Micro Focus, Malcolm Collins spent over 25 years in the Hi-Tech industry in key leadership positions with NCR and Nortel Networks. He brings significant global sales management and execution expertise in core areas of Global and Enterprise Sales, Software and Professional Services and Maintenance. Previous roles: NCR Corporation SVP Global Sales and Marketing ($5bn+) Responsible for driving growth of NCR s assisted and self-service solutions across multiple industries in more than 100 countries SVP Financial Solutions Division ($2.3bn+) End-to-end responsibility of ATM and financial self-service business including payments and imaging solutions Malcolm Collins President, Global Sales Nortel Networks President, Global Enterprise Division ($2.5bn+) End-to-end responsibility for all elements of Nortel s Enterprise business, including business development, products, marketing and sales 45

46 IMPORTANT LESSONS Fundamentally a strong business Q1 Important Lessons AMQ post integration Sales execution Current Focus of Attention AMQ drive to success Pipeline analysis and growth Sales discipline and accountability Aligned management structure Energised partner programme This is now about execution 46

47 SALES FORCE EVOLUTION Value & Complexity COBOL Development Direct Field Sales ISV Channel Sales force <100 Acquisition - Staff Changes (Planned & Unplanned) Migration and Modernisation Higher Value Deals Direct Field Sales Technical Services SI Partner Channel ISV Channel Resellers Borland & Compuware acquisitions Application Management and Modernisation Solutions Broader Portfolio Higher Value Deals Direct Field Sales Partner Programme Professional Services ISV Channel Telesales Reseller Programme Maintenance Sales Sales force 260 New GTM Model Aug 2009 May

48 CHALLENGES OF THE NEW GO-TO-MARKET MODEL GTM Coverage FY 2011 GTM Coverage FY 2010 Named Accounts 2,000 Accounts Field Sales (Greater Focus) Field Sales ++++ Medium Enterprises more than 10,000 Accounts Telesales Improve Coverage Field Sales supported by Telesales Sales Cycle ++ Small Enterprises more than 100,000 Organisations Resellers Web Telesales Resellers + We have a clear understanding of our customer segments and how to grow our business... 48

49 ORGANISATION MATURITY & STABILITY Regional Businesses FY 2010 Global Businesses AMQ Inside Sales Partners Maintenance Professional Services North America International Asia Pacific LFR (42%) MFR (51%) CFR (7%) Executive Management Team (avg. tenure 1.5yr) Stable, now aligned to new Go-to-Market Model and bring significant experience Country Managers (avg. tenure 4.5yr) Stable Sales (50% less than 1yr) LOS impact of new inside sales recruitment Planned and unplanned field sales churn Partner organisation now in place Revenue split as per FY10 group accounts 49

50 SALES EXECUTION Issues New Go-to-Market Implementation Medium enterprise direct and channel focus Pipeline mix Sales force stability & experience New inside sales teams Planned / unplanned attrition AMQ Open headcount Sales Process Discipline Forecast accuracy Cadence Management information systems Action Increased focus on partners and inside sales Refresh comp plans, stable leadership On-boarding training Fill vacancies Weekly forecast Commit process Bid review process Comp review 50

51 PARTNERS Strategy: to be their modernisation partner of choice, working together to drive incremental revenues for us both Global Strategic Partners (5) System Integrator Partners (8) Specialty Partners (8) Resellers (11) CDW, Component Source, En Pointe, Insight (Software Spectrum), Wayside Technology (Lifeboat & Programmers), Software House International (SHI), Spectrum Systems, Softchoice, Tech Data 51

52 PARTNERS Selling alongside partners is an important component of our growth strategy... We have trained over 130 sales executives from our partners Training and certification of partner delivery resources Focus has created deeper, more strategic relationships Measurable progress, results and growth Partners have delivered more than 100 net new opportunities $ multi-million net new opportunities in FY11 Support and Execute 52

53 MAINTENANCE REVENUES COMPOSITION IMFR Levers Price increases Renewal rates above budget Upsell RMFR Bank Bank Revenue from prior year contracts RMFR Revenue from current year maintenance renewals bookings IMFR Revenue from first year maintenance 53

54 MAINTENANCE RENEWALS Renewal best practices delivered by 40 reps worldwide... Renewal Rates Classic business remains stable Inherited lower renewal rates with the acquired businesses, as expected AMQ Initiatives Highest priority was to re-establish contact with AMQ customers Terminated outsourcing contract to increase renewal rate by bringing acquired business in line with Micro Focus best practices Results are that renewal rates are improving and customers are renewing earlier New programmes Researching service and support offerings to identify potential higher value support packages 54

55 PROFESSIONAL SERVICES Delivery of larger, more profitable, repeatable & longer term revenue flows... To support the growth of profitable LFR: c. 250 Micro Focus experts and partner professionals delivering projects in H1 Core capabilities in migration analysis, design, construction, test & implementation Completely aligned with partner program: Sell through / with model, enhanced by joint opportunity planning Projects resourced by the most appropriate mix of partner and MF delivery experts Moving up the value chain: Constructing solutions based on repeatable services building blocks PS as a differentiator leading to long-term engagements and richer business lead discussions Valued by clients as experienced architects, reducing program risk Target for Professional Services revenues remaining below 10% of Group revenues: Enhances LFR without jeopardising Group margins Ensures focus on core business 55

56 AMQ Background Acquired two underperforming businesses approximately one year ago Borland Software and ASQ Division of Compuware Current AMQ Division includes two distinct product lines: Application Management & Testing solutions Visibroker CORBA technology Measures to drive performance: Retaining and rebuilding sales delivery engine after M&A staff losses New product launches Creating new pipeline for new AMQ through new marketing campaigns Creating new processes to maximise impact of marketing campaigns e.g. Lead process, Inside Sales 56

57 AMQ Current Status Automated Testing Tools market affected by current IT budget cuts R&D investment supporting customer retention and sustainable product differentiation going forward Continuous Quality Assurance believed to be a compelling proposition The Group remains positive about the AMQ market and the leverage we see with other parts of the business 57

58 THE WAY FORWARD FOR MICRO FOCUS SALES 1. Drive AMQ business 2. Pipeline improvements through quality lead generation and qualification 3. Maximising partner revenues through plan execution 4. Reducing sales churn and attracting / retaining the best sales talent Creating a winning sales team & culture 58

59 MANAGEMENT TEAM Q&As 59

60 SUMMARY Nigel Clifford

61 5 TAKEAWAYS FROM TODAY Micro Focus has a strong: 1. Market opportunity vast legacy market, technology and cost transformation is catalyst for growth 2. Customer offer modernisation is relevant and compelling 3. Product set our excellent products can both stand alone and work together 4. Focus on operational excellence progress made, more in train 5. Team great blend of new and established DNA delivering outstanding shareholder value 61

62 INVESTOR & ANALYST DAY 29 September 2010