IT Process Organization (Provided by Booz-Allen & Hamilton)

Technology Issues

Business Imperatives are Putting Challenges on the I/T Capability

Taking a Process View Has Helped Several Organizations Improve the Value Received from the I/T Capability Improving the value and return on I/T assets by focusing resources on critical market driving capabilities (e.g., “Advantaged Systems”) Positioning the I/T Organization to support growth Improving service management disciplines using process based organization concepts Capturing cost reduction opportunities of up to 40%

Capturing Information Technology Opportunities Requires the Implementation of Best Practices on a Global Basis Simplifying I/T Operational Processes —Separate supply and demand, fixed and variable —Eliminate low value added work and redundant support systems accumulated over years of growth, acquisitions, etc. —Optimize I/T processes for low cost delivery…benchmark to best practices —Develop processes to share expertise and internal best practices Restructuring I/T Delivery Model to Achieve Operational Effectiveness —Centralize operations where strong economies exist —Develop service level agreements to create accountability to the line —Balance sourcing of I/T capabilities (insourcing vs outsourcing)

Capturing Information Technology Opportunities Requires the Implementation of Best Practices on a Global Basis (Cont.) Leveraging Information Systems Investment —Enforce common technical architecture standards (hardware, software, network) —Implement rigorous cost/benefit standards for new application software investments —Optimize application software maintenance requirements Reducing Headcount Costs —Strip out redundant support systems and staff accumulated over years of growth, acquisitions, etc. —Staff to “base case” I/T delivery model and streamlined I/T processes

I/T Transformation is a Long-Term Program for Change Identify/ Validate/ Prioritize Detailed Design Implement Process Scoping the Opportunity Continuous Improvement Segment/Roles/ Responsibilities Transition Planning Implement Organization Structure Decision Go Iterate/ Streamline/ Structure Accountability/ Alignment Action Policy Decision Go Business Process Redesign Phase IPhase II Phase III Corporation Staff Design Approach Each Phase is Based on Facts and Analysis to Drive the Business Change

Lost Economies of Scale in Help Desks (FTE’s Versus Call Volume) Client’s Help Desks Were Too Small and Did Not Leverage Economies of Scale Sufficiently Help Desk (FTE’s) Help Desk Call Volume (Calls Per Month)

Root Cause Analysis Highlights Common Themes That Erode Value

Once the Opportunities are Understood, Objectives are Set to Guide the Design: Achieve best in class cost savings Redirect cost efficiencies to fund new business opportunities Deploy a flexible organization that will support a growth strategy –Respond proactively to strategic changes -- e.g., new JVs, deregulations –Facilitate entry into new markets –Establish partnerships with service providers Respond promptly to business needs –Establish clear accountability over key services –Create global organization to facilitate cooperation –Establish priority over delivering services -- not technology Develop reliable solutions, more cheaply and more quickly –Consolidate Infrastructure -- on a global scale –Leverage learning and expertise on a global basis –Fund and create a global, standard infrastructure -- new applications will “plug in” to the infrastructure –Develop global, common application solutions

Benchmark Studies on Growth Companies and Leading Edge Practices are Useful to Guide Design Growth company benchmarking concluded successful companies were leveraging scale and standards to control overhead costs and deploy quickly in new geographies Best practice process benchmarking revealed options to improve value –Demand and supply management –Cost restructuring –Leveraging the market –Knowledge sharing Our benchmarking confirmed a new approach to HR management is needed: –Demand for I/T resources will continue to outpace the supply –Traditional HR practices are challenged by rapidly changing business and technology environments –Existing retention and reward practices are not always market competitive and can hinder I/Ts ability to attract and retain key talent –Employee training and development practices often lack a strategic focus on business, organization and people requirements

Fundamental Reengineering Starting With a Service Mission and Definition Allows the Organization to Redesign Itself Based on Priorities Process Improvements Development Computer Operations Telecommunications Networking Problem Support Identify Key Services Reengineer Process Deploy Process- Based Organization Clients Encourages New Behaviors Measure, Benchmark, and Manage Service Levels

The Analysis Starts by Prioritizing the Key Services and Processes to Redesign These marks represent the focus of the reengineering effort

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The New Processes Address All Key Management Issues Identified in Phase I and Drive the Organization Design

A Key Aspect of the Change is to Separate Demand and Supply Management I/T Business Managers (Embedded) I/T Business Leaders (Embedded) Management Council Global Information Manager Global Systems Regional I/T Supply Global Network Computing Service Service & Asset Management DEMAND SUPPLY I/T SHARED SERVICE ORGANIZATION Focus = I/S Service Delivery

Separate Demand and Supply Organizations are Needed to Maximize Sharing While Maintaining Strong Business Focus Enable I/T to meet two separate goals –Reduce I/T supply costs by increasing sharing and by standardizing I/T services -- throughout the embedded organization –Increase I/T value by prioritizing I/T solutions aligned to specific business strategies and filtering discretionary, low value-added requests -- through I/T shared services Create constructive tensions between both groups which enables the organization to make cost/service tradeoffs effectively Formalize a demand management process and organization which helps control and eliminate “shadow” costs

An Implementation Guide Defines the New Organization and How It Operates TABLE OF CONTENTS I.Implementation Guide Summary II.Products and Services III.Major Processes IV.Major Process Changes V.Organization VI.Governance VII.Demand Management VIII.Organization Linkages IX.Organization Capabilities X.Roles and Responsibilities XI.Accountabilities XII.Budget XIII.Service Agreements XIV.Related Projects IMPLEMENTATION GUIDE

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Regular Benchmark Analysis Ensures That the Organization Remains Market Competitive and Focused on Supporting the Business Strategy Reengineer For Growth Establish “Balanced” Scorecard Deliver I/T Services, Measure Performance Benchmark Periodically - Cost - Service Levels - New Investments Negotiate Cost, Service Levels Client Requirements Updated Stretch Targets Initial Targets Market Input Identify “Market” competitive performance targets -- especially in a high-growth environment Review current performance against market cost and service levels

The Organization Must Implement Best Practices for Continuous Improvement Assign accountability for continuous improvements to those responsible for each service -- not to a dedicated quality management group Establish a close link between scorecard performance and performance based systems -- in process Define periodic market competitive “stretch” targets through benchmarks Continuously improve I/T cost and service structure –Ongoing Service -- Organize I/T buyers’ committees to review cost and service performance and to negotiate future targets –Current Investments -- Appoint “process professionals” to maximize the value of current applications/investments on an ongoing basis –Discretionary Investments -- Review value proposition for new projects and perform “post-audit” reviews to capture benefits Negotiate cost and service levels with clients