Digital Solutions Business
March 16, 2020
Osamu Noda
Senior Vice President and Member of the Board
NEC Networks & System Integration Corporation(TSE: 1973, NESIC)Self Introduction

Osamu Noda
Senior Vice President and Member of the Board
Executive General Manager,
Business Design Operations Unit
Executive General Manger,
Digital Solutions Business Unit
Career in brief
Engaged in assignments associated with business solutions
at NEC Corporation.
Joined NESIC in 2015. Engaged in the enterprise solutions business.
Assigned to the present position in April 2019.
MottoDeveloping the DX business by facilitating open and straightforward
communications and making decisions in a timely fashion.

2© NEC Networks & System Integration Corporation 2020

Digital Solutions Business in NESIC

Providing SI and service of ICT systems
to enterprises and public clientsDSL(Digital Solutions)(Segment)

NWI(NetworkInfrastructures)

ESS(Engineering &Support Services )Marketing & Sales Operations Unit
Business Design Operations Unit
(Promotes the medium- to long-term technological strategy
as well as the business development and commercialization of leading technology)(Organization)

3

Digital Solutions
Business Unit

NetworkInfrastructures
Business Unit

Engineering &Support Services
Business Unit

Five consolidated
subsidiaries such as
Q&A Corporation

Four consolidated
subsidiaries such as K&N
System Integrations
Corporation

Seven consolidated
subsidiaries including
overseas subsidiaries© NEC Networks & System Integration Corporation 2020

Digital Solutions Business in NESIC

Promoting growth strategyof digital businesstoward “Digital x 5G” era※Collaborating with Business Design Operations Unit

<Biz. Areas>

Digital solutions field

ServiceICT SI

CloudWorkstyleInnovation services

Digital x 5G
4G→5G
migration

Infrastructure

Full 5G

5G infrastructure field

Medium-term
4NESIC’s synergies, owning bothknowhow of enterprise ICT services
and telecom. infrastructures© NEC Networks & System Integration Corporation 2020

Long-term

NESIC’s Strengths（１）Broad client base-Abundant PBX/network clientsClient base

Sales by industry(DSL: 1Q-3Q FY19/3)

Apprx.

10,000Share of PBX※
over 50%
1/3 of 1st sectionlisted companies

Telecom.
11%
Governments
6%
NEC Group
14%
Others10%※As NEC Group5© NEC Networks & System Integration Corporation 2020

Financial16%¥78.6Bn

Manufacturing
15%

Retail/services
28%

NESIC’s Strengths (2)NESIC applies the sophisticated technologicalexpertise and service platforms expected of the NEC
Group to multi-vendor services
NESIC has a fully in-house capability
to introduce ICT.
Expertise in the building andoperation of large-scale ICTservices.
Consultation

Maintenance/Operation

DesignNationwide
sales/SI /maintenancesystems

Network monitoring
center with contact
center functions

Logistics/repair
centers

Data centers

Product
procurement/
Construction

Offering new services by leveraging its service platforms andcollaborating with superb Japanese and overseas vendors andstart-ups.

6© NEC Networks & System Integration Corporation 2020

NESIC’s Strengths (3)NESIC embraces workstyle innovation initiatives andhas practiced such reforms for more than 10 years
2007～2010～

HQ
relocation

Workstyle not constrainedby time or location

Office innovation
Large amountsof papermaterials

Close-mindedworkstyle

Paperless work

Creation of flat
structures byremoving
organizational
barriers

7

Securing a sufficient, excellent
workforce.
Autonomous workstyle

Labor shortages
Increase in
overtime work

Retirement due tolong-term care

Work at home(telework)© NEC Networks & System Integration Corporation 2020

Taking on new challenges todevelop new workstyles

Established an efficient and creative
workstyle combining ICT and facility
management capabilities.

2015～

DSL Performance in FY2020/3 (1Q-3Q)*Forecasts as at January 29, 2020

Driving improvement of NESIC
centering on workstyle innovation
Net sales(¥ Bn.)

CAGR

Operating incomes
CAGR

+6%
277.9

267.9

300

CAGR

7.1%

10.1%
8.5%

CAGR

+11%
6.8

88.4

99.8

To total (33%)(36%)

FY18/38109(36%)

FY19.3

FY20.3e

15.0

12.8

11.1
To sales

+16%

+27%
8.4

11.0

～～～～～～

FY18/3

FY19.3

FY20.3eOthers/Elimination© NEC Networks & System Integration Corporation 2020

Factors for improved performance

Sales and profit increased due to continuousefforts to expand services and reduce costs
Sales expansion


Growth in workstyle innovation-related businesses
Growth in hotel and distribution-related businesses
Increase due to the offering of DX-based solutions

Cost reductions
Improvement of productivity by implementing workstyleinnovation within NESIC.
(Reduction of fixed expenses ratios by utilizing RPA and other tools)

Improvement of variable expenses such as personneland equipment cost.

9© NEC Networks & System Integration Corporation 2020

Medium-term StrategyofDigital Solutions Business10© NEC Networks & System Integration Corporation 2020

Business Environment Surrounding Digital Solutions
Interest in investment in workstyle innovation areas isrising despite concern over corporate investment trends
amid a downswing in the domestic economy
Society/Customers▐

Growing need for workstyle innovation.
 A rise in the level of attention paid to telework triggered by
the COVID-19 coronavirus and the Olympics.

▐Measures to address labor shortages and improve themanagement of employees’ health.
Technology▐

Accelerated migration from on-premises systems toservices, mobility and digitalization.
Progress in the shifts to the cloud, wireless and DX.
11© NEC Networks & System Integration Corporation 2020

Medium-term Business Policy
Make changes in business structure from a network
system integrator into a solution provider.
Basic strategy (i)Business model

Basic strategy (ii)
Focus Area

Shift to a recurring/service
provision model

Progress in workstyleinnovation

Basic strategy (iii)
Technologies

Strengthening of DX
Post-labor intensive businesses(Stable growth and improvements in profitability)
Expansion of the customer base and increase of sales per customer

12© NEC Networks & System Integration Corporation 2020

Basic Strategy (i)：Shift in Business Models
Expand recurring models

through the enhancement of value to be provided
Maintenance and subscription only≠Recurring

Business expansion throughthe constant value enhancement=Recurring

Recurring model

Flow & maintenance modelBusiness
opportunities

13

Consultation

Enhancement of value
provided by NESIC

Maintenance/
Operation

DesignTimely service
launches throughcollaboration

Consultation

Improvement of profitability
by placing more weight onservices and facilitating
automation

DesignProductprocurement/
Construction

Maintenance/
Operation

Product
procurement/
Construction

When systems arerenovated

Business
opportunities

When new services arelaunched© NEC Networks & System Integration Corporation 2020

Basic Strategy (ii)： Evolution of Workstyle Innovation

Cultivate new workstyles by utilizing leading-edge
technology and embracing innovation
2007～

2010～

HQ
relocation

Established an efficient and creative workstylecombining ICT and facility management
capabilities.

Paperless work

14

Securing a sufficient,excellent workforce.
Autonomous workstyleCreate new businesses byutilizing internal and external
knowledge

Workstyle not constrained Utilization of leading-edge
technology/innovation
by time or location

Office innovation
Large amountsof papermaterials

Now
Now

2015～

Close-mindedworkstyleCreation of flat
structures byremoving
organizational
barriers

Labor shortages
Increase in
overtime work

Retirement due tolong-term care

Work at home(telework)© NEC Networks & System Integration Corporation 2020

Global competition
Speedier action

Three steps aheadof competitors

Offices for co-creation- Instant connection withwidely dispersed people
and offices
DX-led automation ofoperations

Basic Strategy (ii)： Evolution of Workstyle Innovation
Goal of the promotion of new workstyles

Solving challenge of Japan bythorough usage of DX/cloud(Overconcentration into Tokyo, work efficiency,
innovation…)[Realization of a drastic process innovation through cloud services and DX]
Overtime work

Commuting Internalarrangements

Information
gatheringMeetings

Optimization and automation of processes
through cloud services and DX

Allowance(time &mind)

Streamlining of processes throughcloud-based operations

15

Preparationof materials

Reporting

Collaborativecreation

Time to workon innovation© NEC Networks & System Integration Corporation 2020

Commuting

Decentralizationof offices

Allowance(time & mind)

Basic Strategy (ii)： Evolution of Workstyle Innovation

Started distributed workby admin. staff since Oct. 201950%
in satellite
officesSolving challenges (team-work,communication, etc.) by cloud and other ⇒ Solutions for customers
leading-edge technologies<Mechanisms supporting distributed work>

HQ

Distributed work at
satellite offices within
30 min. commute16© NEC Networks & System Integration Corporation 2020

Basic Strategy (ii)： Evolution of Workstyle Innovation

Building mechanisms to kick-start innovation- Efforts originating in Nihonbashi to facilitate innovation New discoveries and the cultivation of new business
opportunities. Creating customer innovation

Open innovation

Place for co-creation

Straightforward discussion
among a range of concerned
parties including customers,partners and start-ups.
customers

Partner companies

17© NEC Networks & System Integration Corporation 2020

Incorporation ofcommunication tools such as
Zoom, Slack and SmoothSpaceBasic Strategy (iii)：Strengthening DX Areas to Support BusinessCore stance for DX strategies

Expand businesses by building ecosystems
with many cloud partners
Provide competitive services

Customers

promptly.

Solution services

Offer achievements made by NESIC inhouse as a package.

External cloud services…
Salesforce

Collaborate with cloud vendors.
Establish amicable relations with start-upcompanies.

CVC

Capabilityto collaborate with external cloud services
外部クラウド連携機能

DX platform services
Multi-connectivity

Provide common functions as platformservices.
Leverage usage information as big data
to reform workstyles and understanddemand.

(Sensors/devices)18© NEC Networks & System Integration Corporation 2020

Basic Strategy (iii)：Strengthening DX Areas to Support BusinessRespond quickly to complicated issues byadopting an open interface platform
NESIC’s DX services

Ordinary DX services

Custo
mers

Custo
Custo・・・
Singleservices
mersmers(Respond to a single issue)

Customers

Respond to complicated/diverse
issues by combining services on theplatform.

Open interface

Collaboration partners

19© NEC Networks & System Integration Corporation 2020

・・・

Devices/Sensors

Devices/Sensors

・・・

Cloudservices

・・・

Cloudservices

・・・

Apps.

CloudApps.

Apps.

Case: Recurring Business x Workstyle Innovation x DX on PBX▐ Providing a cloud-based voice service for Isetan Mitsukoshi Holdings
NESIC resolved the client’s issue through DX (a cloud-based solution).
In addition, the new service contributed to workstyle innovation and the expansionof provided value (recurring)[Second step]
Automated reception service through DX (workstyle reform)
Incoming external
or internal calls

Voice
recognition

AutomatictransferDX
Responsible
personnel

Customer/Internal calls

Implemented the new service using cloud-based voice
infrastructure (Expansion of provided value)[First step]Issue

If personnel are notavailable, asmartphone text
message isautomatically created.

PBX installed on a store-by-store basis
Operational burden increased(manpower/cost)(Client by PBX)
IsetanstoresMitsukoshi
stores

PBX

PBX

20

Centralized operations carried out by respective storesand facilities through a cloud-based voice service⇒ Enabled the customer to focus on the main business.
Costs were reduced.

Cloud-based voice service
Offices・・・

Isetanstores

PBX© NEC Networks & System Integration Corporation 2020

Mitsukoshi
storesDXOffices・・・

Medium-term KPI

Increasing service business ratio by recurring & DX
and aim at stable growth & profitability improvement
Service Ratio

60％

Nonservice

40%

ServiceFY2020/3
Target2140％

DX OrdersThree-fold

60%¥5 Bn.
FY2022/3
TargetFY2020/3
Target© NEC Networks & System Integration Corporation 2020

FY2022/3
TargetToward “Digital x 5G" Era

Promoting growth strategyof digital businesstoward “Digital x 5G” era※Collaborating with Business Design Operations Unit

<Biz. Areas>

Digital solutions field

ServiceICT SI

CloudWorkstyleInnovation services

Digital x 5G
4G→5Gmigration

Infrastructure

Full 5G

5G infrastructure field

Medium-term
22

NESIC’s synergies, owning bothknowhow of enterprise ICT servicesand telecom. infrastructures© NEC Networks & System Integration Corporation 2020

Long-termCautionary Statement
Forecasts and targets of results mentioned in this document are future
estimates and are thus inclusive of risks and uncertain factors since theyare not based on definite facts. Please be aware that a variety of factors
could cause actual results to differ significantly from those projected. The
major factors affecting actual results include the economic climate andsocial trends surrounding the business of this Company’s group, consumer
trends vis-a-vis systems and services provided by this Company’s group, as
well as pressure to lower prices and ability to cope with the market in
response to intensified competition.
Factors affecting results are not limited to the ones mentioned above.

23© NEC Networks & System Integration Corporation 2020

NEC Networks & System Integration Corporationis committed to increasing customer value byredesigning future communications from the user’s
perspective.

nesic
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© NEC Networks & System Integration Corporation 2020

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