Information &Telecommunication Systems
Business Strategy
Hitachi IR Day 2012
June 14, 2012

Shinjiro Iwata
Senior Vice President and Executive Officer,
President & CEO
Information & Telecommunication Systems Group,
President & CEO
Information & Telecommunication Systems Company,
Hitachi, Ltd.
© Hitachi, Ltd. 2012. All rights reserved.

Information & Telecommunication Systems
Business Strategy

Contents
1. Business Overview and Outlook
2. Market Trend and Business Policy
3. Measures for Focused Businesses
4. Strengthen System Solutions Business and Platform Business
5. Strengthen Business Structure
6. Conclusion© Hitachi, Ltd. 2012. All rights reserved.

1-1 Business Fields
Provide highly reliable social infrastructure systems
Collaborative creation with customers based on quality and trust

Services●IT services●Data center●Consulting

System Solutions●Large-scale systems●Highly reliable systems

Integrated Platforms
Servers / Storage / Networks●Hardware●Software

Highly reliable cloud computing services,
smart information and big data
© Hitachi, Ltd. 2012. All rights reserved.

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1-2 Business Overview: Contribute to Social Innovation Business

Management vision

through collaborative creation with customers

Business size FY2011 revenues: ¥1,764.2 billion●Revenue breakdown
SoftwareHardware30％

Services (Incl. System solutions)10％

Financial institutions Government

30％

60％
Industry,
distribution

Social infrastructure

20％

30％

20％

Japan

Overseas

75％

25％
North America: 44%
Europe: 26%
China/Asia etc.: 30%(Note) The percentages for the breakdown of Japanand overseas revenues are approximate figures.
© Hitachi, Ltd. 2012. All rights reserved.

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Results and FY2012 Forecasts
1-3 FY2011(1) Revenues●Revenues(Billion yen)

FY2011 Summary

Hardware/software
Services

2,300.0

1,652.0 1,764.2 1,760.0

Services revenue ratio

58％

60％

61％

FY2010(Actual)

FY2011 FY2012(Actual) (Forecast)

65％

FY2015(Target)Overseas revenue ratio

24%

25%

25%

35%

lRevenues rose due to increased
sales from services in Japan, as
well as sales in storage
solutions and consulting overseas

Outlook from FY2012
2012年度以降の見通し
lWe are aiming to expand revenues
in the system solutions andplatform businesses by focusing
on “Highly Reliable Cloud
Computing Services”, “Smart
Information” and “Big Data related
business.”© Hitachi, Ltd. 2012. All rights reserved.

5

Results and FY2012 Forecasts
1-4 FY2011(2) Operating Income●Operating Income (Billion yen)
FY2011 Summary
Operating income ratio

Over 8.0%

lEarnings rose mainly due toimproved hardware profitability,
notably in telecommunications &network systems.

6.8%
6.0%

5.8%

185.0
98.6

FY2010(Actual)

101.7

Outlook from FY2012

120.0

FY2011 FY2012(Actual) (Forecast)

FY2015(Target)lWe are aiming to create a highly
profitable structure through the
Hitachi Smart Transformation
Project, and through rigorous
project management in services
and improvement on hardware
profitability.
© Hitachi, Ltd. 2012. All rights reserved.

6

Information & Telecommunication Systems
Business Strategy

Contents
1. Business Overview and Outlook
2. Market Trend and Business Policy
3. Measures for Focused Businesses
4. Strengthen System Solutions Business and Platform Business
5. Strengthen Business Structure
6. Conclusion© Hitachi, Ltd. 2012. All rights reserved.

2-1 Market Trends and Competitive Environment● IT market

Base year 2008=100

124

Japan

Global

100

2008

106

100
91

91

90

91

92

93

94

2009

2010

2011

2012

2013

2014

2015

93

2008

113

2009

118

108

98

2010

2011

2012

2013

2014

2015

Source: IDC, June, 2012 ”Worldwide Black Book Query Tool, Version1.1, 2012” (Except Client Systems, Feature Phones, Smartphones)●Industry
TrendslSeeking growth opportunities in global markets
due to the slower domestic market
lGreater use of big data and cloud computing services
lGrowing interest in BCP* and data centers after the Great East
Japan Earthquake●Competitive
Environment

lTrend to put more efforts in social infrastructure businesslFocus on high-value-added software as well as greater investment on it
lEmergence of new players in cloud computing business* BCP: Business Continuity Plan
© Hitachi, Ltd. 2012. All rights reserved.

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2-2 Where we are at?
Transform into a global major player by expanding business in the social infrastructure field

(%)
IBM

2011

20

Operating income ratio

2009

15
HP

(%)

2011

2009

10

10
NTT Data
2015

2009

5

2011

2011
2009

Information &Telecommunication
Systems Company

NEC
2009

2

100

2011

120

140

($billion)

Source: Each company’s announcements

2011

1

80

FUJITSU

3

2009

4

5 (¥trillion)

Revenues© Hitachi, Ltd. 2012. All rights reserved.

92-3 Key Focus and Our Strength
Grow business out of leveraging fusion (information, control and infrastructure)
Contribution to safe, secure and comfortable social innovation supported by highly reliable systems

Healthcare/
MedicalFinancial
institutions

Education
Government

Manufacturing/logistics

Water

Transportation
EnergyCreate safe, secure andcomfortable societies

Provide Advanced IT Platforms
Highly Reliable
Cloud Computing
Services

Smart
Information

Big Data
utilization

Information × Control × Infrastructure© Hitachi, Ltd. 2012. All rights reserved.

102-4 FY2015 Business Targets

FY2015
Targets

Revenues: ¥2.3 trillion

Operating income ratio: Over 8%Overseas revenue ratio: 35%

Services revenue ratio: 65%

Be Globally Competitivein the information and telecommunication systems business field

Expand systemsolutions business●Continue to grow in the Japanese market
by developing new business fields●Strengthen business in key focus areas
as growth driver●Expand global business●Generate higher earnings via the Hitachi Smart
Transformation Project

Expand platformbusiness

Highly Reliable Cloud Computing business
Smart Information business
Big Data related businesses

Key Focus© Hitachi, Ltd. 2012. All rights reserved.

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Information & Telecommunication Systems
Business Strategy

Contents
1. Business Overview and Outlook
2. Market Trend and Business Policy
3. Measures for Focused Businesses
4. Strengthen System Solutions Business and Platform Business
5. Strengthen Business Structure
6. Conclusion© Hitachi, Ltd. 2012. All rights reserved.

3-1 Highly Reliable Cloud Computing Business Strategy
Set out to create highly reliable cloud computing services
for social infrastructure systems and mission critical operations
Related revenues

FY2012: ¥200 billion

FY2015: ¥500 billion●Expanded adoption by various business segments, categories and applications
as well as adoption for large-scaled mission critical systems[Manufacturing / distribution, education, government, transportation, financial institutions,healthcare / medical care, water, energy, etc.][Energy visualization][Energy visualization][Private cloud services]

・Mori Building

・TOKYO SKYTREE・Japan Tobacco (JT)[Private cloud services][Service provision platform][Service provision platform]

・Hosei University

・Hokkaido University

・Gurunavi[Consolidated tax filing][Timetable creation][Service provision platform]

・All Nippon Airways(ANA)[Private cloud services]

・Ministry of Foreign
Affairs of Japan・Hiroshima Electric Railway[Service provision platform]

・Ministry of Land, Infrastructure,
Transport and Tourism[Shared cloud service for local governments]

・Japan Meteorological Agency ・Okazaki City and Toyohashi City,
Aichi Prefecture© Hitachi, Ltd. 2012. All rights reserved.

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3-1 Highly Reliable Cloud Computing Business Strategy
Set out create highly reliable cloud computing services
for social infrastructure systems and mission critical operations
Related revenues

FY2012: ¥200 billion

FY2015: ¥500 billion●Expanded adoption by various business segments, categories and applications
as well as adoption for large-scaled mission critical systems[Manufacturing/logistics, education, government, transportation, financial institutions,healthcare/medical care, water, energy, etc.]●Strengthen and expand businesses in global markets[Business development for
local corporations]
・Combine with strong storage
solutions: Hitachi Data Systems[Supporting Japanese companies
for business development
overseas]
・Cloud computing services:
Microsoft Japan[Alliance to expand business in Asia]
・Data center: Hi-Transcend Information
Technology (Dalian)・Cloud computing service for China:
Founder Group●Provide optimized solutions in cooperation with Hitachi group companies[Data center design, construction
and operation services]
・Hitachi, Ltd. ・Hitachi Systems
・Hitachi Plant Technologies
・Hitachi Building Systems
・Hitachi Architects & Engineers[Crane Monitoring, Failure Diagnosis
and Facilities Maintenance Service]・Hitachi, Ltd. ・Hitachi Solutions
・Hitachi Plant Technologies© Hitachi, Ltd. 2012. All rights reserved.

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3-2 Smart Information Business Strategy
Expand IT business for social infrastructure and new business areas
Related revenues

FY2015: ¥100 billion●Further develop the social infrastructure business・Promote proposal-type businesses with “Information”, “control” and “infrastructure” for customers
responsible for providing social infrastructure such as energy, water, and transportation… Propose information & telecommunication systems to customers
together with the Infrastructure Systems Company
・Organizational adjustment to provide solutions for social infrastructure… Strengthen workforce (for business incubation, top-level consulting, SEs, etc.)… Put the task force team (April, 2012) in specializing social infrastructure to accelerate the business●Track records and know-hows through demonstration trials and utilize them in actual projects
・Develop business in smart city demonstration trials in Japan and overseas… [Demonstration trials for isolated-island smart grid] Hawaii, U.S., etc.
・Use in actual projects in Guangzhou and Dalian, China and U.K. (e.g. TrainLink maintenance), etc.

●Develop and expand core solutions… Urban city (regional) management cloud, energy management cloud, maintenance cloud computing,
Big data analysis and modeling service (by Smart Business Innovation Laboratory)
Develop platforms for EAM*1 (asset management), GIS*2 (map information management),
MDM*3 (meter data management), etc.
*1 EAM : Energy Asset Management *2 GIS : Geographic Information System *3 MDM : Meter Data Management© Hitachi, Ltd. 2012. All rights reserved.

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3-3 Big Data Related Business Strategy
Support customers’ business expansion through big data utilization

FY2015: ¥150 billion

Related revenues

Collaborative creation
with customers●Accumulate know-hows throughcollaborative projects●Grow data meisters (experts)

Create solutions●Business operations ●Application to systems●Build and apply big data processing platform

Establish
newbusiness
model

Develop products and technologies●Promote collaborative business with customers and business partners
・Support customers’ new business development, expand new businesses with business partners
・Use experience for urban planning, preventive maintenance, etc.

●Launch big data related services
関連売上高・Support to find value propositions of customer’s business by analyzing big data
… Start providing data analytics meister services (June, 2012)… Centralize and strengthen human resources related to big data analysis(about 200 people belongs to the related projects)
・Provide infrastructure cloud and content cloud computing services●Develop platform products and technologies for supporting big data utilization
・Offer Hitachi Unified Storage globally (April, 2012)
・Commercialize the results of joint R&D with the University of Tokyo regarding ultra-high-speed
database engine (May, 2012)© Hitachi, Ltd. 2012. All rights reserved.

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Information & Telecommunication Systems
Business Strategy

Contents
1. Business Overview and Outlook
2. Market Trend and Business Policy
3. Measures for Focused Businesses
4. Strengthen System Solutions Business and Platform Business
5. Strengthen Business Structure
6. Conclusion© Hitachi, Ltd. 2012. All rights reserved.

4-1 Expand System Solutions Business and Platform BusinessContinuously grow in the Japanese market and expand business globally
System solutions
Business
PlatformBusiness●Enhance business and improve efficiency through Group consolidated
management●Strengthen global business centered on Hitachi Consulting●Bolster ability to meet customer needs through business structure
integration●Provide platform products for supporting focused areas

Build Global Value Chain
Information & Telecommunication
Systems Company

Joint product development
Service lineup creation

Hitachi Solutions
Hitachi Systems
Hitachi-Omron Terminal Solutions

Hitachi Consulting

R&D collaboration
Global customer response…
Hitachi Data Systems

Utilization of offshore resources© Hitachi, Ltd. 2012. All rights reserved.

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4-2 Strengthen System Solutions Business
Expand business and add value propositions via consolidation of in-house companies●Continue to leverage business in the Japanese market “Aggressive sales”
・Accommodate needs of big customer accounts, steadily develop the major SI business・New development to get into the cutting-edge technology area to meet customer needs
・Expand customer coverage by strengthening sales force, open up new business domains●Strengthen global solutions business・Further strengthen consulting business (by expanding specialized fields)… Expand scale of business through continuous M&A(Acquired PRIZIM Inc. in April, 2012, an environmental sustainability consulting firm)
・Expand solutions business leveraging global consulting networks
・Provide cross-border IT services in China, Southeast Asia and other Asian markets… Acquired eBworx Berhad in May, 2012, a Malaysian financial IT solutions company
Expand exposure in the Asian markets, and maximize business synergies with other offices in Asia

●Improve business efficiency and expand business opportunities
by consolidating functions with in-house companies
・Maximize customer response ability through role-sharing and eliminating overlapped operations
・Restructure in-house company businesses and streamline functions across various customer types… Hitachi Systems, a new company started in October, 2011 after two companies merged
and restructured ERP* business (March, 2012)●Further improvement of project management
・Improve project management capabilities to cope with competition and customer demands change… Integrated certification systems for project managers (April, 2012), about 6,000 certified personnel in total* ERP : Enterprise Resource Planning© Hitachi, Ltd. 2012. All rights reserved.

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4-3 Strengthen the Platform Business
Provide integrated platform solutions to support key focus areasand create value propositions with customers worldwide
Field to Future
Technology

Information cloudContent cloud

Software

Infrastructure cloud・Make know-how
formulated knowledge
・Total managementof diversified data
・Scalability ・ High efficiency

Integrated platform solutions to support key focused areas●Respond to market trend changes
・Organization to provide integrated platforms: Established IT Platform Division Group (April, 2012)
・Jointly developed the new product by Hitachi and Hitachi Data Systems: Hitachi Unified Storage (April, 2012)●Further expand global collaboration
・Promote market-oriented R&D
・Build global value chains●Product platform to back up content / information cloud
・Provide high-value-added software products
・Supply highly reliable telecommunications and network platform© Hitachi, Ltd. 2012. All rights reserved.

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Business via Consolidated
4-4 Strengthen
in-house companies
Enhance synergies among in-house companies
and leverage strengths of each company●Pursue synergies in and out Japan among Hitachi, Ltd. andHitachi group companies
・Joint proposals, solutions lineups sharing
・Develop businesses utilizing each company’s customer bases and sales channels
・Role sharing and elimination of overlapped operations●Expand business with advantages of each company’s strength
Hitachi Solutions

Offer compound solutions leveraging core products andtechnologies

Hitachi Systems

Offer high-value-added services leveraging strengths in monitoring,
operating and construction

Hitachi-Omron Terminal Solutions

Extend sales of ATMs, with the greater success in China,
to the other Asian markets

Hitachi Data Systems

Increase profitability through business expansion and software /services business

Hitachi Consulting

Extend global network and enhance business portfolio© Hitachi, Ltd. 2012. All rights reserved.

21

Information & Telecommunication Systems
Business Strategy

Contents
1. Business Overview and Outlook
2. Market Trend and Business Policy
3. Measures for Focused Businesses
4. Strengthen System Solutions Business and Platform Business
5. Strengthen Business Structure
6. Conclusion© Hitachi, Ltd. 2012. All rights reserved.

5-1 Hitachi Smart Transformation ProjectTransform cost structure to compete with global companies- Plan and execute drastic measures with “Simple”, “Slim” and “Best Practice” [Business Structure Reforms]
・Optimize manufacturing venues andstandardize product development
・Promote consolidated management bycustomer categories[Fixed Expense Structure Reform][Variable Expense Structure Reform]

・Standardized work andIT system integration
・Promote shared services

・Expand use of offshore resources
for software development
・Enhance centralized purchasing andglobal procurement●Specific Measures(1) Optimize manufacturing bases
・Reform the value chain from product development to manufacturing to raise global competitiveness… Optimize hardware-related manufacturing bases (FY2012)(2) Promote efficiency in the internal governance・Improve efficiency with Hitachi group companies for raising corporate value and improving profitability… Hitachi Solutions made Hitachi Business Solution a 100% subsidiary (March, 2012)(3) IT system integration
・Provide shared services of standardized system with small and medium-sized Hitachi group companies… Pilot integrated system will be in experiment at some Hitachi group companies (FY2013),
and gradually extend the system to other group companies(4) Expand use of offshore resources
・Reduce costs by extending the use of offshore resources from a concentration of software development tofront-end (design) and back-end (testing) process as well
… Utilize China and India bases© Hitachi, Ltd. 2012. All rights reserved.

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5-2 Strengthen Business Bases
Enhance business bases for realizing information andtelecommunications systems business to compete globally●Improve Financial Structure
・Generate stable earnings to invest for business expansion with cost structure reforms
・Investment plan for FY2012: ¥160 billion
・R&D investment plan for FY2012: ¥90 billion●R&D strategy to accelerate global growth・Promote R&D along with business strategy spearheaded by global major six regions… China: Develop system management software products; North America: Develop next-generation
integrated platforms
・Increase global R&D researchers from 150 (FY2012) to 300 (FY2015)●Pursue improvement on quality and productivity by leveraging MONOZUKURI・Share technology design platforms
・Enhance integrated project management with group companies●Strengthen business continuity plan (BCP)・Already formulated BCP for major business divisions and Hitachi group companies (FY2011)
・Integrated BCP operation across all in-house companies© Hitachi, Ltd. 2012. All rights reserved.

24

Information & Telecommunication Systems
Business Strategy

Contents
1. Business Overview and Outlook
2. Market Trend and Business Policy
3. Measures for Focused Businesses
4. Strengthen System solutions business and Platform business
5. Strengthen Business Structure
6. Conclusion© Hitachi, Ltd. 2012. All rights reserved.

6-1 Conclusion●Revenue(Billion yen)

Hardware/software
Services[1,652.0] [1,700.0] [1,750.0][2,300.0]●Operating Income (Billion yen)
Operating income ratio Over 8.0%

2,300.0

1,652.0 1,764.2 1,760.0

6.8%
6.0%

5.8%
［185.0］185.0
Services revenue ratio

58％

60％

FY2010(Actual)

FY2011 FY2012(Actual) (Forecast)

65％

61％

［98.6］

98.6［110.0］101.7［122.0］120.0

FY2015(Target)Overseas revenue ratio

24%

25%

25%

35%

FY2010(Actual)

FY2011 FY2012(Actual) (Forecast)

FY2015(Target)* Figures shown in [ ] are disclosed at Hitachi IR Day 2011.
© Hitachi, Ltd. 2012. All rights reserved.

26

6-1 Conclusion

FY2015 Targets●Revenues: ¥2,300 billion, Operating income ratio: Over 8%●Overseas revenue ratio: 35%●Services revenue ratio: 65%© Hitachi, Ltd. 2012. All rights reserved.

27

6-2 Vision

We bring innovation to realize human dreams
with IT, control and social infrastructure.

© Hitachi, Ltd. 2012. All rights reserved.

28

Cautionary Statement
Certain statements found in this document may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such“forward-looking statements” reflect management’s current views with respect to certain future events and financial performance and include any statement that does notdirectly relate to any historical or current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions whichindicate future events and trends may identify “forward-looking statements.” Such statements are based on currently available information and are subject to various risks
and uncertainties that could cause actual results to differ materially from those projected or implied in the “forward-looking statements” and from historical trends. Certain“forward-looking statements” are based upon current assumptions of future events which may not prove to be accurate. Undue reliance should not be placed on “forwardlooking statements,” as such statements speak only as of the date of this document.
Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from historical trends include, but are notlimited to:neconomic conditions, including consumer spending and plant and equipment investment in Hitachi’s major markets, particularly Japan, Asia, the United States and Europe,
as well as levels of demand in the major industrial sectors Hitachi serves, including, without limitation, the information, electronics, automotive, construction and financial sectors;
nexchange rate fluctuations of the yen against other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities are denominated, particularly
against the U.S. dollar and the euro;
nuncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing;nuncertainty as to general market price levels for equity securities, declines in which may require Hitachi to write down equity securities that it holds;
nthe potential for significant losses on Hitachi’s investments in equity method affiliates;
nincreased commoditization of information technology products and digital media-related products and intensifying price competition for such products, particularly in the Digital Media &Consumer Products segments;
nuncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technologies on a timely and cost-effective basis and to achieve market acceptancefor such products;
nrapid technological innovation;nthe possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts for which Hitachi uses the percentage-of-completion method to recognize revenue from sales;
nfluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals,
or shortages of materials, parts and components;
nfluctuations in product demand and industry capacity;
nuncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand, exchange rates and/or price of raw materials or
shortages of materials, parts and components;
nuncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation Business;nuncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen competitivenessand other cost reduction measures;
ngeneral socioeconomic and political conditions and the regulatory and trade environment of countries where Hitachi conducts business, particularly Japan, Asia, the United States andEurope, including, without limitation, direct or indirect restrictions by other nations on imports and differences in commercial and business customs including, without limitation, contract
terms and conditions and labor relations;nuncertainty as to the success of alliances upon which Hitachi depends, some of which Hitachi may not control, with other corporations in the design and development of certain
key products;
nuncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property rights, particularly those related to electronics and data processing technologies;
nuncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings of which the Company, its subsidiaries or its equity method affiliates have become or
may become parties;
nthe possibility of incurring expenses resulting from any defects in products or services of Hitachi;nthe possibility of disruption of Hitachi’s operations by earthquakes, tsunamis or other natural disasters;
nuncertainty as to Hitachi’s ability to maintain the integrity of its information systems, as well as Hitachi’s ability to protect its confidential information or that of its customers;
nuncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its significant employee benefit-related costs; andnuncertainty as to Hitachi’s ability to attract and retain skilled personnel.
The factors listed above are not all-inclusive and are in addition to other factors contained in other materials published by Hitachi.

© Hitachi, Ltd. 2012. All rights reserved.

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