DePaul University – School of CTI IS 565 IT Outsourcing Management Application Outsourcing Dave Galen 12 th February 2007

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

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 3 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. 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 GLOBAL: Net Revenues: US$15.55 billion for fiscal 2005 (12 mos. ended Aug. 31, 2005) Exchange/Ticker: NYSE/ACN Employees: More than 123,000 (including approximately 2,300 partners) Global Reach: More than 110 offices in 48 countries Geographic Regions: –Americas –Asia Pacific –Europe/Middle East/Africa FACTS & FIGURES, WHAT WE DO, SERVICES WE OFFER Accenture serves approximately 2,500 clients that span the full range of industries around the world. We serve 84 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, 93 have been clients for at least five years and 73 have been clients for at least 10 years.

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 4 Accenture delivers its services and solutions through five operating groups… ACCENTURE ORGANIZATION MODEL Comm. & High Tech Financial Services GovernmentProductsResources Banking Capital Markets Insurance Communication s Electronics & High Tech Media & Entertainment 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 Chemicals Energy Forest Products Metals & Mining Utilities Business Consulting Outsourcing & BPO Businesses Technology & Systems Integration 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.

Outsourcing Trends

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

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 7 Improve Company Focus Reduce and Control Operating Costs Free Resources for Other Purposes Gain Access to World- Class Capabilities Resources Not Available Internally Accelerate Reengineering Benefits Reduce Time to Market Share Risks Take Advantage of Off-Shore Capabilities Function Difficult to Manage or Out of Control Top 10 Reasons Companies Outsource (2005) 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 What are the benefits to outsourcing? 3% 4% 6% 8% 12% 16% 17% 0%5%10%15%20%

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 8 Geopolitical Concerns Employee Backlash Customer Reaction Negative Publicity Legislation Severance Costs Political Pressure Market Reaction Union Pressure Competitor Criticism LowLevel of Concern High Diamondcluster Global ITO Study. Employers more candid with employees re: outsourcing endeavors; Finding new, higher-value roles for employees who would have been displaced Uncertain geopolitical conditions require buyers to think more strategically and weigh risk versus reward when choosing how and where work is performed. Fear about negative customer reaction and publicity continues to keep buyers from publicly discussing outsourcing endeavors; potentially increases tendency for employee backlash 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 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 A sound human capital management strategy is required in order to control costs and mitigate morale issues What are the perceived barriers to outsourcing? (READ AS AREAS OF RISK!!!)

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

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 10 Why Outsourcing? Why Now? Lower Total Cost of Ownership Gain Greater Management Control and Flexibility Increase Value from Application Investments Improve Application Performance

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

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 12 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

Application Outsourcing

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 14 Accenture’s Application Outsourcing Approach

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 15 Accenture’s Flexible Spectrum of Application Outsourcing Services Our application outsourcing services are tailored to our client’s needs…

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 16 The following diagram illustrates typical application support services. Strategy Telecommunications Management Release & Configuration Management Oracle Technical Support Level 2 Help & Vendor Support Change Requests & Control Management Level 1 Help Desk Desktop Support Hardware Support OS Management / Data Center Operations Level 3 Break / Fix Support WAN Support LAN Support Disaster Recovery Business Processes New Applications & Major Releases New Development Projects Vendor Patches & Document Ad-hoc & Minor Enhancements Service Management Client Sponsors and Leadership Client Sponsors and Leadership Application Support Team Infrastructure Support Team Infrastructure Support Team Non-Discretionary Application Management Support Work Discretionary Application Development Work (not included as part of basis offering) High Level Application Support Scope of Services – The What

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 17 Service Management and Business Operations Non-Discretionary : Service based SLA measured and committed Fixed price Workload / cost driver based Change Control & Documentation User Questions & Help Desk Support Break / Fix Requests Problem Management Application Maintenance Application Patches Technical Support Coordinated with Discretionary work Capacity based Schedule / budget measured Resource based Coordinated with Non-Discretionary work Minor Enhancements Small Change Requests Ad-hoc User Requests New Reports & Interfaces Discretionary : Committed Dev. Projects : Based on committed project spend Large Projects Major Enhancements Software upgrades New modules / functions implemented Other Dev. Projects : Optional Services Base Services Separately bid efforts Business value based Large Projects Implementing new business units Distribution of ADM Work Types within Base and Optional Services – The How ADM Work Types occur within base non-discretionary and optional discretionary categories.

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 18 Extensive range of skills and capabilities 24x7 development and maintenance Strong technology alliances Onshore / offshore delivery expertise since 1985 Core network with 30,000+ people Deep Client Knowledge, Industry & Platform Skills Certification – (e.g., India -- CMM Level 5, ISO9001, eSCM, COPC, BS7799, SAS70; Manila -- CMM Level 5, ISO9001, eSCM, COPC) SLA and metrics-based approach Global Delivery Center Network – Onshore, Nearshore, and Offshore – The Where

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 19 Day to Day Monthly Quarterly Yearly Assist in planning for changes / upgrades Capacity planning Assist with database maintenance planning Report on Performance Metrics Assist in performance tuning Request database management activities Technical Support Customer satisfaction survey Proactive customer communications Training for new rollouts / upgrades Resolve problems forwarded by Call Center Prioritize and escalate issues Customer Support Major software upgrades (as agreed by plan) Coordinate software releases with retained IT organization Release management for “bundled” enhancements Root cause analysis Proactive patch management Break Fix work Minor enhancements Regulatory/compliance changes Minor software upgrades Application Maintenance & Development Annual budget planning Contract management Strategic Planning SLA management - measuring, reporting, analyzing, revising Continuous improvement planning SLA reporting Enhancement planning Demand management Manage relationships (Retained HR IT organization, PeopleSoft) Track SLA metrics Prioritize and approve discretionary work Service Management Accenture not only provides day-to-day application support, we also plan for future needs to ensure a long-term solution. “A Day in the Life of” Application Outsourcing

Risks & Mitigating Strategies - Discussion

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 21 Geopolitical Concerns Employee Backlash Customer Reaction Negative Publicity Legislation Severance Costs Political Pressure Market Reaction Union Pressure Competitor Criticism LowLevel of Concern High Diamondcluster Global ITO Study. Employers more candid with employees re: outsourcing endeavors; Finding new, higher-value roles for employees who would have been displaced Uncertain geopolitical conditions require buyers to think more strategically and weigh risk versus reward when choosing how and where work is performed. Fear about negative customer reaction and publicity continues to keep buyers from publicly discussing outsourcing endeavors; potentially increases tendency for employee backlash 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 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 A sound human capital management strategy is required in order to control costs and mitigate morale issues What are the perceived barriers to outsourcing? (READ AS AREAS OF RISK!!!)

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 22 Sliding position indicates current client mindset Insource Offshore Staff Augmentation Onshore Staff Augmentation Co-Source Outsource Onshore Outsource Offshore Degree of Comfort Status Quo Fully leveraged model What is your Current View on a Sourcing Solution?

© 2005 Accenture. All rights reserved. IS 565 IT Outsourcing Management Application Outsourcing 23 RisksExplanationMitigation Approach Transition and operations management Ability to ensure timely set up of new capability based on defined timelines; including trained teams, management and infrastructure 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 Business continuity Ability to avoid disruption of business operations and achievement of SLAs 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 GeopoliticalAbility to maintain a stable government which supports business growth at the service delivery location Perform up-front due diligence on political risks Ensure ongoing tracking of political issues Multiple Delivery Centers Morale of employees at existing operations Ability to sustain the degree of ongoing commitment and stability of continued ongoing opportunities at current location 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 Risks and Mitigation

Questions?