ITOCHU Techno : Growth Strategies (PDF/3.7MB)

SECTION 2 Growth Strategies

Review of the Previous Medium-Term Management Plan

Advancing the IT Industry

as a Leading Company

FY2013-2014

Revenue Target: ¥360 billion	→	¥381.9 billion
Operating income		¥29.3 billion
Target: ¥30 billion	→
Net profit attributable to CTC's shareholders	¥17.4 billion
Target: ¥18 billion	→

Initiatives and outcomes

(1) Reinforce strengths

• Achieve stable growth in primary business groups, deepen relationships with major customers

(2) Enter growth domains

• Acquire and expand new business domains

1. Develop cutting-edge and optimal technologies
   • Creation of the Innovation Promotion Office and Cloud Innovation Center
2. Strengthen footholds

• Execution of personnel system reforms
• Thorough management of profitability

FY2015-2017

Revenue Target: ¥500 billion	→	¥429.6 billion
Operating income		¥32.6 billion
Target: ¥40 billion	→
ROE Target: At least 10%	→	11.8%
Market capitalization		¥534.5 billion
Target: At least ¥500 billion	→

(peaked at ¥614.4 billion)

Initiatives and outcomes

1. Shift to service-oriented business
   • Release various unique services
   • Expand Cloud business
2. Shift to comprehensive strength management
   • Large-scale reorganization
   • Tackle large projects across business groups
3. Shift to investments in growth

• Train personnel able to use advanced technologies
• Establish bases in Thailand and Indonesia

1. Reinforce the business foundation
   • Implement work-style reforms
   • Upgrade core systems

Revenue		Operating income
¥207.6 billion	¥11.4 billion
1999 Public listing	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010

Japanese GAAP

35 ITOCHU Techno-Solutions Corporation Integrated Report 2022

Opening New Horizons

FY2018-2020

Net profit attributable to CTC's shareholders	¥30.5 billion		Cloud, IT outsourcing business		¥71.6 billion
Target: ¥30 billion →		Target: ¥60 billion	→
ROE Target: 12% or above →	12.5%		Global businesses		¥61.7 billion
			Target: ¥60 billion	→

Initiatives and  outcomes

1. Go Upwards!: Challenge Business Transformation
   • Achieve progress in digital business for key customers
   • Strengthen agile development and low-code development
2. Go Forwards!: Sharpening Our Advantages

• Maintain and expand strengths in large-scale infrastruc- ture and network domains
• Achieve growth in Cloud computing and other recurring business models

1. Go Outwards!: New Coverage, New Region in Globe

• Investment execution in Indonesia, Malaysia, and the United States

• Creation of new businesses through the use of CVC

1. Consolidate Footholds!: Stabilize Management Infrastructure

• Work-styletransformation, health management, and promotion of women's participation and advancement
• Changes in corporate governance structure
• Dividend increase for 12 consecutive fiscal years

Toward the next stage

Revenue		Operating income	Revenue	Operating income	(¥ billion)
			¥479.9 billion	¥43.6 billion

500 50

										400	40
										300	30
										200	20
										100	10
2011	2012	2013	2014	2015	2016	2017	2018	2019	2020 (FY)	0	0
Revenue	Operating
				International Financial Reporting Standards (IFRS)				income

ITOCHU Techno-Solutions Corporation Integrated Report 2022 36

SECTION 2 Growth Strategies

The Medium-Term Management Plan (2021 to 2023)

Policies of the Medium-Term

Management Plan

Under its medium-term management plan, CTC will expand upon the strengths it has built thus far and accelerate new initiatives to create future wealth. At the same time, we will upgrade our human resource and management platforms to boost the feasibility of these efforts. Through this approach, CTC will seek to develop a deeper understanding of customers, so that it can identify their fundamental issues and provide technologies and unique skillset to resolve their issues.

CTC will continue to tackle the challenges to shape tomorrow.

Overview of Fiscal 2021 and Future Initiatives

In fiscal 2021, CTC was able to set new records for reve- nue, operating income, net income, operating income margin, orders received, and backlog, despite the impact of semiconductor shortages. In addition, we have already achieved the medium-term management plan's target for return on equity (ROE), and the figure for ROE recorded the all-time highs even when excluding the influence of extraordinary factors such as the sale of data center assets.

Given the changes in the operating environment, the outlook for fiscal 2022 cannot be deemed optimistic. Nevertheless, we are committed to growing our business by responding accurately to the needs and changes surrounding digitalization based on the focus themes of DX, Cloud, and 5G technologies.

Expand

Expand current wealth

Further exploration and

market expansion

in strong areas

Steering the future of wealth

Contributing to the current wealth is the driving force.

Upgrade

Increase feasibility

Practicing

self-improvement

with a view to the future

Accelerate

Create future wealth

Accelerate new initiatives that support customers' innovation

37 ITOCHU Techno-Solutions Corporation Integrated Report 2022

Quantitative Targets and Progress

Operating income margin		Net profit attributable to		ROE*
		CTC's shareholders

(¥ billion)		553.0			(¥ billion)
522.4
						40.0
479.9						35.4	38.0
					30.5
9.1%	9.7%									13.2%		13% or above
									12.5%
		10.0%	10.0%
43.6	50.5	55.5
2020	2021	2022	2023	(FY)	2020	2021	2022	2023	(FY)	2020	2021	2022	2023	(FY)
		Plan	Target				Plan	Target					Target

Revenue		Operating income	* Net Income / Average Total Shareholders'
Operating income margin	Equity x 100

Analysis of the External Environment

In this "new normal," remote working and digital technologies have become an essential part of people's lives and ­economic activity. The overall IT market is projected to continue growing briskly.

Politics

Opportunities

Introduction of laws and regulations related to information security

Acceleration of digitalization in government administration to realize a digital society

Demand for higher labor productivity in keeping with work- style reforms

Factors Limiting Growth

• Restrictions on the movement of people and commodities and on supply due to the emergence of variant COVID-19 viruses and intensification of the war in Ukraine

Society

Opportunities

Digitalization needs accompanying changes in the business environment

Demand for improved productivity stemming from the declining birthrate, population aging, and contraction in the workforce

Demand for regional innovation and revitalization of local economies

Factors Limiting Growth

• Decline in the working population and shortages of advanced IT staff

Economy

Opportunities

Brisk investment among companies in conjunction with global economic recovery

Acceleration of DX Growth in ESG investment

Factors Limiting Growth

• Curtailment and delays in IT investment due to the impacts of variant COVID-19 viruses
• Rising raw material prices and fluctuation in financial and capital markets due to impacts of the war in Ukraine

Technology

Opportunities

Society-wide digitalization trend spurred by 5G, AI, the Internet of Things (IoT), and metaverse technologies

Accelerated use of Cloud-native technologies

Response to the "2025 Digital Cliff" and modernization of core systems

Factors Limiting Growth

• Delivery delays and price increases due to global semiconduc- tor shortages

ITOCHU Techno-Solutions Corporation Integrated Report 2022 38

SECTION 2 Growth Strategies

The Medium-Term Management Plan (2021 to 2023) Beyond the Horizons-To the Future Ahead-

Progress in Priority Scenarios and Priority Measures for Fiscal 2022

Accelerate

Create future wealth

Accelerate new initia-

tives that support

customers' innovation

	Results of Initiatives Based on		Priority Measures for
	Priority Scenarios for Fiscal 2021		Fiscal 2022

Customer operations,	Data management, data science, process mining, AI,	Acquisition of projects in
wide-ranging fields (new
customer businesses,	and other digital technology projects emerging as a
customers, line of busi-
and DX in people's	result of DX initiatives to transform customer pro-
ness (LOB)) by leveraging
daily lives	cesses and businesses
our Unique Skillset
	Progress in collaboration with telecom carriers and
Community building and	other strategic alliances with partners, founded on	Expansion of
strengths in Cloud technologies and data centers
expanding business	businesses through
and in verification tests and co-creative businesses
co-creation	co-creation
with customers and municipal government agencies
	in various fields
	Acquisition of projects for verification testing of	Transformation of
Providing high value-	advanced technologies and development of	advanced technologies
upstream projects in the systems field, where CTC	into elements of our
added services and
has built a track record, by strengthening R&D and	Unique Skillset and
advanced technologies
new product marketing functions, but there is a	­discerning eye for
	need for further acceleration	technology

5G business expansion	Continuation of favorable performance in
5G-related businesses targeting telecom carriers
based on "creation"
and steady progress in local 5G initiatives

Further growth of

5G businesses through

expansion into

new fields

Expand
	Expansion of public Cloud businesses centered on
Expand current wealth	Strengthening XaaS	Cloud integration services and Amazon Web	Expansion of upselling
Services for central government ministries and
	and cross-selling using
Further exploration and	businesses	agencies, local governments and evolution of the
"OneCUVIC"
"OneCUVIC" hybrid Cloud service through strategic
market expansion in
	partnerships
strong areas
Global expansion of	Enhancement of frameworks for providing services	Acceleration of global
	conforming to CTC's quality standards at overseas	expansion using the
	domestic business
	bases by capitalizing on strong relationships with	CTC Group's compre-
	models
	vendors	hensive capabilities

Upgrade

Increase feasibility

Practicing

self-improvement

with a view to the future

Strengthening overall	Cultivation of human resources with capabilities in the	Release of
capabilities by combin-	areas of digital innovation, DX, sophisticated security	individual employees'
measures, and advanced Cloud technologies, as
ing individual growth	capabilities to upgrade
required for the measures of Group companies and
and the right person in	organizational
implementation of the Career Sponsorship Program
the right place	to empower female employees	capabilities
Management infrastruc-	Completion of head office relocation, advance of ini-
ture reform to adapt to	tiatives to boost productivity by elimination of waste,	Transformation in line
stress, and wastefulness in operating processes by
changes in the	with the changing times
means of the newly established Process
environment
Transformation Office, and promotion of in-house DX
	Release of Human Resources Strategy: Detailed	Reconstruction of
Co-existence with	Report to upgrade information disclosure and
arrangement of internal awareness-raising work-	corporate branding
various stakeholders	shops and corporate advertisements to enhance	initiatives for the next
	corporate branding in commemoration of our 50th	50 years
	anniversary

39 ITOCHU Techno-Solutions Corporation Integrated Report 2022