De Paul University School of CTI IS 565

De. Paul University – School of CTI IS 565 IT Outsourcing Management Application Outsourcing Dave Galen 4 th February 2008

IS 565 IT Outsourcing Management Application Outsourcing Today’s Discussion • Who is Accenture? • What outsourcing trends are reshaping IT and business process delivery models? • IT Outsourcing: – What is Application Outsourcing? – What is Business Process Outsourcing? • What are the Risks and Mitigation Strategies? Group Discussion • Questions © 2005 Accenture. All rights reserved. 2

Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses. IS 565 IT Outsourcing Management Application Outsourcing FACTS & FIGURES, WHAT WE DO, SERVICES WE OFFER ACCENTURE GLOBAL: • Net Revenues: US$19. 7 billion for fiscal 2007 (12 mos. ended Aug. 31, 2007) • Exchange/Ticker: NYSE/ACN • Employees: More than 175, 000 (including approximately 4, 400 partners) • Global Reach: More than 110 offices in 48 countries • Geographic Regions: – Americas – Asia Pacific – Europe/Middle East/Africa © 2005 Accenture. All rights reserved. • • We help clients: – Identify and enter new markets. – Increase revenues in existing markets. – Improve operational performance. – Deliver their products and services more effectively and efficiently. • Services we offer include: – Business consulting. – Systems integration. – Application outsourcing. – IT infrastructure outsourcing. – Business process outsourcing. Accenture serves approximately 2, 500 clients that span the full range of industries around the world. We serve 94 of the Fortune Global 100, two-thirds of the Fortune Global 500 and government agencies in 26 countries. Of our top 100 clients in fiscal 2004, all 100 have been clients for at least five years and 85 have been clients for at least 10 years. 3

IS 565 IT Outsourcing Management Application Outsourcing Accenture delivers its services and solutions through five operating groups… ACCENTURE ORGANIZATION MODEL Comm. & High Tech • Communications • Electronics & High Tech • Media & Entertainment Financial Services Public Service Products • Banking • Capital Markets • Insurance Serving sectors: • Defense • Postal • Education • Revenue • Human Services • Immigration • Justice/Security • Election Services • Automotive • Health Services • Industrial Equipment • Pharmaceuticals & Medical Products • Retail & Consumer • Transportation & Travel Services Business Consulting Resources • • • Chemicals Energy Forest Products Metals & Mining Utilities This industry focus provides Accenture’s professionals with a thorough understanding of industry evolution, business issues and applicable technologies, enabling Accenture to deliver solutions tailored to each client's industry. Technology & Systems Integration Outsourcing & BPO Businesses © 2005 Accenture. All rights reserved. 4

Outsourcing Trends

IS 565 IT Outsourcing Management Application Outsourcing The parachute analogy What are the client’s (for example, the military) top 3 buyer values when buying parachutes? Which one is MOST important? Why? © 2005 Accenture. All rights reserved. 6

IS 565 IT Outsourcing Management Application Outsourcing What are the benefits to outsourcing? Top 10 Reasons Companies Outsource (2005) Reduce and Control Operating Costs 17% Improve Company Focus 16% Gain Access to World. Class Capabilities 12% Free Resources for Other Purposes 12% Resources Not Available Internally 8% Reduce Time to Market 6% Take Advantage of Off -Shore Capabilities 6% Accelerate Reengineering Benefits 4% Share Risks 3% Function Difficult to Manage or Out of Control 3% 0% 5% 10% 15% 20% Note: Data is based on 1, 410 new members surveyed by The Outsourcing Institute. Source: Outsourcing Institute, Eighth Annual Outsourcing Index, Vol. 3 No. 4, Winter 2005. © 2005 Accenture. All rights reserved. 7

IS 565 IT Outsourcing Management Application Outsourcing More CIOs are Turning to Outsourcing to Stay Competitive Analysts predict the Application Outsourcing market will continue to have broad uptake and high growth. Relative Market Adoption Annual Market Growth 10 -12% Infrastructure Outsourcing 9 -11% Application Outsourcing Business Process Outsourcing © 2005 Accenture. All rights reserved. 5 -8% Infrastructure Outsourcing Business Process Outsourcing Application Outsourcing 8

IS 565 IT Outsourcing Management Application Outsourcing Why Outsourcing? Why Now? Lower Total Cost of Ownership Increase Value from Application Investments © 2005 Accenture. All rights reserved. Gain Greater Management Control and Flexibility Improve Application Performance 9

IS 565 IT Outsourcing Management Application Outsourcing What is your Current View on a Sourcing Solution? Degree of Comfort with a Sense of Loss of Control Fully leveraged model Status Quo Insource Onshore Staff Augmentation Offshore Staff Augmentation Co-Source Outsource Onshore Outsource Offshore Sliding position indicates current client mindset © 2005 Accenture. All rights reserved. 10

IS 565 IT Outsourcing Management Application Outsourcing Companies are Bundling Outsourcing Services to Gain Additional Benefits Industry Specific Services Enterprise Data Management Services Customer Contact Services Learning Services Procurement Services HR Services Today’s Topics Finance Services Bundled Solutions Application Services Infrastructure Services © 2005 Accenture. All rights reserved. 11

IS 565 IT Outsourcing Management Application Outsourcing Benefits of Bundling Outsourcing Services • Improve competitive positioning: quick saving in cycle times and costs enable companies to compete much more aggressively on price and performance • Simplify the governance process: investing in a relationship with one provider, companies have only one relationship to manage, reducing administrative and contact activity • Reduce redundancies and costs: operating multiple processes from a single platform reduces hardware redundancy, development, maintenance and licensing costs • Improve performance: automating manual processes and activities such as error handling can result in increased productivity and reduced time to compete © 2005 Accenture. All rights reserved. 12

Application Outsourcing

IS 565 IT Outsourcing Management Application Outsourcing Companies are Bundling Outsourcing Services to Gain Additional Benefits Industry Specific Services Enterprise Data Management Services Customer Contact Services Learning Services Procurement Services HR Services Today’s Topics Finance Services Bundled Solutions Application Services Infrastructure Services © 2005 Accenture. All rights reserved. 14

IS 565 IT Outsourcing Management Application Outsourcing Let’s Go On a Cruise!! © 2005 Accenture. All rights reserved. 15

IS 565 IT Outsourcing Management Application Outsourcing Accenture’s Application Outsourcing Approach “Casinos & Lounges” “Engine Room” © 2005 Accenture. All rights reserved. 16

IS 565 IT Outsourcing Management Application Outsourcing Accenture’s Flexible Spectrum of Application Outsourcing Services Our application outsourcing services are tailored to our client’s needs… © 2005 Accenture. All rights reserved. 17

IS 565 IT Outsourcing Management Application Outsourcing High Level Application Support Scope of Services – The “What” The following diagram illustrates typical application support services. Client Sponsors and Leadership Strategy Business Processes © 2005 Accenture. All rights reserved. Level 3 Break / Fix Support Telecommunications Management Level 1 Help Desktop Support Change Requests & Control Management WAN Support Hardware Support Oracle Technical Support t Infrastructure Support Team Level 2 Help & Vendor Support Ad-hoc & Minor Enhancements en em ag Non-Discretionary Application Management Support Work Vendor Patches & Document an M Release & Configuration Management Application Support Team e (not included as part of basic offering) ic New Applications & Development Major Releases Projects rv Se Discretionary Application Development Work LAN Support OS Management / Data Center Operations Disaster Recovery 18

IS 565 IT Outsourcing Management Application Outsourcing Distribution of ADM Work Types within Base and Optional Services – The “How” D R I v E T O Base Services Optional Services ADM (Application Development & Maintenance) Work Types occur within base non-discretionary and optional discretionary categories. Other Dev. Projects : n Separately bid efforts n Business value based Committed Dev. Projects : n Based on committed project spend n Large Projects Discretionary : n Capacity based n Schedule / budget measured n Resource based n Coordinated with Non-Discretionary work Non-Discretionary : n Service based n SLA measured and committed n Fixed price n Workload / cost driver based n Change Control & Documentation n User Questions & Help Desk Support $0 © 2005 Accenture. All rights reserved. n Large Projects n Implementing new business units n Major Enhancements n Software upgrades n New modules / functions implemented n Minor Enhancements n Small Change Requests n Ad-hoc User Requests n New Reports & Interfaces n Break / Fix Requests n Problem Management n Application Maintenance n Application Patches n Technical Support n Coordinated with Discretionary work Service Management and Business Operations 19

IS 565 IT Outsourcing Management Application Outsourcing Global Delivery Center Network – Onshore, Nearshore, and Offshore – The “Where” • Core network with 50, 000+ people • Deep Client Knowledge, Industry & Platform Skills • Certification – (e. g. , India -- CMM Level 5, ISO 9001, e. SCM, COPC, BS 7799, SAS 70; Manila -- CMM Level 5, ISO 9001, e. SCM, COPC) • SLA and metrics-based approach © 2005 Accenture. All rights reserved. • • Extensive range of skills and capabilities 24 x 7 development and maintenance Strong technology alliances Onshore / offshore delivery expertise since 1985 20

IS 565 IT Outsourcing Management Application Outsourcing “A Day in the Life of” Application Outsourcing Accenture not only provides day-to-day application support, we also plan for future needs to ensure a long-term solution. Day to Day n Service Management Application Maintenance & Development Customer Support Technical Support n n n n n Monthly Manage relationships (Retained HR IT organization, People. Soft) Track SLA metrics Prioritize and approve discretionary work n Break Fix work Minor enhancements Regulatory/compliance changes Minor software upgrades n Resolve problems forwarded by Call Center Prioritize and escalate issues Assist in performance tuning Request database management activities © 2005 Accenture. All rights reserved. n n SLA reporting Enhancement planning Demand management Quarterly n n Yearly SLA management measuring, reporting, analyzing, revising Continuous improvement planning n n n Annual budget planning Contract management Strategic Planning Release management for “bundled” enhancements Root cause analysis Proactive patch management n Coordinate software releases with retained IT organization n Major software upgrades (as agreed by plan) n Training for new rollouts / upgrades n Proactive customer communications n Customer satisfaction survey n Report on Performance Metrics n Capacity planning Assist with database maintenance planning n Assist in planning for changes / upgrades n n n 21

Business Process Outsourcing

IS 565 IT Outsourcing Management Application Outsourcing Companies are Bundling Outsourcing Services to Gain Additional Benefits Industry Specific Services Enterprise Data Management Services Customer Contact Services Learning Services Procurement Services HR Services Today’s Topics Finance Services Bundled Solutions Application Services Infrastructure Services © 2005 Accenture. All rights reserved. 23

IS 565 IT Outsourcing Management Application Outsourcing Accenture Outsourcing Portfolio Copyright © 2007 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. © 2005 Accenture. All rights reserved. 24

IS 565 IT Outsourcing Management Application Outsourcing Accenture BPO Business Process Model © 2005 Accenture. All rights reserved. 25

Accenture Finance and Accounting BPO Services What We Do Redefine Increased Value Increased Effectiveness Back-office functions truly become frontoffice capabilities. Continuous improvement is embedded into the economics Increased Efficiency Reducing the cost and resources to execute finance processes. IS 565 IT Outsourcing Management Application Outsourcing Re-engineer Rationalize • Processes adopt best demonstrated levels • Efficient transaction processing • Reduced costs • Extended finance capabilities using new competencies, processes and ways of working • Evaluation and implementation of best -practice processes • Accenture change capability applied to organization transformation • Increased ability of Finance to focus on strategic tasks • Robust technology solutions provide a platform for growth enabling successful change at lower cost • Clear management information provides clarity of performance initiatives. Decreased Cost © 2005 Accenture. All rights reserved. 26

IS 565 IT Outsourcing Management Application Outsourcing Scope Of Services Overview Value. Added Services Tier 3 – Business Analytics and Performance Management • Performance and value Tier 2 – Income Statement, Cash Flow and Balance Sheet Optimization • Key metrics focus Tier 1 – Compliance and Recovery Management • Risk/reward sharing • End-to-end processes Record to Report Core Services Procure to Pay Acquire to Retire Order to Cash and Banking • Costeffective/efficient processes • Variable and flexible pricing Document Management • Global scale and complexity Management Operating System Application Management Retained Finance Services Finance Strategy © 2005 Accenture. All rights reserved. Organization Design Skills and Competency Change Management • Business case achievement • New finance capabilities 27

IS 565 IT Outsourcing Management Application Outsourcing Scope Of Services Procure To Pay Prevention (4+ Way Match) Cash Discount Mgmt Post Payment Audit Fraud Detection Value-Added Services Supplier & Spend Analytics Purchase Requisition Purchase Order Goods/ Services Receipt Invoice Receipt & Capture Invoice Match Invoice Approval Payment Processing Core Services Demand & Planning Contracts & Policies Stock & Inventory Management Supplier Management Exception Resolution Business Approvals Payment Approvals Retained Services Compliance (Internal + External) © 2005 Accenture. All rights reserved. 28

IS 565 IT Outsourcing Management Application Outsourcing Procure to Pay Capability Overview Service Definition Value Proposition Assets & Solutions • End-to-end transaction processing services from supplier to customer including 3 rd party management • Analytics and insight-driven valueadded services such as compliance and analytics for supplier mgmt • Process refinement and optimization services such as enhanced PO compliance, reduced exceptions and supplier payment cycle time • Automated, streamlined and industrialized Procure-to-Pay transaction capability • Focus on driving value over and above the transaction itself by deploying proprietary assets and solutions. For example, profit recovery and analytics • Integration of invoice-to-pay back end process with front end procurement • Profit recovery & analytics services and tools including prevention capability. • Accenture Vendor Payment Services (VPS) – a modular suite of technology assets including integrated document management solution, electronic invoicing, Intelligent character recognition, electronic workflow and vendor self help Metrics Experience & Credentials Continuous Improvement • 20 m+ AP invoices processed per annum with a combined invoice value of >$100 bn • Supplier invoices received from >30 countries • >10 m imaged documents per annum across 50 countries served • 60% of our clients use our VPS asset over and above their ERP systems • >90% of Accenture Finance and Accounting BPO contracts have a payables component. Example results include: ü~$30 m recovered through AP contract compliance ü 30% improvement in invoices paid on time to take advantage of early payment discounts üImproved invoice data entry productivity by 100% • Increased PO compliance • Reductions in duplicates, exceptions and overpayments e. g. $2 m reduction in cash loss • Standardized controls across countries and business units • Reduction in supplier cycle times to better manage DPO e. g. 65% reduction in invoices on hold – equivalent to freeing up $18 m © 2005 Accenture. All rights reserved. 29

IS 565 IT Outsourcing Management Application Outsourcing Accenture Delivery Centre Network Regional Management Nodes China Europe Shanghai and Dalian Prague, Bratislava, Warsaw, Bucharest Americas North America India Bangalore and Chennai © 2005 Accenture. All rights reserved. Rest of UK/I Europe India Asia-Pacific Mauritius Manila 30

Risks & Mitigating Strategies - Discussion

What are the perceived barriers to outsourcing? (READ AS AREAS OF RISK!!!) IS 565 IT Outsourcing Management Application Outsourcing Geopolitical Concerns Uncertain geopolitical conditions require buyers to think more strategically and weigh risk versus reward when choosing how and where work is performed. Employee Backlash Employers more candid with employees re: outsourcing endeavors; Finding new, higher-value roles for employees who would have been displaced Fear about negative customer reaction and publicity continues to keep buyers from publicly discussing outsourcing endeavors; potentially increases tendency for employee backlash Customer Reaction Negative Publicity Tends to be more of a concern on the provider-side due to pending/recently passed state and local legislation in the US that prohibits outsourcing activities under certain conditions Legislation Severance Costs A sound human capital management strategy is required in order to control costs and mitigate morale issues Political Pressure Areas of Minimal Concern Few buyers are worried about competitor criticism (because everyone is doing it), union pressures (because most IT jobs are non-unionized) and market reaction (because it can be a financially sound decision). Few buyers expressed concerns about political pressure, though this will likely increase as a concern with the approach of the U. S. Presidential campaign in 2008. Market Reaction Union Pressure Competitor Criticism 2005 2006 Low Level of Concern High Diamondcluster. 2006 Global ITO Study. © 2005 Accenture. All rights reserved. 32

IS 565 IT Outsourcing Management Application Outsourcing Risks and Mitigation – Group Discussion Area of Risk Mitigation Strategy 1. 2. 3. 4. 5. 6. © 2005 Accenture. All rights reserved. 33

IS 565 IT Outsourcing Management Application Outsourcing Risks and Mitigation - Examples Risks Transition and operations management Explanation Ability to ensure timely set up of new capability based on defined timelines; including trained teams, management and infrastructure Business continuity Ability to avoid disruption of business operations and achievement of SLAs Geopolitical Ability to maintain a stable government which supports business growth at the service delivery location Ability to sustain the degree of ongoing commitment and stability of continued ongoing opportunities at current location Morale of employees at existing operations © 2005 Accenture. All rights reserved. Mitigation Approach • Adhere to detailed, defined implementation plan • Conduct early recruitment of key management personnel with relevant experience • Pre-select infrastructure vendor(s) based on prior experience and track record • Ensure redundancy and contingency is built into the planned infrastructure • Plan for an alternate connectivity solution • Retain limited onshore capability and improve the capacity through process re-engineering • Perform up-front due diligence on political risks • Ensure ongoing tracking of political issues • Multiple Delivery Centers • Ensure adequate, ongoing communication with all stakeholders • Hold one-on-one discussions with leadership of the current operations • Maintain targeted and positive communication to the market 34

Questions?