Why Outsource De Paul University February 19 2007

Why Outsource De. Paul University February 19, 2007 Richard Howe Vice President richard. r. howe@saic. com

Why outsource? ¨ Chinese Proverb: – If you don’t know where you are going, any road will do ¨ Humphrey (originator of SEI/CMM): – If you don’t know where you are, a map won’t help

Business Drivers Internal External Work force constraints u User dissatisfaction u Inefficient operations u Escalating budgets u Attrition u Redirect internal staff u Mission critical services u Complex services u u Tight labor market u Global competition u Rapid change in technology u Technology complexity u Cost pressures u Integration needs u Business process change u Partners are competitors Irrelevancy may carry larger risks than inefficiency

How far should we go? Model A Model B Model C Contract Management Retained Strategy Setting Retained Outsourcer Service Integration Retained Outsourcer Project Management Outsourcer Operations Delivery Outsourcer Company Confidential

What’s in outsourcing? For the Firm: • Improve quality: – Create focus on service delivery from a company and people whose business is delivering the service – Greater experience/knowledge from professionals in a company offering careers in a specific discipline • Cost reductions where applicable: – Industry average of 20%/year improvements – Greater incentives to use market solutions and commodity service rather than custom – Access to larger scale economies For employees: • Pure player career advantage • Training and career opportunity • Access to latest technology • Opportunity! For executives: • Predictive cost model • Real pricing competition • Excite lines of business on IT responsiveness • Positive impact on people/community • SLA’s

Offshore adds a third dimension to outsourcing • Insource • Outsource Control – Cost structure – Economies of scale – Financial engineering – Service requirements – Process expertise/ capabilities Business Process Call Center Se rv ice Information Technology Ca te go rie s • • Offshore On-shore Location – Vendor capabilities and availability – Labor pool projections/economics/skills – Deal types/relationship structure (e. g. , subsidiary; JV; consortium) – Location/geographic considerations – Risk management Source: Society for Information Management, SIMposium 2004 Comprehensive assessments include – A qualitative assessment of benefits and risks associated with each option – An economic valuebased analysis of relative opportunity sizing

Onshore v. Offshore Delivery comparisons High Proportion Offshore Low Management complexity High Medium Low Core/Strategic Mix of Application application onshore/offshore Development development Application Support support Offshore Legacy & maintenance enhancements maintenance & enhancements Low Project selection donethrough diagnosticsstudy Non-core Application application Development development Medium Interaction requirements High