NEC 2009 Annual Report Download - page 11

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FIXED COST REDUCTION TARGETS BY COST ITEM (Billion ¥)
Cost item Reduction target
Labor cost 72.0
Outsourcing engineering,
consignment of activities 124.0
Depreciation, lease, etc. 28.0
Other 46.0
Total 270.0
ALL-OUT REDUCTION OF COSTS
Reduce fixed costs by 270 billion yen (versus fiscal 2009)
( II ) EARNINGS STRUCTURE
REFORMS
We are already implementing several measures to
establish a leaner and more powerful earnings
structure.
We are currently improving business processes
across the NEC Group based on the two themes
of simplifying operations and adopting global stan-
dards. Our aim by simplifying operations is to
speed up management of the business. At the
same time, by adopting global standards we aim
to achieve world-class competitiveness across
NEC’s operations.
These reforms will also eliminate overlapping
functions within the NEC Group, resulting in a
reduction of about 20% in the number of divisions.
Combined with the benefits of introducing a com-
pletely revamped backbone IT system, we expect
to achieve a reduction in TCO* (total cost of own-
ership) for IT systems of at least 20% across the
entire NEC Group.
In January 2009, NEC announced a plan to
reduce its workforce by more than 20,000 person-
nel throughout the NEC Group, including staff affili-
ated with contractors. In line with this plan, we will
be moving in-house some production that we had
previously outsourced. In addition to labor costs,
outsourcing engineering expenses, and business
outsourcing expenses, we are also rigorously
reducing all manner of costs, including selling,
advertising and other expenses. In fiscal 2010, we
plan to reduce fixed costs by ¥270 billion year on
year. We are already executing activities that have
been budgeted for at the individual business
segment and division levels, and are closely moni-
toring progress against cost-cutting targets.
We are conscious of the fact that our top
priority for fiscal 2010 is to pave the way for
growth after the current downturn by seeing these
structural reforms through, and achieving our
performance targets.
* Total Cost of Ownership: the total cost of introducing, maintaining and
managing IT systems.
09
NEC CORPORATION
Annual Report 2009