Outsourcing Best Practices SIM – Philadelphia April 1, 2003 Presented by: Michael Speaker President, MSC Services, Inc.

2 Overview Outsourcing Strategy Program Goals & Scope Organization Impact Vendor Selection Approach Due Diligence Best Practices Contract Negotiation Negotiation Best Practices Q&A

3 Outsourcing Strategy Outsourcing strategy must balance 3 key components Review balance at each phase of strategy design through execution Neglect of one component may have significant negative impacts Goals & Scope Organization Impact Vendor/ Partner

4 Strategy Best Practices Get educated on outsourcing capabilities, best practices, and pitfalls early Visible executive sponsorship is critical Identify all stakeholders early and get buy-in Communicate strategy early & updates frequently Avoid temptation to pilot too early Plan for the long-term before taking short-term actions Plan to find a partner, not just a vendor

5 Defining Goals & Scope Define needs including in/out of scope activities Set clear & measurable goals Understand success factors for all stakeholders before analyzing vendors Cost should not be the only driver Goals & Scope Organization Impact Vendor/ Partner

6 Organization Impact Minimize negative impacts via good communication Clear up common misconceptions & fears early Should not be a “big secret” – communicate appropriately at all levels Ensure best performers get extra communication & assurance Be ready for patriotic concerns if considering offshore Goals & Scope Organization Impact Vendor/ Partner

7 Vendor Selection Approach Cross-functional team defines selection criteria in advance Use due diligence effort as a vehicle to attain buy-in Key selection criteria: Cultural/Organizational fit Domain experience Resource quality Technical capabilities Risk/reward balance Goals & Scope Organization Impact Vendor/ Partner Establish good two-way communication with finalists before negotiation – start to develop a partnership

8 Due Diligence Best Practices Look objectively at vendor qualifications - stay focused on proven capabilities & industry experience Use caution - outsourcing firms have savvy salespeople Get to know the vendor, not just the sales staff: Visit vendor facilities – perform random interviews with resources performing similar work Analyze methodology: How well will vendor methodology integrate with your methodology? Is there sufficient flexibility? Assess how vendor overcomes cultural barriers Assess level of onsite work required at existing clients Leverage internal or 3rd party outsourcing expertise

9 Negotiation Best Practices Outsourcing firms are hungry – customers have the advantage (be aggressive but reasonable) Agreements are complex – do it once and think long-term (avoid “nickel-n-dime” charges later) Mature firms are excellent negotiators Get quality guarantees/penalties Name specific account management resources in the contract: Interview resources first Guarantee for months by name to ensure momentum Usually at no cost

10 Negotiation Best Practices (Continued) Resources Be specific about the skills you need/foresee Guarantee skillset availability at contract price Define experience levels (what is “advanced”?) Tiered volume pricing by skillset works well Price Onsite, Onshore and Offshore separately Negotiate travel cost as a fixed price per week for short- term onsite/onshore assignments - do not include in hourly rate Telecommunications Cost Plan carefully - be as specific as possible Making changes later typically costly

11 Thank You Q&A with