Shared Services 2 0 Massachusetts Digital Summit October

Shared Services 2. 0 Massachusetts Digital Summit October 19 th, 2009

Program Agenda Theory • What are Shared Services? • Why Do Organizations Adopt Shared Services? • How are Shared Services Implemented and Optimized? • How does Oracle Enable Shared Services? • What’s Next/Trends? Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 1

What Are Shared Services and What Are the Benefits? Key Benefits Shared Services is a service model designed to gain efficiencies in routine processing by leveraging common practices and enabling technology • Reduces costs • Improves productivity • Promotes timely execution • Enables better decision making • Leverages existing and exploits emerging technologies • Ensures acceptable levels of control and risk management • Optimizes skills/capabilities of the organization • Promotes collaboration across the extended enterprise Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 2

Pre-Shared Services Silos of Resources/Data LOB 1 Purchasing Manufacturing Distribution Marketing Sales FINANCE HUMAN RESOURCES INFORMATION TECHNOLOGY LOB 2 Purchasing Manufacturing Distribution Marketing Sales FINANCE HUMAN RESOURCES INFORMATION TECHNOLOGY LOB 3 Purchasing Manufacturing Distribution Marketing Sales FINANCE HUMAN RESOURCES INFORMATION TECHNOLOGY Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 3

Post-Shared Services Independent LOBs with Common Model Support LOB 1 Purchasing Manufacturing Distribution Marketing Sales LOB 2 Purchasing Manufacturing Distribution Marketing Sales LOB 3 Purchasing Manufacturing Distribution Marketing Sales FINANCE SSC HUMAN RESOURCES INFORMATION TECHNOLOGY Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 4

Shared Service Models Are Highly Mature And Successful Shared Services Are Highly Mature… • Service delivery models for Shared Services are proven – Ranging from sharing only technology …And Have a High Success Rate % of respondents and/or processes and/or people – Varying strongly in scope • Technology is mature 95% of SSC implementations rated “successful” – Core are global ERP/HRMS systems – Wide range of tools in use • Best-practices available in abundance – From numerous successful implementations in all industries Yes, however, No, we have definitely a we had some major problems. full success. issues. Total Source: Hackett “The Future of Shared Services” 2005 Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 5

Why Implement a Shared Service Center? High Tactical vs. Strategic Business Drivers Improve Service Levels Process Standardization Process More Process with Same/Less Improvements Medium Capture Acquisition Synergies Data Visibility Coordinate IT Accelerate ERP Implementation Low STRATEGIC Increase Control Headcount Reduction Low Medium Increasing (sustainable) value/continuous improvement as f(x) of time High TACTICAL Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 6

Top Business Drivers for Shared Services Are Process Standardization and Improvements Business drivers for adoption of SSC (% of respondents) Process standardization Facilitate process improvements Headcount reduction Improve service levels Increase control Accelerate ERP implementation Data visibility and comparability improvements Coordinate IT Process standardization and improvements Other business drivers Cross-division/location comparability Capture acquisition synergies 0 10 20 30 40 50 60 70 80 90 Headcount reduction is not #1 priority, although important Source: Deloitte Research “The Future of Shared Services” 2003; Oracle analysis Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 7

Overwhelming Evidence of Proven Financial Benefits From SSCs • Average ROI for shared services implementation is about 20 percent – Average payback period approximately three years – 74 percent meet or exceed their financial targets • Measurable direct bottom-line impact, e. g. up to 45% reduction of finance cost through shared services • Sizeable benefits achievable in payroll administration - the early adopter in HR shared services – Top performers beat the average payroll cost per employee by 47% • Shared services also deliver on intangible benefits – Such as productivity, quality and customer service Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 8

Shared Services Cover A Wide Variety Of Processes Across Multiple Functional Areas (1 Of 2) Functional Areas And Key Processes Covered By SSCs Procurement Finance HR • Cash disbursements • Revenue cycle • Accounting & External • Rewards administration • Payroll services • Data management, reporting Tax management Treasury management Compliance management Planning and performance management Business analysis Function management reporting and compliance Staffing services Workforce development service Organizational effectiveness Total rewards planning Strategic workforce planning Function management • • • Services • Supply data management • Order and contract management • Requisition and PO • Service execution processing • Service operation • Supplier scheduling • Planning & strategy • Receipt processing • Compliance management • Function management • Customer management • Sourcing execution • Supplier management & development • Sourcing & supply base strategy • Function management Source: Hackett; Oracle Insight analysis Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 9

Shared Services Cover A Wide Variety Of Processes Across Multiple Functional Areas (2 Of 2) Functional Areas And Key Processes Covered By SSCs • Infrastructure • • development & management End user support Application development & maintenance Quality assurance Risk management IT business planning Enterprise architecture planning Emerging technologies Function management • Marketing • • communications Brand product management Planning & strategy Market research & analytics Sales execution Sales operation Sales planning Function management Corporate Services Manufacturing Marketing & Sales Information Technology • • • Production planning Inventory management Shop floor scheduling Capacity management Function management • General administration • Travel & transportation • Real estate & facilities • • mgmt Government affairs Legal Quality management Risk & security management Corporate communications Planning & strategy Executive office Source: Hackett; Oracle Insight analysis Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 10

Ensuring Successful Shared Services Implementation: Best Practices (1/2) 1 • Clearly define the Shared Services vision – Senior executive driven process with operating unit leader participation – Clear alignment of Shared Services vision with overall organizational goals 2 • Develop a detailed business case for change – Develop “case for change”; include both hard benefits (e. g. labor cost reduction) and soft benefits (e. g. service improvement, better visibility, etc. ) – Do not under-estimate the implementation and transition costs 3 • Define scope for economies of scale and skill – Scope includes “scale” based processes (e. g. Payables, invoices, etc. )…. – …and “skill” based processes (e. g. legal, marketing, tax, etc) 4 • Establish appropriate executive leadership – Steering committee includes HQ and operating unit executives – Use distinct leadership for SSC development vs. operations 5 • Select the right people for the project – Select the “right” resources, not the “available” resources for the project – Release SSC project resources from their day-to-day responsibilities Source: “Ensuring Successful Shared Service Implementations: From Vision To Operation”, Accenture Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 11

Ensuring Successful Shared Services Implementation: Best Practices (2/2) 6 • Communicate extensively – Establish a clear communication plan (message outline, timing, audience, communicator) – Communicate to potentially affected employees early-on 7 • Start transition planning early – Start transition activities up to 180 days prior to SSC implementation – Focus on knowledge transfer, data conversion, and training activities 8 • Use technology as a strategic enabler – Streamline/consolidate core transaction processing systems (ERP, HRMS, etc. ) – Invest in workflow capabilities, case management solutions, and self-service tools 9 • Recruit and train the “right” team for the Shared Service Center – Use a mix of internal and external hires to develop the SSC team – Develop and implement an enduring training plan 1 0 • Over support each implementation – Over staff the organization during the transition and stabilization periods – On-site project representatives for support & issue resolution during stabilization phase Source: “Ensuring Successful Shared Service Implementations: From Vision To Operation”, Accenture Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 12

Example Governance Structure for Shared Service Centers COO SSC Leadership Advisory Board SSC Management • Service delivery strategy • Scope expansion • Significant issue resolution • Funding review • SLA approval • Process & strategy review • Issue resolution • Operation unit behavior influence • Continuous improvement feedback Steering Committee SSC Operations User Committee • Resolve service Source: “Optimizing Shared Service Performance through Better Service Management”, Accenture Copyright © 2009, Oracle. All rights reserved. Oracle Confidential performance issues • Continuous improvement ideas • New requirements 13

Hindsight Reveals to Experienced Shared Service Organizations that Executive Sponsorship is Critical Success Factors Deemed Most Important by Surveyed Executives Strong planning and process standardisation are not enough on their own. Source: Shared Services: A Benchmark Study, March 28 2005, Arthur D. Little / The Johnsson Group; based on a survey of 40 global organisations, workshops, and client engagements. Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 14

Best Practices Adopted By Shared Service Center Leaders Best Practices Employed In Shared Services Operations Percentage of Centers Governance related Performance related Technology related Source: “Shared Services: The Evolution of Higher Performance”, Accenture 2004 Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 15

Shared Services: Top Optimization Initiatives Top Initiatives Percentage of Respondents Source: Deloitte Research Copyright

Most SSC Organizations Move Beyond Simple KPI Measurement to Form SLAs with Internal Customers Continuous Improvement and Self Service are also Key Drivers SLAs that do not promote simplicity, transparency, and accountability are likely to cause more administrative burden than benefit. Source: Shared Services: A Benchmark Study, March 28 2005, Arthur D. Little / The Johnsson Group; based on a survey of 40 global organisations, workshops, and client engagements. Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 17

What Makes a Service Level Agreement (SLA) Successful? Critical Success Factors Simplicity Transparency and Choice Metrics and Accountability What You Need • Short (1 -3 pages) and simple to understand • Bundle services by business units to enable tradeoffs across functions • Enable straightforward, ongoing communication • Invoicing clear and understandable • Pricing provides insight into service cost drivers and encourages desired behavior • Base level “lights-on” operations separated from optional services • Flexible, scalable service levels, up or down • Track performance against internal targets and external benchmarks (without adding excessive infrastructure) • Link business and service management Source: Booz-Allen & Hamilton 2000, “Getting Shared Services Right: Capturing the Promise” Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 18

Integrated Technology Is a Key Enabler For Shared Services IT standardization in SSCs continues Homogeneity of IT landscape in SSC 100% 80% 65% 54% 47% 46% 53% 2004 2005 40% 20% 35% Heterogeneous Uniform 0% 2003 “One single integrated ERP system” identified as the single most important best-practice for SSC performance (Hackett 2004) Source: Hackett “The Future of Shared Services” 2005 Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 19

Technology Enablers For Shared Services Top 10 Technology Enablers 1. ERP 2. Data Analysis and Reporting Tools ERP Standardization Is A Given % of respondents 3. Workflow 4. Document Imaging 5. Data Warehouse 6. e. Payment 7. Employee Self-Service 8. EDI 9. Manager Self-Service ONE common ERP system. 10. Financial Consolidation Tool Legacy System Multiple ERP systems Multiple ERP instances Total Source: “Shared Services: The Evolution of Higher Performance”, Accenture 2004 Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 20

Oracle E-Business Suite Offers Rich Functionality For Shared Services Key Differentiators • Single, comprehensive suite of applications covering Reduce IT integration and maintenance costs • Rich functionality for a variety of self-service tasks Reduced workload for SSC staff • Pre-built, workflow across various functional areas • Delivers complete process solution (e. g. Procure to Integrated processes across HC and SSC • Daily business intelligence • Pre-built reports and dashboards by user roles and Enable continuous improvement all key functional areas for SSCs (Finance, HR, Supply chain, Procurement, etc. ) Pay, Order to Cash, etc. ) responsibility Copyright © 2009, Oracle. All rights reserved. Oracle Confidential

Key Oracle Differentiators for Shared Services • Unifying Technology – Oracle Applications are designed to support multiple organizations in one instance • Workflow – The key link between SSC and the divisions being served is built into Oracle’s applications • Interfaces – Management tools for open interfaces to legacy systems, and a comprehensive application integration framework to enable seamless integration • Self Service – Integrated applications to be used by the division being served, driving strong operating efficiencies • Business Intelligence – Powerful means to monitor and manage performance by both the SSC and the divisions being served • SEM Products – Activity Based Costing or Balanced Scorecard can be used to manage performance against service level agreements • Integrated Customer Relationship Management (CRM) – Oracle CRM Modules are pre-integrated into the E Business Suite application family Source: Oracle Global Implementation Guide Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 22

Four Important Trends in SSCs: Outsourcing, Automation, Global Reach and Scope Expansion • Outsourcing and offshoring – Once an organization feels comfortable with internal Shared Services it may decide to outsource and/or offshore operations – Mature offerings in Finance/IT available, HR/procurement/etc. taking up speed • More automation – Most important objective of most SSCs: single global ERP/HRMS system – Top 2 -4 priorites are: vendor self-service, e-procurement, employee self-service • Global reach - movement to global shared service models – Pressure to move to lower labor markets − Increased efficiency with lesser SSCs • Scope expansion along all corporate functions Copyright © 2009, Oracle. All rights reserved. Oracle Confidential 23