Accelerated IT. Jeroen Tas, CIO Royal Philips Electronics

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1 1 Accelerated IT Jeroen Tas, CIO Royal Philips Electronics

2 Agenda Why are we transforming What are we doing What is different now How are we going to achieve it Where are we heading Key takeaways 2

3 Why was the transformation needed 1 Costs too high IT costs approached 1 billion in 2011 Philips at 4%, peers are at 3% of Sales 80% of IT resources spent on operations Patched lt landscape 2 Complexity drives time-to-market and operational issues Complexity of the landscape impacts reliability Our business is real-time, our systems not Data quality and consistency issues Long lead-time to implement new functionality 3 Way of working needs to align with new operating model Complex structure, heavy processes hamper speed and agility Business ownership and responsibility for IT were lacking No full stack management of systems Inefficient sourcing 3

4 What are we doing Embedding IT fully in End2End business processes Ensuring IT investments have compelling business cases Drastically reducing the number of systems Deploying off-the-shelf IT solutions Running IT in a LEAN manner Moving work to low-cost countries and further outsourcing 4

5 What is different now An executive committee that is Willing to bite the bullet on difficult topics that have been chewed on for ages Spending the quality time on a topic that is not a typical favorite IT Leadership Consisting of seasoned IT professionals with a strong business focus Additions to the team, ensuring the right balance between knowing Philips and the transformational skills needed 5

6 How are we going to achieve it A Multi-disciplinary team Mats Beem End2End Steve Olive CiO Healthcare Bart Luijten CIO Corporate Anosh Thakkar Architecture & Platforms Charel van Hoof Solution Delivery Joe Norton IT Infra & Ops Deputy CIO Jeroen Tas CIO Minke van Steenis CIO Lighting Dr. Nick Mankovich Security Unni Nair CIO Markets Jan van Loon CIO Consumer Business needs End2End business-it transformation Business Business partnering & portfolio mgt Architecture & platform mgt Solution delivery IT IT operations IT services

7 How are we going to achieve it The 4 Initiatives Robust portfolio 2 LEAN operating model management Rigorous IT investment screening Compliance with business - IT roadmaps Service level optimization 3 Thin layer IT management with fast decision making LEAN IT processes Controlling the IT value chain Optimized sourcing From input (time & material contracting) to output (deliverables) to business outcomes Strategic vendor partner management and scale efficiency 4 Overhaul and simplification of IT landscape Radical IT landscape simplification in context of Accelerate! End2End Legacy systems decommissioning Infrastructure efficiency, cloud-based 7

8 Path to Value: 4 Initiatives reduce IT cost by 25% in % run rate reduction by end 2013 Shift in allocation to support of business transformation and differentiating capabilities 1,000 Robust Portfolio Management IT Projects Infrastructure Demand Reduction Lean Operating Model Thin layer IT management Lean IT processes Controlling the IT value Chain Optimized Sourcing Output Based Solution Delivery Amounts in million IT Landscape Simplification 250 Operations Optimization Infrastructure Outsourcing 750 Software Rationalization System Decommissioning 2011 Baseline End2End Landscape Overhaul 2015 Target 8

9 Accelerate! Changing the way we work at Philips Customer Centricity Strong customer centricity and entrepreneurship in our markets Resource to win Clear strategies which are resourced to win and agreed between businesses and markets End2End Innovating with higher speed and excellence to outpace competition through effective End2End customer value chains Culture A new growth and performance culture to become a more agile and market oriented growth company Operating model Developing a simplified operating model to enable markets and businesses: reduced overhead costs 9

10 Focus on execution and Return on Investment Time-tomarket Inventory levels Customer service level Cost of non-quality IT cost - 40% to 300 bps over two years > 95% - 30% - 25% 10

11 Where are we heading IT for the connected company Philips dynamics Our business is global and operates 24/7 in dynamic markets Our customers and products are increasingly connected Our company is integrated in multiple eco-systems We acquire and divest companies Industry developments Lines between traditional IT and business IT getting blurred Social business and mobility daily gaining in importance New insights and real-time analytics through big data New business models emerging e.g. pay-per-click clinical decision support, lighting as a service 11

12 Where are we heading IT as a fundamental enabler for Growth Customer Centricity Agile business processes Help businesses differentiate their products and services in the markets Support integration with customers and products through Social business, Internet of Things and Big data technology Enable the business to configure, run and analyze their processes easily and quickly To link with eco-system partners Based on a scalable and secure platform for always-on, real-time business End2End Business Transformation Accelerated IT Business Growth & Flexibility 12

13 Case Study Living a healthy life Measures captured and wirelessly uploaded each time Measure your health Easy to use, well connected devices to provide data on key health parameters Active Health Management From Track your progress Real-time measurement including history to see your progress Motivate to remain engaged Measurement history, personalized action plan, community support, customized reminders, and challenges Internet of Things Big Data Social Business Mobility Cloud 13

14 Case Study Event Management A New Way to deliver Business Value rapidly Remote Customer Customer Care Solutions Center On-Site Business Modeling & Architecture Customer Value Prototyping Agile Development and Delivery 14

15 Key Takeaways Disciplined IT approach with focus on business value 250 million of cost savings in the next four years Accelerate! is changing the way Philips works Accelerated IT to implement new capabilities and cost efficiencies Laying the foundation for the connected company IT as a fundamental enabler for growth Supporting new business models 15

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