1. © Grant Thornton LLP. All rights reserved. Next – Generation Outsourcing Kris Ruckman June 4, 2008

2. © Grant Thornton LLP. All rights reserved. Introduction Kris Ruckman, Partner –Charlotte, NC –Kris.Ruckman@gt.com –IT Consulting Partner in charge, GT's SE Region –20 years experience in IT and Supply Chain work –International experience with outsourcing

3. © Grant Thornton LLP. All rights reserved. Audience Demographics What industries do you represent What experience do you have with outsourcing What are your specific questions/objectives

4. © Grant Thornton LLP. All rights reserved. Definitions Services versus Location Outsourcing generally refers to the delegation of a non-core function to an external entity specializing in the management of that operation or function. Out-tasking generally refers to sharing elements of a core or non-core function to an external entity. Centralization / shared services refers to concentrating service delivery in a geographic area to leverage skills, enforce standardization and increase efficiency. This is generally kept inside the company. Offshore – non US location Onshore – US location Near shore – non US location, generally in the same time zone and reasonably close to customer Functions can be a business process (BPO) or IT (ITO) Services and location should be thought of as a separate but interrelated decisionServices and location should be thought of as a separate but interrelated decision

5. © Grant Thornton LLP. All rights reserved. Definitions A whole function (IT) Manage tp SLAs Separate IT Systems with reporting Process redesign requires renegotiation Elements of a function – shared Active Management Shared systems/web services; common data, network standards Allows process redesign & continuous innovation

6. © Grant Thornton LLP. All rights reserved. The Extended Enterprise is Relationships Enterprise Extended Outsourcing Joint Ventures Alliances Preferred Suppliers Distribution Agreements R&D Program Partnerships Collaborative Marketing The Extended Enterprise is the total set of entities and processes involved in the cash-to-cash creation of value to the end customer

7. © Grant Thornton LLP. All rights reserved. The Extended Enterprise Challenge Partner Competitor Customer Enterprise Competition today is as much between Extended Enterprises as between corporations.

8. © Grant Thornton LLP. All rights reserved. The Extended Enterprise Challenge Flexibility Customization Unique Fit Standard Efficient Common Fit

9. © Grant Thornton LLP. All rights reserved. Forces of Change Why are Companies Outsourcing?

10. © Grant Thornton LLP. All rights reserved. Forces of Change Where are Companies Outsourcing?

11. © Grant Thornton LLP. All rights reserved. Forces of Change Enablers to Outsourcing/Off shoring Sophistication of software and services Globalization and speed of the network Normalization of dis-aggregation and business partner relationships Mobile workforce and applications Socialization and communities supported by IT Outsourcing/Off shoring is becoming the "Norm"

12. © Grant Thornton LLP. All rights reserved. Case Study The Enterprise The Extended Enterprise Strategy Global OEM for Consumer & Industrial High Tech products Operations and sales offices, with regional HQ in Asia, North America, Central & Latin America and Europe Traditional supply chain with only logistics outsourced via 4PL Outsource manufacturing Retain outsourced logistics Outsource payroll and HR Benefits Out task/ share customer service Outsource IT

13. © Grant Thornton LLP. All rights reserved. Case Study Enterprise OwnedShared (Out-tasked) Partner Owned (Out-Sourced) Customer Management Order Commitment Field Service Order FulfillmentLogistics/Delivery Operations Management R&D Quality Control Inventory AllocationManufacturing Information Technology Human Capital Management Hiring Training Firing HR AdministrationBenefits Administration Payroll Financial Management SEC ReportingProduction Reporting Internal Financials

14. © Grant Thornton LLP. All rights reserved. Trends – ITO

15. © Grant Thornton LLP. All rights reserved. Risks and Considerations Not every company is ready for the leap! Process Efficiency and Effectiveness REACTIVE Shared Services and Outsourcing are "risky" for companies that have "immature" processes and lie on the "Reactive" side of the CMM DEFINED OPTIMIZING INITIAL REPEATABLE MANAGED PROACTIVE Impact on Business

16. © Grant Thornton LLP. All rights reserved. A CMM to determine when it is acceptable to move to Shared Services or Outsourcing Models! Capability Maturity Model (CMM) considerations. Risks and Considerations A CMM to determine when it is acceptable to move to Shared Services or Outsourcing Models! Capability Maturity Model (CMM) considerations. © 2006 IT World Limited on behalf of the BuyIT Best Practice Network

17. © Grant Thornton LLP. All rights reserved.

18. Risks and Considerations Topics to be monitored Risks with Shared Services –Reforming organizational behaviours and incentives –Reworking unstructured/undocumented organizational processes –Standardizing policies and procedures –Developing Communication protocols –Budgeting adequate time and funds –Developing rapid change enablement tools –Complying with security-related regulations (e.g.., auditing requirements, privacy rules) –Getting appropriate information to and from front-line field employees (e.g.., financial, HR, etc. )