Moderated Discussion Performance KPIs and Other Measures of Success Kevin Giblin, McGraw-Hill Rick Collison and Cristen Hughes, Ariba … and YOU © 2012 Ariba, Inc. All rights reserved. CS

Performance KPIs and Other Measures of Success Wednesday, April 11, :15 p.m. What’s good and what's great when it comes to collaborative business commerce? How are your peers doing, and how are they measured by their leadership? Find out when you attend this informative session. You'll learn not only about how your peers measure success and the metrics that can be leveraged to drive your success, but also how Ariba's stealth metrics program can be used to your advantage. © 2012 Ariba, Inc. All rights reserved. 2

Moderators and Participants © 2012 Ariba, Inc. All rights reserved. 3

Session Format Some Initial Topics  Rick to setup a topic  Kevin to share his experience and thoughts  Audience discussion Audience Suggested Topics  Cristen to facilitate  Topic + your view  Discussion © 2012 Ariba, Inc. All rights reserved. 4

Topics to Start With! 1. Context  Objectives of using KPIs (with leadership, you, and users) (Discussion)Discussion  Characteristics of ideal measures (Discussion)Discussion  Performance measures – different types (Discussion)Discussion 2. Putting it into practice  Governance and getting this to the next level and alignment (Discussion)Discussion  KPIs by business process (Discussion)Discussion  Putting KPIs into operation (Discussion)Discussion  Frequency and to who? (Discussion)Discussion  MBOs and KPIs (Discussion)Discussion 3. Key takeaways (final notes)final notes © 2012 Ariba, Inc. All rights reserved. 5

Key Takeaways Final Notes Your final notes  [to be completed during the session] What do you need from Ariba?  [to be completed during the session] © 2012 Ariba, Inc. All rights reserved. 6

7 Kevin - Rick - Cristen -

OBJECTIVES OF USING KEY PERFORMANCE INDICATORS Discussion Topic © 2012 Ariba, Inc. All rights reserved. 8

Objectives of Using KPIs setup Leadership You Users © 2012 Ariba, Inc. All rights reserved. 9

Business Pressures in 2012: How Do We… Increase Savings Targets Drive year-over-year savings with fewer resources? Outperform currency and inflation factors? Improve Sourcing Execution Reduce negotiation time and effort? Exploit the largest savings opportunities? Balance quality, cost and risk? Drive Sustainable Savings Leverage supplier knowledge to improve price performance? Enforce negotiated terms? Maximize Sourcing Influence Consistently apply policy rules enterprise-wide? Leverage expert sourcing practices across all commodities and divisions? Procurement Organization 10 © 2012 Ariba, Inc. All rights reserved.

Establishing Performance Measures Ensuring alignment with suppliers... Market sector supply strategy for spend category Background from sourcing efforts used to establish the relationship Understanding of how and where supplier value is delivered to MH Prior performance criteria MH and Supplier alignment on objectives Completed KPI and Survey Templates Performance reporting and communications requirements agreed with by governance team InputsImplementation Outputs Review value objective Establish Performance Measures Engage Stakeholders Document & Communicate Understand what stakeholders want to get from the relationship Drive discussions around where supplier performance delivers the value objective Create metrics that outline relationship value Align governance team in the performance measures Solicit their input to the measures and reporting Document the performance measures agreed upon Communicate needs to all stakeholders Establish process for reporting

Developing Key Performance Indicators Getting clarity on goals and objectives

CHARACTERISTICS OF IDEAL MEASURES Discussion Topic © 2012 Ariba, Inc. All rights reserved. 13

Characteristics of Ideal Metrics 14 © 2012 Ariba, Inc. All rights reserved.

Performance Evaluation Q&A 15 © 2012 Ariba, Inc. All rights reserved.

PERFORMANCE MEASURES – DIFFERENT TYPES Discussion Topic © 2012 Ariba, Inc. All rights reserved. 16

Performance Measures Ensure Supplier Value 17 © 2012 Ariba, Inc. All rights reserved.

Supplier Management - Use of Metrics Daily  Record supplier issues  Update issues status Monthly  Spend report analysis and review  Monitor issue resolution  Escalate critical issues identified, SLA results Quarterly  Program “wellness check”, business review, KPI results  Recommendations on program enhancement opportunities Annual  Conduct internal customer survey  360 feedback  Financial analysis 18 © 2012 Ariba, Inc. All rights reserved.

GOVERNANCE AND GETTING THIS TO THE NEXT LEVEL AND ALIGNMENT Discussion Topic © 2012 Ariba, Inc. All rights reserved. 19

KPI’s Value Objective Understanding the expected outcome is a must for good KPI’s 20 © 2012 Ariba, Inc. All rights reserved.

Performance Measurement through KPIs 21 © 2012 Ariba, Inc. All rights reserved.

KPIs BY BUSINESS PROCESS Discussion Topic © 2012 Ariba, Inc. All rights reserved. 22

BENEFITMEASURE Cost Cost savings Cost avoidance Time to Market Shorter project duration Greater # of projects per year Increased productivity Development/Maintenance Ratio Less internal time spend on maintenance Business Alignment Requirements capture Quality Increased customer satisfaction Fewer supplier issues Transition Quicker transition time Lower transition costs Sources: McKinsey Quarterly, PSC, Aberdeen Defining Procurement Measures of Success – Internal KPI

Ariba Suggested Adoption KPIs And in Solution Reports Business Goals:  Have a consistent way to view each customer  Data  Have a consistent way to get a sense of success  KPI © 2012 Ariba, Inc. All rights reserved. 24

Navigation to Usage Reports Manage  Prepackaged Reports  System and Benchmark Usage reports  System Usage Reports  Solution © 2012 Ariba, Inc. All rights reserved. 25

Sourcing Usage Reports Our “source of truth” for Adoption © 2012 Ariba, Inc. All rights reserved. 26

Scenario 1: Sourcing Adoption KPIs  Key Performance Indicators (KPIs) that help you determine how effective you are using the solution. © 2012 Ariba, Inc. All rights reserved. 27 Based on the R/Y/G of the "Sourcing Projects per Licensed User" How many projects is this customer "creating“ this month How many users are “entitled" to create Sourcing Projects Number of sourcing project per month/Number of Sourcing Licensed Users Average event savings percentage over the last rolling 12 months Average number of suppliers invited to each event (All event types) Average number of suppliers participating in each event (All event types) Number of L1 Commodities that are sourced over a rolling 12 month period

Scenario 1: Sourcing © 2012 Ariba, Inc. All rights reserved. 28

Scenario 2: P2P, P2O and APC Adoption KPIs © 2012 Ariba, Inc. All rights reserved. 29 Based on R/Y/G values of Active PO Suppliers and Active Invoice Categories The rolling 12 month approved invoice spend A Customers Annual Contract Amount of Spend Ratio of Annualized P2P Spend vs. Annual Spend Entitlement Percent of PO spend purchased from a catalog over a rolling 12 month period % Contract PO Spend vs. Total PO Spend Unique number of suppliers that received at least one (1) PO over the last rolling 12 months Unique number of categories that been invoiced for over the last rolling 12 months

Scenario 2: P2P, P2O and APC © 2012 Ariba, Inc. All rights reserved. 30

Scenario 3: Spend Visibility Adoption KPIs © 2012 Ariba, Inc. All rights reserved. 31 Based on the R/Y/G/B of the “Spend Entitlement %” Sum of rolling 12 month Invoice Spend A Customers Annual Contract Spend Entitlement Annualized Invoice Spend / Annual Spend Entitlement Invoice Spend for the latest month

Scenario 3: Spend Visibility © 2012 Ariba, Inc. All rights reserved. 32

Scenario 4: Contracts Adoption KPIs © 2012 Ariba, Inc. All rights reserved. 33 Based on the R/Y/G of the "Average Monthly Contract Volume" Average # of monthly contracts created over the last rolling 12 months % who are Contract Users compared to the entire population of Contract Users and Contract Team Members Number of Contract Users that have logged within the last 2 months

Scenario 4: Contracts © 2012 Ariba, Inc. All rights reserved. 34

PUTTING KPIs INTO OPERATION Discussion Topic © 2012 Ariba, Inc. All rights reserved. 35

Establishing the KPI Process Supplier’s input helps drive the program! 36 © 2012 Ariba, Inc. All rights reserved.

Make The Program Count 37 © 2012 Ariba, Inc. All rights reserved.

38 Delivery Customer MarketingSolutions CustomerSat SalesForce Finance  Thousands of Buyer Customers  Hundreds of Thousands Supplier Customers Siebel AN Quadrem PeopleSoft CMO Support 2000 Realms Sales Analytics Fusion

Data Quality – OMG! 39 Metrics updated approximately every month. Four (4) elements to track completeness  Data Completeness (Entitlement) : Measures the percentage of blank/missing entitlement fields  Data Completeness (Adoption): Measures the percentage of blank/missing Adoption fields  Customer Completeness: Measures the percentage of customers that are missing when compared to the list of customers from Psoft.  Data Accuracy: Measures the percentage of the data that has known inaccuracies and is not correct yet. Target for each completeness area = 100% © 2012 Ariba, Inc. All rights reserved.

FREQUENCY AND TO WHO? Discussion Topic © 2012 Ariba, Inc. All rights reserved. 40

The Performance Monitoring Cycle KPI ToolFrequency Issues LogDaily Status UpdatesDaily Spend Report & AnalysisMonthly Compliance ReviewsMonthly Issue ResolutionMonthly SLA ResultsMonthly Metrics and Wellness Review, ScorecardsQuarterly Program Enhancements, CollaborationsQuarterly Internal Customer SurveyAnnual 360 FeedbackAnnual Financial AnalysisAnnual 41 © 2012 Ariba, Inc. All rights reserved.

MBOs AND KPIs Discussion Topic © 2012 Ariba, Inc. All rights reserved. 42