P.36 Special Feature: Digital & AI Strategy (DAIS)

36 01. Value Creation Stories for the Future

Special Feature: Digital & AI Strategy (DAIS)

Q4. Investor and analyst perspectives

Please share your views on how generative AI and other technological advances are reshaping the business and industry landscape. For example, there has recently been discussion about how advances in frontier AI, such as Mythos, are enabling vulnerabilities to be identified almost instantly. In the short term, there will be an increase in work to address detected vulnerabilities, but once those issues are resolved, there is a possibility that maintenance̶which has been a source of earnings for system integrators̶will disappear. In such a case, one could argue that profitability will decline over the medium to long term. How do you view that?

Answer

We believe that generative AI and similar technologies represent a significant tailwind for SCSK, which offers SI, NI, security, and BPO services. This is because enterprise systems require human expertise throughout the cycle̶from design and integration to operation̶and the ability to provide end-to-end support remains a key strength. Moreover, the importance of trusted implementation partners continues to increase, driven by growing requirements for accountability and governance. In addition, the growing demand for security driven by the adoption of AI provides a favorable backdrop. By leveraging capabilities created through the integration of Net One Systems, we see significant room for growth.

AI-driven market changes

AI-driven enhancement of management and

business operations

• Opportunities Growing demand for customer business and operational transformation
• Opportunities Shift to data-driven management

AI-driven automation

• Risks In-house development by customers
• Opportunities Changing development models

AI development

• Opportunities Growing demand for AI infrastructure
• Opportunities Need for robust security and AI governance

AI-driven automation of operations and maintenance

• Opportunities Accelerating AI agent adoption in customer operations
• Opportunities Growing demand for digital and AI-enabled BPO services

Growth opportunities for SCSK in the AI era

Creating customer value with AI and building a competitive advantage through internal AI adoption Supporting safe and secure operations in the AI era through the quality, security, and transformation of existing systems

Growth potential in the AI era: Sources of competitive advantage = S + N

SI business

System design and development ｜ System operation and enhancement ｜ Security ｜ Data utilization and analysis Application Enterprise systems (ERP) ｜ Business applications ｜ Cloud applications ｜ Customer touchpoints & digital End-to-end design and implementation, from applications to infrastructure SI×NI full-stack services Integrated application and infrastructure operations and monitoring centered on security Locations/devices Headquarters, offices, and satellite offices Local governments, schools, hospitals, and factories Home/remote Mobile phones/PCs Consolidated in 2024 Network integration Top tier in the industry

NI business

Network infrastructure design and deployment ｜ Security ｜ Network infrastructure operation and monitoring ｜ IoT