Investor Update

Oct 13, 2021

Slides

Ladies and gentlemen, good afternoon and welcome to this investor event. My name is Kjellana Hansen and I'm the Head of Investor Relations for the company. We are very happy to host this event for you today and present our new strategy for Tieto Eri that we released this morning. You will first hear a presentation from our President and CEO, Kim O'Alkio and our CFO, Tomi Heerlein. After the presentation, we will be doing a Q and A session. And if you would like to participate in that Q and A session, you need to join the webcast via the Teams link available on the webcast page. I will also come back with some more detailed instructions on that Q and A session after the presentation is done. But now I will hand it over to Kimo. He is next to me on stage and very eager to get started. So Kimo, please go ahead. Thank you very much, El Arne, and a very warm welcome to everybody today to our quite significant strategy sharing session. The direction we set today is very transformational. We see an attractive and rapid changing market with significant growth opportunities. Specialization becomes our way to capture the opportunities we are identifying. We'll be focusing on cloud native and software centricity in our business choices and investment priorities. We renew the way we operate through end to end businesses to be actually ever faster in the marketplace. The time to step ahead is now considering the market opportunities, market dynamics and our integration progress. So this is a very exciting day and the direction we are setting for the next few years to come shall be really transformational and very exciting. I'd like to begin our sharing from the market, how we read the future of the market and the market segments, which will actually provide us with very interesting growth and expansion opportunities. I'd like to begin first by a bit visionary perspective, which is a world which is very familiar to us over the work over the past few years. We'll be talking a lot about the world of the hyper connected data. We've been talking about the data centricity for several years. We see a big difference in the marketplace as every enterprise, every decision maker and every C level customer is considering how to utilize the benefits of data through one's own ecosystem even faster and also through higher investments as one of the primary drivers of the technology sector. Overall and with the foundation of Tieto Evry, we are also betting on our trust with our customers and winning new customers by having great capabilities in terms of security, privacy, being active promoters of circular economy with a very, very extensive sustainability agenda. Now when we go forward to more practical views on what's most important to our customers today and as of tomorrow, The customer needs are primarily in 3 categories. Our customers will all require more agility, more efficiency. It is not unusual to be seeking 20%, 30% lower total cost of ownership on traditional services. It is a very significant driver where we need to be and can be even more active. 2nd big driver is for our customers in their businesses to be shifting from a product led proposition to an experience led proposition supported by the data enriched services supporting the real time and personalized experience is. And finally, the 3rd big priority from a customer standpoint is the ever accelerating agenda around innovation and launching highly advanced digital experiences potentially even with renewed brands even by traditional enterprises. Now the role we play is a very significant one in supporting customers of achieving these objectives. The main enablers being the cloud momentum. Over 50% of all enterprise decisions are design and attention around UX user experiences. The notion of DevOps becoming a standard way of delivering services faster and utilizing the developments around continuous integration, continuous development as a standard methodology in the industry. And furthermore, attention and further capabilities on data analytics and around automation. From our standpoint, customer needs very clear and the technology enablers very clear for the years to come. And naturally you'd expect us to account for these in terms of our future choices. Next, I would like to provide a perspective on the view of the market by the market. There are 3 really important messages on this page. When we look at the global arena of technology and technology services, the cloud native world is an area where investments are clearly geared towards. Whether we think about investments into data and analytics, data management, data engineering, data platforms, whether we think about cloud native application development, whether we talk about moving traditional enterprise software to a SaaSified world, whether we talk about cloud managed services as a hybrid between public and private. This is an area which is driving significant change in the marketplace. 2nd factor on the left side, the traditional services will deserve even greater scale as the price erosion in these traditional segments shall further accelerate. With that in mind, it is a very important phenomenon and an opportunity to consider how to modernize our customers from a standpoint of considering optimization of our customers' business processes, application modernization and infrastructure modernization. So investments being geared also towards the market being modernized. So big 3 big factors: cloud native world, it is the biggest phenomenon for the years to come. Recognition traditionally requires scale and in between very active modernization market. But these are backgrounders on the market development. And main points still on the previous page, distinctive competitive advantages through specialization is a development in the marketplace. With these considerations in mind, naturally as Teatro Evry in our renewed strategy, we are looking into how to significantly increase aggressive advancement in our business mix and in parallel considering the business choices in a manner that we'll be increasing our addressable market, both in terms of identifying sustainable long term growth and We have clearly a growth and expansion oriented agenda where we believe we will be adding even greater value to our customers through faster execution in the marketplace. I would like to summarize our 4 main choices. Clear business choices themselves to capture the market growth and expansion opportunity. End to end businesses with full accountability and broader options to scale as the drivers of each business are highly unique. And furthermore, highly focused and clear investments to expand around cloud native and scalable software businesses, while driving partnerships to scale in the more traditional domains of managed applications and infrastructure services. With this in mind, we believe we'll be adding greater value to customers through highly specialized customer engagement through specialization, greater career opportunities for our colleagues in the company and also continuing strong and good momentum on shareholder returns. With this in mind, I would like to next go into the businesses and the business choices. We are seeing here on this page 4 of the businesses being within the cloud native and software domains and then the 2 more traditional on what we call modernization towards cloud. Our business design and engineering is centered around cloud native development, data and software engineering continuously expanding globally. Here, we have a very good foundation between the or as a combination of the advanced cloud native consulting in the Nordic countries, our international operations, which has been on a nice growth trajectory and our highly competitive product development services being able to expand as a combination, utilizing also the Product Development Services customer base around telecom and automotive. Really interesting foundation in light, both of our starting point and in terms of the market development. Then we have our software oriented business choices, stronghold around health and care, open and modular software, expanding Nordic customer base and over time further expansion potential geographically. Financial Services, also a stronghold, significantly stronger as a result of the merger. Modular and integrated software suite for Nordic and Global Financial Institutions as having very strong capabilities around core banking, around cards and the payment side with very interesting and attractive opportunities in the years to come. And furthermore, a bit narrower on the industry software, software for core processes in public energy and industrial sectors with a clear aim to build scale and further focus. And then we have our enterprise modernization, as briefly reflected earlier, to drive transformation and automated managed services for select Nordic customers in the cross section of optimizing business processes, application modernization and infra modernization. Selective customers, very big agenda, very dedicated end to end customer teams. And finally, cloud platform services to really focusing on multi cloud capacity with further scale factors being considered and naturally supporting customers in their own modernization from traditional environments towards highly modern. So these comprise of our business choices. Here, we wanted to include the example how we have talked to our customers in the pretesting also on the very specific value domains of the 6 businesses, I will not be overly repetitive to my descriptions earlier, maybe a couple of highlights. When we think about the business design and engineering to accelerate our customers' innovation from digital products to experiences and data embedded. So this is a market segment we believe we can be much more active and aggressive compared to what we have so far achieved. 1 of the background being that our consulting business had been quite extensively around applications, application management, application modernization. Now when we combine the capabilities of advanced Nordic consulting, international operations and product development services, we'll be putting a lot more energy into what I call we call the design data and software engineering with extensive expansion opportunities. Value propositions for customers for the software businesses, very distinctive and we'll run the software businesses like the best software companies in the world do. And furthermore, enterprise modernization, I would like to confirm that the existing customers whereby we deliver application services and infrastructure services, these have a very natural home with the enterprise modernization business and whereby we expect to be actually addressing new customers and gaining market share in the future more actively than we have so far achieved. And finally, the platform side, orchestrating multi cloud capacity for scaling and securing data assets and sovereignty. So very distinctive value propositions and we believe very well aligned in terms of the belief on how the tech services and technology market globally will be evolving. With this kind of a customer value proposition in mind, I'd like to next address the very important part of employee value proposition. We will continue to build on the stronghold of our Nordic heritage. This is a very valuable base to continue from in terms of culture and globally the values around openness, trust, diversity. We are seeing good developments all across our operations internationally and we believe this will end up turning continuously into greater competitive advantage as we encourage highly unheararchical behaviors working in networks and paying enormous amount of attention for career development for our colleagues. The one part that we are addressing furthermore through the renewed strategy is the clarity of vision as the end to end businesses with own strategies do enable exciting career opportunities and the transparency and visibility on where the exact business will be heading rather than looking at the group average from a visionary standpoint. So those are some of the considerations and our foundation from a standpoint of employee well-being in the era of very active talent market. It continues to be in a good shape and this is something that we'll be working very, very actively naturally given the demand in the marketplace. Next, I would like to go into further descriptions about the starting point of the businesses. So this is one of the very interesting areas, I'm sure, a lot of curiosity. So how will these businesses actually start off with? And what type of ambition levels are we setting? So first, I would like to go through briefly the starting point from a revenue mix standpoint. Business Design and Engineering 10% of revenues financial services approximately 15% of revenues industry software closer to 5% of revenues enterprise modernization 10% to 15% and cloud platform slightly below 30%. So we believe there will be a very transparent shift from the old businesses to the new definitions then as we make the transition early 2022. 2nd important part that when we think about the growth and scale potential of the company. So I'd like to start off with the top of the page. When we consider the opportunities around business design and engineering, we to begin with, we have an attractive starting point already kind of healthy growth. We believe the potential from a growth standpoint to be very solid and on a high level. The legend is down below. This is in alignment with the CMD perspectives from December. So here, high meaning over 8%. And furthermore, we do believe this will continue to be well scalable and around the group average at any given point in time. Health and Care Software growth potential high. And in recent years, we've been sustainably been able to increase the profitability and fully expect this to continue to perform above group average. Financial Services, good business, significant investments in place, long term potential medium. We maintain that view as we had in the Capital Markets Day. There we talked about 6% to 8% and profitability above group average. Financial Services, once the investment period is completed on the platform side, further opportunities for expansion, I believe, in Financial Services. Industry software growth potential medium and as seen historically above group average. So overall, when we think about the business choices, the growth and scale potential with the businesses and the starting point to begin with quite, quite advantageous. And then furthermore fair to highlight that comparatively with traditional service higher traditional services intensity around enterprise modernization and cloud platform services as the audience would expect the growth profile lower and below group average naturally subject to building significantly more scale than we've been able to in recent years. And there, we shall be looking into a multitude of means for scaling the businesses, which I'll come back to shortly. So with this in mind, wanted to share the initial descriptions, the profiles to begin with attractive mix to drive actually both the growth side in alignment with the market development and continue to drive very solid progress in our overall financials. Then the next important part of our consideration around the investments and portfolio considerations. So investment priorities are clearly geared towards sustainable high growth businesses and we have 3 categories. The first one to invest to expand to accelerate product services and related capabilities and to prioritize M and A from a group standpoint, specifically around the 3 high potential businesses: Business Design and Engineering, Health and Care Software and Financial Services Solutions. And the next category partnered to scale to be investing in the capabilities to drive scale and automate the managed services. It's a foundation that will continue. And further to consider partnerships both operational and structural, in order to jointly invest and scale the businesses further. And finally, the category of focus for value to optimize investments for selected businesses and to continue to drive the portfolio to increase focus and also in support of capital allocation towards prioritized M and A towards the invest to expand. And these considerations, as you have noted, have been already on the table for several quarters. Overall, when we think about the investment priorities and portfolio management, we fully expect to continue the active active portfolio development to drive focus and scale in all businesses that would usually be a natural step post merger to be very clear on what are the future growth and scale businesses you invest into and as may be necessary to continue the portfolio pruning. You may have noted a bit earlier today, we did announce divestment of 3 smaller software businesses that had to do with the smaller indeed, software units around construction and transportation. So this is actually continuation of our initiatives as referred to a minute ago. Next, I would like to go into the one other very important part as always around the strategic choices. So and also the geographical consideration. So first important point that through the specialization and end to end businesses business approach, we are providing the optionality for the businesses to consider the best ways to grow and expand. I would like to clarify why the optionality per business is important. Each business to consider the tuning to its strategy and to its investment priorities. Furthermore, considering the type of operational partnerships such as technology partners in order to utilize the pre made investments of certain global technology partners, as mentioned. And furthermore, in case it is preferable and beneficial to consider certain structural alternatives to expand the business even faster, we are open minded. And the requirements per business are highly distinctive. And this is a very clear change now in how we expect to be actually running the company and guiding the businesses. 2nd important point, if I may. We naturally have a have the strong market position in the Nordics. It's a very good foundation. And furthermore, we have the business design and engineering already being quite global. These are depicted through the red circles on this page. So foundation, stronghold in the Nordic countries, business and engineering already embarking on the global expansion. All the businesses have the opportunity to expand, while the means and timing to expand shall be highly differentiated and will vary. The greatest expectations from an expansion standpoint are full in alignment with our choices, further expansion from business design and engineering and over time, the expansion potential, 1st of all winning share in the Nordics and potential geographical expansion primarily very likely with the Health and Care and financial services side. And these markets will be high growth segments in the industry at large. Next, I would like to go into further considerations and clarifications on the future structure and what do we really mean by the specialized end to end businesses. Each business has its options for scaling, including the prioritization for mergers, acquisitions and potential divestments. As mentioned earlier, the end to end businesses will have full operational responsibility covering the usual responsibilities or components of go to market, the business models and service portfolio, culture, talent and rewarding mechanisms, investments and partnerships and naturally responsibility for financial performance. We fully anticipate that the specialized end to end businesses will actually drive faster execution in the marketplace, drive fast decision making and be able to provide even greater expertise in each customer interaction also serving to the advantage of employee attractiveness. I would like to also confirm that we will naturally maintain certain level of governance in the group functions, Tietoevri as a group. We will continue to guide around performance management, objective setting, investment allocations and overall verification for group wide efficiency at any given point in time. And the support functions for HR, operation, strategy and finance as the foundational element in order to support the businesses to focus 1st and foremost winning more market share, having better and better products and services and the exactly appropriate talent to be driving that. So that's just a consideration and a very natural step furthermore in the evolution towards the transition and implementation in early 2022. And with this in mind, I would like to confirm the leadership team appointments as the strategy is changing, the way we run the company is developing And by nature, the new leadership appointments are kicking into effect then in January. The business design and engineering to be led by Christian Pedersen for the 1st couple of years of the merger having been the managing partner for Norway. Ari Jarvela running primarily the health and care software unit also leading the industry software, Ari having been the head of the international operations and behind the growth of that business as well as running the operation support functions at the group level. Christian Segersven continued and then being dedicated financial services. Sato Kiskinen previously as the managing partner for Finland, now running enterprise modernization. And Johan Torstensson, previously Head of Cloud continuing to lead the cloud platform services with extensive capacity and scale orientation. And furthermore, at the group functions level, Tomi with me here today, continuing as CFO Trond as the Head of HR Marlin for Schevel and takes on the responsibility of Head of Operations, and she was the integration executive for the 1st 2 years of the merged entity. And Kishore Kadiran continuing as the Head of Strategy and then myself as the CEO. With this in mind, perfect timing to shift over to Tommy. Thank you, Kimo, and good afternoon. We will be maintaining our financial targets as we announced at the CMD end of last year. However, recognizing that the new strategy supports potential for enhanced performance. I want to specifically here point out one of the targets so one time items of 1%. We are keeping that as is, highlighting the fact that this strategy change is not about cost cutting, quite the opposite. This is about growth and capturing the market opportunities. This strategy strengthens the foundation for improved shareholder returns. With this strategy, we will be improving the growth profile of the company, including profits. This is driven from the specialized businesses, our increased focus and our prioritized investments, including M and A. We are continuing with strong cash flows, which is supported by our cash flow foundation, which remains solid and our improved reported profits. Our reduced leverage level enables us flexibility in our investments, both organic and inorganic, supporting our strategy execution. We will continue with dividend attractiveness, increasing dividends annually, and we expect that the focus On the financial reporting timeline, so as of today, we keep our financial targets as is. We have a go live on January 'twenty two, where all our end to end businesses will become operational. Q4 reporting will be with the existing segment structure. So we will be reporting Q4 and full year actual with the existing reporting segments. We will not be giving out the soft guidance for the businesses as you have used to seeing. But as normal, we will be giving out our 2022 guidance for the group. Prior to Q1 reporting, we will be releasing the restated financials of the new structure with more detailed business descriptions. Q1, we will come out with the new reportable segments, and we will continue with the practice of giving soft guidance for the businesses then for Q2. We intend to organize a CMD towards the end of 2022 during H2, where we will be updating the long term financial targets for the new segments and the group. Then to preliminary revenue mapping of the new businesses, which will form the new reportable segments. So this will be in Q1, as I mentioned. Cloud Platform Services will be built from the foundation of cloud and infra, including managed infra services, private cloud, end user services and security. Enterprise modernization will consist of businesses of selected customers from cloud and infra and digital consulting, including respective ERP practices. Business Design and Engineering will consist of our international operations, which is the high growing cloud native business, which we have been reported in, which is currently in our segment other. It will include from digital consulting design, cloud, data and software engineering practices and our product development services. Financial Services Solutions will remain as is and the industry software will be divided into health and care software and the remaining in the industry software. And I won't repeat the indicative revenue sizing as Kimo went through those already. Back to you, Kimo. Thank you very much, Tommi. So then with this in mind, I'd like to briefly cover consideration for how will this be implemented, what type of phasing we have. Quite the usual 3 staged approach, for 2022 to actually ensure that we are very rapidly transitioning to the specialized end to end businesses. And as mentioned earlier, we believe this will start to deliver also in the short term that we become faster even faster in the marketplace. We'll be establishing the end term businesses ASAP. We'll be operating in the new structures of January. We'll be driving already next year investment focused to the high growth businesses with further scale potential, cloud native and software. And we anticipate to continue to the attention and agenda on portfolio focus. I'll come back to identity in a minute a bit further. Next and the second phase, we expect that we are scaling the end to end businesses as more self sustainable manner with distinctive options being looked into how to accelerate that expansion even further. And we do anticipate in the next stage already to be realizing potential partnerships around cloud platform and enterprise modernization to ensure that the scale factors are supported and realizing. And then furthermore, portfolio pruning to be already quite far and actively pursuing the acquisition agenda in support of the industry dynamics and our greatest way to compete, our greatest way to actually gain market share. And then furthermore, in the 3rd stage, looking into further expansion potential, dependent exactly on the market dynamics of that point in time. By 2024, we would be very far in achieving our desired new type of business mix. Then I would like to very briefly mention or cover before the closing commentary that we are we have also been working on the on releasing a refreshed view of the company's identity. The strategy we are embarking on is very transformative. This also deserves an uplift in how the whole how the company is being looked at. We are looking into the type of tonality that we are creating purposeful technology that reinvents the world for good purposeful referring to ethical and highly supporting the sustainability agenda of our company and of our customer companies as well. Innovating solution to bring value for all futures, value to employees, to our customers, to society, while we redefine and reshape our view of the future. And the Theatre Every Colleague shall be the developers of digital futures. And further information will naturally follow as the refreshed identity view shall be provided at a later stage. If I may, I'd like to summarize the exciting news of today. The direction that we are setting is really transformational. It is a directional setting we have and will take a few years to get very, very ambitious outcomes. As mentioned, we foresee an attractive and rapidly changing market with significant growth opportunities. Specialization becomes our way to compete and win market share, specialization around cloud data, engineering and software. As we reshape our company and the way of working, we are specializing through the end to end businesses and subsequently modifying the way the company functions, the company structure and leadership nominations, and we'll be going live in January. And as Tomi has here covered, we maintain your view on financial targets as defined in the Capital Markets Day last December. So at this point in time, Cielarni, this would summarize our strategy and the presentation for today. Thank you. Thank you, Kimo, and thank you, Tomi. And then we are ready for the Q and A session. And I'll just repeat what I said in the introduction. If you would like to participate in the Q and A, you need to join the Teams link on the webcast page. When you're in Teams, if you want to raise your hand and I will let you know when it's your turn and then remember to unmute and state your question. And we will only be taking audio questions in this round. So then we are ready to start. And our first caller of the day is Daniel Jurgberg from Handelsbanken. So Daniel, please unmute and state your question. Thank you. Can you hear me? Yes, we can. Perfect. Thank you. Yes, congrats to this new strategy. It looks clever to me at least. I was thinking starting off already in 1st January and full end to end divisions and so forth and less of a 2 dimensional structure. I guess you will not have any country managers in the new management group or my question is really, do you see this change? Have it triggered any major turbulence? When was this work starting off and so forth. And what you can see if how to mitigate employee turnover given the very, very strong market we see for IT professionals. Indeed. Thanks. Sure. So given that we have progressed far into integration, we actually have a very solid foundation both in the service line and in the next layer of service practices that will have very clear mapping to the new structure. And we have today shared that internally on the mapping as well. So we believe there will be a very smooth transition. We will keep all customer teams intact. If I add a bit of a depth in that why this is fully feasible in a few months' time, most of our customer teams have a very clear home in a service line. The ones where we have multi service line deliveries, it is usually around combination of application services and infrastructure services, and these go directly into enterprise modernization. So I fully follow your considerations, and this is the pre considered view that we believe will actually support the transition. Furthermore, as we are ending or disbanding the matrix way of working, Each of the businesses have their own go to market. As usual, in this type of environment, we are, as always, nominating a country manager. But while the role of the country managers more from a media engagement standpoint for potential sea level dialogue with customers when customers want the local language, local presence and furthermore around the employee interest groups. And we are also confirming during today the managing the country manager roles, including Sweden. So these are actually, if I may, addressed. Perfect. And may I also ask you, you have quite substantial near and offshoring capabilities. This new strategy, will you change the strategy on holding on to this level of capabilities going forward? Or any changes or that you will need to address on back of this strategy change? In offshore? No, we will not change. The offshore and nearshore capability is a very important competitive factor we have. And it is we will not change that logic if I add a bit of depth. So as we have run during this year led by Ari Jarvella, so he has been leading the global network of delivery centers around the world and delivery center strategies. And the businesses also this year have directly direct contact with the people servicing those service lines. So this will also be, in that sense, a smooth transition should be given that this foundational factor of the delivery centers has already existed. And each business will consider how much how to optimize resource capacity and price competitiveness actually on a bit faster pacing as they can make those their decisions on their own and no need to align with other parts of the company. Perfect. I will let Sami and Samadher in and then coming back here for more questions. Thanks. Thank you, Daniel. And I think the next caller would be Michael Vries from UBS. So Michael, please unmute your phone. Yes. Thanks, Kjell, and good morning, good afternoon. A couple from me. I apologize I missed the start. But just to understand how much of the business you're looking for partnerships? And would you consider disposing of these businesses? Or are they so core the overall offering to the client that you do have to keep it in house? And then just in terms of employee environment today, we've heard from others, I think, emphasis has reported today there's a very active labor market. How are you competing to retain resources? And are you seeing additional sort of salary and attrition pressures today? Okay. Thank you, Michael. So first around the partnership. So as covered about halfway through the presentation, this category of partner and to scale. So I'm happy to open that up on your question naturally further. So there are 2 areas, the enterprise modernization and cloud platform that have higher dependency on the traditional services and legacy technologies as well recognized. So the consideration on what type of partnerships in the future will likely vary by business. If I give an example around enterprise modernization, partnerships like SAP on public cloud to be able to utilize the pre made investments of certain partner companies. And this is something we know already have started and looking for scaling that faster and not necessarily needing to invest ourselves. Then consideration on the cloud platform side, a couple of factors. So continuation of technology partnerships like VMware, where we have been kind of co developing and looking at the architectures, technologies driving the shared environments and how to even more actively utilize again the pre made investments that VM the likes of VMware do make globally. So that's kind of a natural continuation. I think the new part we are opening up today what we call the structural considerations. So structural considerations, we leave a bit open on what might it take to ensure that we drive scalability of our company in our region, data sovereignty of Europe. So we leave it a bit open ended, while I would like to mention that these may over time consider also potential joint ventures. So that would be a bit of a new angle we are offering today. Then on the employee side. So first of all, if we think about the strategy, I do believe that the direction that we are setting today will further support the attractiveness of Teatro Evry in the very active talent market. So just to be clear, this is not being done to address some hot issues in the marketplace. They are well recognized on the talent market by specializing identities of the businesses become even clearer the potential career paths within specialization. So that's been actually feedback already today after our internal sharing that this actually addresses the consideration of where is the company heading because the company average is one thing as we recognize these are highly distinctive businesses. So that would be Michael, my commentary on that. Thank you. Just to clarify, I mean, Atos are looking for partnerships with their data center hosting business. Is this the sort of thing that you're talking about within cloud and infrastructure? And do you, therefore, not envisage any disposals of any of these businesses through 2023? So at this point in time, we are opening the door of considering of the different factors to scale. So in that sense, I wouldn't speculate of exactly which version. We have, of course, the developments with the on the more technology partnership side to consider how to scale faster, as mentioned, even considering potential joint ventures. So that would be the new dimension we are opening up. And next in line would be Sami Sarkomiris from Nordea. Hi. Thanks for taking my question. I would have a couple. Firstly, starting on cost takeout potential, I mean, I know that you're not doing this change because of cost saving potential, but you will be putting quite a bit of the group costs into the business units from the beginning of next year. So do you see a phase early next year when you will actually be able to trim on sort of operating costs? Yes. So as I said, we are not focused on reducing costs with this one. We are focused on building specialized businesses that can scale and compete in the market. So no, there is no point in time where we say we have now trimmed the cost for next year. We will be naturally going through all the businesses carefully, and we will incur some cost. But we will stay within the guidance, as I said, of 1%. Maybe I add a flavor there, Sami, that we have ongoing mechanisms have for during the integration of doing on a continuous basis financial and efficiency planning for all businesses. It's an ongoing process. So we fully expect to continue to do that to ensure efficiency across all businesses and for the group. Okay. And then my second question would be on spending levels going forward. Should we anticipate elevated investments in the high growth areas into go to market and offering development? Or will these spending levels remain unchanged also going forward? It's good to recognize that as of today, we are not announcing any investment level changes. The investment levels will be defined once the business leaders are building their business plans. And I would add to that, that this leverage level currently gives us flexibility to do increase the levels as needed based on the foundation that the business leaders and the strategy they will build for their businesses. Okay. And then finally, I would ask about the Business Design and Engineering Unit. It seems like a collection of various type of activities, Nordic Digital Consulting, PDS and then sort of smaller international activities. What is common for these businesses? And is this an area where you might actually do also smaller divestments going forward? So the common denominator, it has to do extensively with the high growth segments of the market. When you remember when I covered that space of cloud native, that is exactly what this unit is pursuing. And as a foundation, we are already doing that. So cloud native referring to, as Tomio bit summarized even on the transition path, the cloud and data oriented advanced consulting in the Nordics, the international operation expansion has already been around the cloud native capabilities. And when we add the software engineering of product development services, over time, we anticipate synergies in the larger customer engagements between the competencies and the ability to grow faster. Okay. Thanks. I don't have any further questions. Thanks, Sami. And I think next in line was actually Daniel Jurgen again. I see you raised your hand. Yes. Can you hear me? Perfect. My question would be on if you could give a little bit of an update on your ambition to get multitenant to have a multitenant cloud delivery. I think you had some target of twothree of your software solutions within a couple of years. And now we focus here on we have the new health and care, FSS and the industry software. If you can just highlight more or less a large percentage of the revenue base that you expect will be offered from a multi tenant delivery via software as a service or model or something? Any views on your ambition here to go? So the strategy from a standpoint of financial services and health and care, this strategy, if I may, doesn't change the speed of architectural advancement with the product. So the strategy doesn't change it. So we are in our way of having re architected most of the health and care solutions already and similar investments to platformatize the solutions in financial services. So the strategy itself doesn't change it. Of course, now when the like Tommy referred to, when the new business leaders or the business leaders start to plan for the next expansion and also the investment priorities. It shall include the views on how to advance the product as well towards the multi tenant or shared code base and towards SaaSified. But the strategy doesn't change that we are well on our way already. So no new proportions in that sense to announce today. Okay. And if I may also, I think you perhaps touched upon it, but your view on the potential to hike prices in 2022 to mitigate the employee salary inflation would be great. And also if you can touch upon the salary inflation that most people, I guess, expect to come up a bit from historical levels. It would be great. Also if you see the frame agreements being a major hurdle for you. So if I may, none of that changes because of what we are announcing in the strategy today. So maybe these are more on the quarterly view that we provide fresh views. Yes, I had to ask. Fair enough. Thanks. Thanks, Daniel. Then the next on line would be Nicolas David from ODDO. So Nicolas, please go ahead. Yes. Hi. Thank you for taking my question. I have several actually. The first one is, could you help us to understand the timing of this strategic announcement? Is this something you have been working on since the merger? Or is this direction to the COVID disruption? That's my first question. And attached to that, very concretely, what's where are the key aspects which were not working properly enough with the current organization and completely how you think the new organization would change those key aspects. And I have a follow-up after that for Tommy mainly, but maybe we start with the 2 one. Yes, sure. So from a timing standpoint, I'll reflect on this, as usual, very openly. So in this industry, we are very used to continuously having our fingers on the pulse of what is happening in the marketplace. And we have a tendency that whenever we feel that the stars of the world are starting to change at an accelerated pace, then we say, okay, time to rethink strategy. There's nothing else behind. It is also natural, by the way, that after about 2 years into the merger, meaning 4 to 5 years before serious rethinking of strategy that this is absolutely time to do so. As usual, this is somewhere around 9 to 11 month process, and we have a very extensive methodology. In this case, we had about 45 people involved in process. And the real main driver, if I may, from my perspective and our perspective is simply the speed of change of the global technology sector, and we can do a lot more to benefit from those main drivers that have to do more than anything with the proliferation of how cloud impacts and cloud native impacts investment decisions, great assets we have on the software side and how we play our potential much more actively. Then if I may about the organization. So in light of how the industry is changing, when I feel this daily basis in the client interaction, the specialization is ever more important in every interaction, starting with the technical experts, including the leaders of the company. So specialization will add speed. It adds also ownership for speedy decisions and actually super clarity on accountability. That would be my short reflection. It is not there's no perfect organizational structure. We entered the merger with the matrix. It has certain consequences, certain benefits. And the specialization for the sake of speed and clarity is seen as the desired way forward. That's clear. And my follow-up is also regarding the transition. I mean the strategic choices you announced, should we expect them to have potentially a negative impact in the short term on your top line and after that having an acceleration. But as you try to exit some legacy business more aggressively, Could you yes, could we expect you to ramp down some business having a negative impact on your top line for 2022, for instance? And also, you mentioned some investment. Should we expect a negative impact maybe on your profitability short term? And after that, an acceleration leading to your mid term targets? If I I'd like to maybe comment that first. So that's always very fair consideration. So most important factor that however we think about, I'd like to call the portfolio development, whether we think about acquisitions or divestments is would be to support the potential of high growth businesses with further expansion potential, and that's the category around the cloud native software, specifically business design and engineering, financial services and health and care. So anything we do would be to actually accelerate and elevate the profile and business mix of the company. Okay. As soon as 'twenty two as I understand. Okay. Thanks, Niklas. I will let Panu take the line soon, but I would just also encourage everyone who has their hand up. If you have raised the question, just remember to take your hand down again. Panu, please go ahead. The line is yours. Okay. Thank you. I have three questions basically clarifying what you already said. So firstly, on this portfolio pruning that you have mentioned, is it like across all these 6 divisions or only in a few? So that's the first one. Secondly, on the industry software, which you saw in this one slide that you will develop the portfolio to focus and you divested the small construction businesses today. Could you kind of give any indication how much of the industry software is what you consider core and what would be more in the kind of consideration for changes? And then thirdly, on these partnerships or, let's say, bigger structural changes, is it correct that it's only in this cloud platform services or also in enterprise modernization as well? So those are the 3. Okay. Good, indeed. So first, consider your question on the portfolio pruning. So if I may, which I commented, I would like to confirm the earlier consideration that especially post merger, it is important to work through the company or businesses to be sure of which businesses are your business of the future and to ask the question, is everything part of the future? So short answer, we, by nature, do that exercise across the company. It tends to be very healthy to make sure you pick the choices where you can best compete, grow and scale. So that is hopefully Panu straight answer to your good question. Yes, no, we are not able to open that further what is core, what is context. So that goes into too much detail. I think at this point in time, we've been as open as we can on the consideration. And then your final point, the structural choice. That indeed, my reflections from earlier would be primarily regarding cloud platform services, but we leave it open in terms of however the industry develops to make sure we scale. And as commented, and we'd like to be very open for businesses where there is traditional technology, scale factors become continuously more important. We are open to saying price erosion will continue. It will even accelerate. So it's a good thing we consider how we scale to make sure we put more and more energy into the businesses that we believe will be well scalable, high growth in the future. Okay. That's clear. Thank you. And I see Daniel has his hand up again. And you will have the chance to ask the final question of the day, Daniel, before we need to close the Q and A session. So Daniel, please go ahead and unmute your phone. Yes. Sorry, it was an accidental raise on my hand. So I will wish you the best of luck instead, and thanks for this opportunity. That's fine, Daniel. Well, thank you all for all your questions. And before Kimo gives his final remarks, I would just like to say thank you on my behalf. And obviously, if you have any more follow-up questions, please don't hesitate to reach out to me. Okay, Mo, please? Yes, thank you and thank you for everybody for joining today. As commented, the direction we set today is very transformational. The industry is changing. We have ample opportunities by gearing the company and making these choices we have today reflected upon. And the time is right and right to start this change journey. Now it's a very good step post merger as the next big step for Tieto Evry. Thank you for joining. Thank you.