Tieto Oyj (TIETO) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon, and welcome to this investor event. My name is Kjell Hansen, and I'm the Investor -- Head of Investor Relations for the company. We are very happy to host this event for you today and present our new strategy for TietoEVRY that we released this morning. You will first hear a presentation from our President and CEO, Kimmo Alkio; and our CFO, Tomi Hyrylainen. After the presentation, we will be doing a Q&A session. And if you would like to participate in that Q&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&A session after the presentation is done. But now I will hand it over to Kimmo. He is next to me on stage and very eager to get started. So Kimmo, please go ahead.

Thank you very much, Kjell 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 hyperconnected 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 TietoEVRY, 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. Second 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 in rich services, supporting the real-time and personalized experiences. And finally, the third 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 impacted one way or another through cloud technologies and cloud enablement. Second big factor being 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 of 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 SaaS-ified 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. Second 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 traditional requires scale and in between very active modernization market. But these are backgrounds on the market development. And main point's still on the previous page, distinctive competitive advantages through specialization is a development in the marketplace. With these considerations in mind, naturally as TietoEVRY, in our renewed strategy, we are looking into how to significantly increase the proportion of the growth and new type of businesses through our cloud-native and software, enabling very aggressive advancement in our business mix, and in parallel, considering the business choices in a manner that will be increasing our addressable market, both in terms of identifying sustainable long-term growth and expansion opportunities. Now with that background towards our strategic choices. 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, a 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, us 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 customers' 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 this 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. One 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 orchestrate the 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 unhierarchical 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 & Engineering slightly below 30% of company's revenues; Health & Care between 5% and 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 '22. Second 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 & 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 in -- 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, I 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&A from a group standpoint, specifically around the 3 high potential businesses: Business Design & Engineering, Health & Care Software, and Financial Services Solutions. And the next category partner 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&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 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 a 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, on around 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 premade 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 for 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. Second important point, if I may, we naturally 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 & 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. First of all, winning share in the Nordics and potential geographical expansion primarily very likely with the Health & 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. TietoEVRY 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, first 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 '22. 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 leader appointments are kicking into effect than in January. The Business Design & Engineering to be led by Christian Pedersen for the first couple of years of the merger, having been the managing partner for Norway. Ari Jarvela running primarily the Health & 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 operational support functions at the group level. Christian Segersven continuing and then being dedicated Financial Services. Satu Kiiskinen previously as the managing partner for Finland now running enterprise modernization. And Johan Torstensson previously Head of Cloud and Infrastructure, now continue 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 Vinje, Head of HR; Malin Fors-Skjæveland takes on the responsibility of the Head of Operation, and she was the integration executive for the first 2 years of the merged entity; and Kishore Ghadiyaram continuing as the Head of Strategy and then myself as the CEO. With this in mind, a perfect timing to shift over to Tomi.

Thank you, Kimmo, 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 of onetime 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&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 and specialization will reduce the discount to SoTP valuation. On the financial reporting time line. So as of today, we keep our financial targets as is. We have a go-live on January 22, 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 & Infra, including managed infra services, private cloud, end user services and security. Enterprise Modernization will consist of businesses of selected customers from Cloud & Infra and Digital Consulting, including respective ERP practices. Business Design & 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 Industry Software will be divided into Health & Care Software and the remaining in the Industry Software. And I won't repeat the indicative revenue sizing as Kimmo went through those already. Back to you, Kimmo.

Thank you very much, Tomi. So then with this in mind, I'd like to briefly cover the consideration for how will this be implemented. What type of phasing we have. Quite a usual 3-stage approach. 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 interim businesses ASAP. We'll be operating in the new structures of January. We'll be driving already next year, investment focus 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 third stage, looking into further expansion potential, dependent exactly on the market dynamics of that point in time. By '24, 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 -- 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 solutions 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 TietoEVRY 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, Kjell Arne, this would summarize our strategy and the presentation for today. Thank you.

Thank you, Kimmo, and thank you, Tomi. And then we are ready for the Q&A session, and I'll just repeat what I said in the introduction. [Operator Instructions] And we will only be taking audio questions in this round. So then we are ready to start. And our first caller of today is Daniel Djurberg from Handelsbanken.

Can you hear me?

Yes, we can.

Perfect. Yes, congrats to this new strategy, it looks clever to me at least. I was thinking, starting off already in 1st of January and full end-to-end divisions so forth and less of a 2-dimensional structure. I guess you will not have any country managers in the new management group or -- and then 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, very strong market we see for IT professionals?

Sure. So given that we have progressed far in the 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 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 multiservice 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 consideration, and this is the preconsidered 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 manager is more from a media engagement standpoint for potential C-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 if I may also ask you, you have quite substantial near and offshoring capabilities. This new strategy, will you -- will it 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?

No, it will not -- so no, it 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 Jarvela, 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 their decisions on their own and no need to align with other parts of the company.

Thank you, Daniel. And I think the next caller would be Michael Briest from UBS.

Yes. 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 to 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 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 premade 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 codeveloping and looking at the architectures, technologies driving that the shared environments and how to even more actively utilize again the premade investments that the likes of VMware do may 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 this 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 TietoEVRY 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.

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 -- 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.

Thanks, Michael. And next in line would be Sami Sarkamies from Nordea.

I would have 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 having 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 costs, 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.