Pragmatic and Actionable

Pragmatic and Actionable Implementing Successful Strategic Sourcing & Outsourcing Initiatives Using Project Management Skills and Disciplines Lessons Learned and Critical Success Factors Presented at: PMI NY Monthly Dinner Meeting Seminar December 15, 2010 New York, New York Dr. Gad J. Selig, PMP, COP Managing Partner, GPS Group, Inc. & Associate Dean for Business Development and Outreach Graduate Studies and Research Division University of Bridgeport Cell: (203) 521-9664 E-mail: gjselig@optonline.net 1

Why Should PM Best Practices be Integrated with Strategic Sourcing and Outsourcing Current/ Emerging g Best Practices? Define scope, requirements and major risks (Focus early) Establish clear and unambiguous accountability (Roles and Responsibilities) [RACI] Improve project performance (through KPI s such as time, scope, cost, customer satisfaction, quality, risk) & take corrective actions, when necessary Manage sourcing vendors more effectively and consistently both domestically and internationally Improve the transition, execution and on-going performance of sourcing initiatives through project management disciplines for both the client and service provider: - Well defined roles and responsibilities High performance collaborative teams Consistent governance, control and escalation processes & techniques Enabling technologies Realistic, meaningful and pragmatic performance metrics and KPIs Honest and frequent communications Solid relationship management principles 2

What is Strategic Sourcing and Tactical Outsourcing? A Working Definition: Outsourcing is a long-term, results-oriented business relationship with a specialized 3 rd party services provider. - Strategic Sourcing or Transformational assets and processes are transferred to vendor and/or core competencies are supplemented by vendor centers of excellence (e.g. R & D, Product Design/Development, IT, Manufacturing, BPO, etc.) - Tactical Outsourcing staff supplementation; no asset transfer; usually linked to specific problems in a company Outsourcing is one of the greatest organizational and industry structure shifts of the 21 st century. James Brian Quinn (Dartmouth College) 3

The Changing Nature of Work Co - located Culturally Similar Face to Face Same time - zone Same organization becoming Traditional Industrial-Age Workplace Demographically similar Virtual Work / Meetings Distributed Multiple time zones Digital-Age Workplace Multi-cultural / dissimilar Networked organizations Demographically distant 4

Outsourcing Major Outsourcing Trends & Challenges Growing market approaching $2 trillion and increasing at 10 15% per year I.T. and Non I.T. (Engineering, Architecture, Medical Transcription, Manufacturing, Supply Chain, etc.) Slowing offshore growth: Major Countries India, China, Ireland, Israel Emerging Countries Philippines, Brazil, Russia & Eastern Europe, Egypt Growing near shore Canada and Rural Shore (USA rural states) Performance Metrics used: Financial, Quality, Schedule, Customer Satisfaction, SLAs, Mean Time to Repair, Up Time, Redundancy, Availability, Project Deliverables, Cost, etc. Penalties for Non Performance & Rewards for Extra Ordinary Performance Contingency& Backup Provisions Varying Models & Contract Durations Multi vendor Strategies Growing Tier 1 providers are growing larger, but there is room for growth for Tier 2, 3 and niche players New Approaches to Sourcing Alignment Align benefit with transaction costs (Buyer) Encourage innovation (Buyer) Leverage standardization (Service Provider) Focus on value for everyone Strategic Sourcing and PM - 12-1-10 Copyright., GPS Group, Inc.,2010-2011. All Rights Reserved 5

Drivers for Outsourcing Cost, capacity, andcapabilities are and remain the main reasons for outsourcing. New drivers are Innovation & Transformation. Whatever the motive, the Service Delivery vision must support the key value drivers inherent at both the functional and corporate levels. Cost To reduce & control operational costs To make capital funds available To gain flexibility To turn fixed costs into variable costs Capacity To improve company focus To free internal resources for other purposes (Opportunity Cost Theory) To reduce cycle times (speed to market) Desire to globalize business operations in a more consistent and uniform way Add periodic bench strength Capability To improve quality of delivery To access capabilities not otherwise available To reduce or share risks To stabilize an unstable situation To transform the function/process/ organization Source: Modified from TPI (Technology Partners International, Inc) 6

Key Strategic Sourcing and Outsourcing Drivers Factors impacting the desire to outsource and/or offshore Financial Savings (Cost Reduction, Containment and/or Avoidance) Operating Model Flexibility and Innovation Talent Management Process Transformation Regulatory Advantages and Compliance Wage Arbitrage Utilizing off shore resources with materially identical skill sets and a lower wage base CAPEX Conversion Reducing investment and converting previous and planned capital expenses into operating expenses through an outsourcing contract Tax Optimization Taking advantage of tax regulations (such as those that favor foreign direct investment or, in some cases, local investment in certain industries or types of activities) Bench Optimization Utilizing a service provider organization s excess work force to deal with potential peaks and valleys in demand for highly cyclical resource roles (short term flexibility) Modular Reconfiguration /Scalability Enabling rapid reconfiguration of resource deployments to deal with changing market conditions and specialty resource requirements (long term flexibility) Innovation Enablement Exposure to new incremental/radical innovative process, technology and talent Talent Acquisition Seeking skilled, qualified resources in sourcing locations to fulfill immediate requirements through a contractual sourcing or captive arrangement Talent Focus Freeing up human resources and executive management to focus on core competencies Leading Best Practice Adoption & Business Transformation Adopting vendor developed process, product or technology leading practices Technology Transformation Adopting a vendor platform to further advance available technologies for use in either intra company processes or new product development or inter company initiatives (supply chain) Quality Assurance ( QA ) QA) Implementing more rigorous QA processes and standards as a result of entering into a contractual services arrangement, often lead by the vendor project team Cultural Proficiency Leveraging a vendor s local knowledge to gain competitive access to new markets Documentation Quality Especially in government regulated industries, high quality documentation is essential to passing regular inspections and facilitating compliance with regulation often vendors perform this activity at an enterprise level Regulatory Knowledge Leveraging vendor knowledge of specific regulatory requirements (e.g. customs, tax incentives) Source: Deloitte Consulting, 2009 with modifications 7

The Modular Corporation Requires Sourcing PM (SCM) Disciplines and Processes to Succeed in a Virtual Corporate Environment of the Future Strategic Sourcing and PM 12 1 10 Copyright., GPS Group, Inc.,2010 2011. All Rights Reserved Strategic Sourcing and PM 4/1/10 Copyrighted, GPS Group, Inc.,2010 2011. All Rights Reserved 8

Global IT and Business Services Outsourcing Market Global IT and Business Process Managed Services Market, 2008 Total Market: $828 Billion Finance & Accounting $32 Bn HR $63 Bn Procurement $1.5 Bn Customer Care $62 Bn Industry specific BPO $40 Bn Knowledge Process Outsourcing $0.9 Bn IT Outsourcing services $ 616 Bn Other BPO services $13 Bn Source: AMR Research Inc.,2009 9

Location of Clients of Global 100 Providers, 2009 10

Superior & Effective Strategic Sourcing and PM are Not Easy Resistance to Change Control & Governing the Processes Overcome Political Fiefdoms Realistic Formal Governance Process Define Metrics Create Customer/Vendor Collaboration Assemble right skills/bench strength Manage Change & Risk Create Innovation & Transformation Negotiate Ownership Form a team Determine Needs Obtain Multi-Level Approvals No Easy Task Formal Procurement/RFP Process Assign Project Manager Define Objectives & Scope Assign Roles & Responsibilities Empower Develop Business Case and Plan Select & Manage Vendor (s) Manage Constitute Expectations Obtain Consensus Establish Base Line & Project Future Scenarios Issues Resolution Multi-Cultural Sensitivity and Work Habits Back-Up, Recovery & Security Negotiate a flexible contract Executive Sponsorship & Commitment Establish a win/win environment and a partnership relationship management environment & process 11

Project Management, like Strategic Sourcing, is Complex & Requires Multiple Competencies Knowledge Management (Intellectual Capital) Scope/Requirements Management Issues Management Time Management Cost Management Integration Management Change Management Governance & Monitoring Vendor/Procurement/Sourcing Management Program/Project Management Planning, Scheduling & Estimating Quality Management Resource/People Management/ Soft Skills/Team Mgt. PM Tools Life Cycle Management Risk Management Communication Management 12

Strategic Questions Sourcing Isthe sourcing strategy in line with our business vision and strategy and competitive differentiation? Do we understand the risks? Financial, Operational, Security, Privacy, Intellectual Property, Other? Do we have adequate provisions in place for disaster prevention, recovery and contingencies? Do we understand regulatory compliance requirements that apply to the outsourcing work and subsequently to the provider? Can outsourcing add strategic value? Can this sourcing opportunity be created as a revenue source for the company alone or through a joint venture? revenue growth;costreduction/containment/ reduction/containment/ avoidance;reduce speed to market; businessprocesstransformation;etc etc.? How can we measure the value of global sourcing? key performance measures Impact on the business/function/department/process What organizational resources are required to support global sourcing? Skills Budget Competencies Certifications What governance, controls and consistent process should be institutionalized for effective sourcing? What experienced/qualified teams can we put in place? For example: functional head, executive sponsor, auditor, accountant, lawyer, project manager and procurement Are there known providers for this service? Do we understand their capabilities, capacity and scale to provide this service? 13

Value Questions Sourcing Will we reap benefits? Clear accountability for achieving the benefits Linking benefits to MBO s and incentive compensation schemes An effective benefits realization ation process and sign off within the company Do we have a clear current as is profile Covering affected assets, people and processes Understanding di licenses, costs, equipment, facilities i etc. Do we have the capability of effectively working with outsourcing providers? What industry frameworks, standards and models should we use? Should we hire a consultant? to assist in developing, review and/or validate our sourcing strategy and approach? As an advisory firm to help choose the provider(s) Is this process or operation scalable? Can it be leveraged with more volume, more customers, etc.? Isthe cost of the operation competitive with what could be obtained in the market? Would de skilling (loss of in house expertise) have a negative impact? 14

Delivery and Execution Questions Sourcing Have we done in house benchmarking to determine: Are we deploying well and effectively: Scalable, disciplined and consistent management, governance and delivery processes capabilities and attitudes? Appropriate and sufficient resources available with the right competencies, capabilities and attitudes at the right ihttime Would loss of data or content of this service/product hurt the firm? How? What would be the impact? Financial? Business Disruption? Overview of provider questions: Is the provider certified vis à vis an industry standard (e.g. ISO, CMMI, PMI, ITsqc, etc.)? Does the provider have local and international presence and capability? Has the firm had previous experience with the provider? Does the provider have a superior reputation for delivering quality services at a reasonable cost? Is the provider financially stable? What processes (e.g. transition management, project management, quality management, performance management, etc.) are being used by the vendor??are they acceptable? bl? Is the provider undertaking sustainable practices? What is the optimum relationship management model to be established between the company and the service provider? 15

Pressures for Change What can be done? What should be done? How to do it? Why bother? 16

Project Management Life Cycle Phases and Key Components INITIATING PLANNING EXECUTING CLOSING & TERMINATION Business Need/Case Feasibility Authorization Funding Project Charter Project Organization Project Management Office (PMO) Critical Success Factors Project Metrics & Vital Signs Go/No Go Gate Enterprises must develop consistent, but scalable & flexible PM processes to fit different types & sizes of programs and projects, including sourcing. Requirements & Scope Objectives Deliverables Work Breakdown Structure Stakeholders Assumptions & Constraints Estimates-Costs, Resources, Effort & Time Sequence Tasks Schedule Resources Roles, Responsibilities & Staffing Plan Quality Management Plan Risk/Contingency Management Plan Disaster Recovery Plan Change Management Plan Communications Management Plan Acceptance Management tplan Integrated Project Plan (of multiple inter-related projects) Vendor/Outsourcing Plan Executing the Plan & Delivery (e.g. SDLC; PMLC) Governance Structure & Escalation Developing the Team (separate module) Progress Reporting, Communications & Meeting Management Comparison of Metrics & Vital Sign Baseline to Actuals Education & Training Vendor/Outsourcing Management Change Control Risk Control Quality Control Go/No Go gate Project Acceptance & Approval Final Documentation Lessons Learned Finalize Project File Administrative & Contract Closure Post Implementation Review & Follow-Up (1 month, 3 months, 6 months) Governance & Control Go/No Go gate Spans all Phases 17

Strategic Sourcing Lifecycle Roadmap Overview Phase 0: Strategy Formulation Phase 1: Feasibility Phase 2: Preparation Phase 3: Evaluation Phase 4: Commitment Phase 5: Transition Phase 6: On going Management Provider Selection & Governance 18

Objectives Deliverables & Decisions Phase 0: Strategy Formulation Determine business need Align with business strategy Develop sourcing strategy and identify areas of opportunity Identify key drivers High level sourcing strategy Validate strategy - Internal - External Secure sponsor and management team Inform executive team Identify sourcing areas of opportunities and priorities Examine sourcing geographic alternatives - on, off, best shore Strategic Sourcing Lifecycle Roadmap Phase 1: Feasibility Develop business case Develop base case (as is state before sourcing) and future scenarios (future state after sourcing) Decompose into discrete components Perform risk assessment: - Function - Country - Culture - Security -Etc Business case Identify PM and Macro Plan Outsourcing market overview Determine core vs. non-core functions, processes, technologies, etc. Risk k assessment and mitigation plan Consulting contract (optional) External Counsel agreement (optional) Review and approve at appropriate levels: - Functional head / Business unit -CEO - Board of Directors Phase 2: Phase 3: Preparation Evaluation Provider Selection Develop detailed requirements/scope Finalize/issue RFP Formulate provider selection criteria and weights RFP Identify resource requirements Form pre-transition team Identify providers (Could use RFI to eliminate unqualified providers) Evaluate contract & provider pricing Evaluate providers Internal Audit review for controls Score vendors Conduct due diligence - benchmark - site visits - references Short list providers Draft Master Service Agreement (MSA) and Statement of Work (SOW) Approve budget Change Management process and authorization Phase 4: Commitment Select and negotiate provider proposals Develop transition program Finalize organization plan Sign contract External and internal communications Manage organizational change Finalize and sign contract MSA and SOWs (Statement of Work) Transition plan Pre and post checklist Form post transition team Risk mitigation, backup and contingency plan Develop human resources and asset transfer and retention plan Finalize governance plan, process, metrics and roles Finalize training plan Finalize pilot testing and/or validation plan Phase 5: Transition Implement phased transition plan 30/60/90 day phases Establish relationship management strategy Execution of transition plan Implement relationship management plan Assess results of initial transition and fix issues Knowledge transfer and finalize documentation Clear hand-offs who, what, when, how, where and dfinalize documentation go/no go go/no go go/no go go/no go go/no go go/no go Phase 6: On going Management & Governance Manage to contract Manage scope and changes Monitor business value of engagement via business case Issues management Reorient retained organization Governance - schedule of activities and process Change control process Escalation process and roles Management and Performance reporting Updated business case Renew, expand or disengage contract Build client/provider high performance teams Institutionalize: - Sourcing process and continuously improve - Improve governance process - Lessons learned - Critical success factors Enabling Checklists, Tools and Technologies Template - Business plan - Sourcing plan Business case template Risk assessment Vendor evaluation scorecard and criteria RFI/RFQ/RFP Table Criteria for vendor due diligence template Transition plan template Communication and Transition Checklists - Pre-transition - Post-transitiontransition Governance framework The end game - Sourcing business template and of Contents Master Service governance plan Relationship checklist case framework Agreement (MSA) - Metrics management (See chapters 1, 2, 12) (See chapters 3, 12) - Framework practices (See chapters 2, 4, 12) (See chapters 4, 5, 12) - Escalation Source: Bullen, Lefave and Selig (See chapters 7, 8, 9, (See chapters 6, 10, 12) 12) 19 (See chapters 4, 6, 8, 9, 11, 12)

Portfolio Selection, Project Management and Deployment Triangle C Suite User Executive Sponsor Customer Sales Business Plan Vision, goals objectives, strategies and financials Evaluation, selection, prioritization and funding of imperatives and initiatives High visibility, large funding, complex, strategic, >6 months, high risk, etc. (Examples: enterprise wide ERP; e Business; complex new product or solution delivery; enterprise architecture; M and A; Standalone, limited scope projects or projects which are interrelated and part of a program CRM NPD Sourcing ERP Portfolio Management Asset Classes: Strategic Infrastructure Transactional Informational Program/Project Management (Key Metrics Time, Cost, Risks, etc) n Initiatio Planning Executio on Strategic initiatives (From Business Plan) Key selection metrics: new/incremental revenues, reduce/contain/avoid costs, share of customer $, ROI, NPV, ROA, strategic fit, intellectual capital, barriers to entry (patent), degree of risk Vsreward, customer satisfaction, laws and regulations Systems/Infrastructure/Sourcing and Product Life Cycles (Vary by type of initiative) Plan Design Develop Termina ation Implement t Ongoing Processes, Operations and Governance (Key Customer, Process and Service Metrics) Quality Legal/Contract Administration Purchasing Customer service Vendor Management Information Technology Continuous process improvement Sales/marketing Build/Buy Test/Pilot Document Flexible and scalable processes, templates and tools required to effectively manage multiple, interrelated projects which range from fast track to full risk mitigation Train Manage Flexible processes, tools and disciplines are used for development, but life cycle tasks will vary by project type (e.g. IT, ebusiness, new product, M and A etc.) Finance/accounting Transportation Training/Human Resources Select Build or Buy Control Deploy/ Evaluate/ Improve 20

Vendor Selection, Evaluation, Contract Negotiations and Award Process Flow Research RFI RFQ RFP RFS RFP/RFS Follow Up Selection/ Evaluation Scorecard Due Diligence Contract Negotiation Award Rollout Transition Governance and Ongoing Support Internal/external research; requirements definition Evaluation criteria and formation of team RFI/RFQ/RFP/RFS focused on services, infrastructure, technology skills, processes, HR policies, governance and metrics Vendor presentations; reference checks; site visits; due diligence Debrief sessions for providers Weighted scorecard Contract strategy, type & negotiations Transition planning and transition Governance and metrics Operating model/roles/escalation Disengagement Consideration Contractual triggers 21

Managing/Reviewing/Escalating Sourcing Performance Client and Provider Clearly Defined Roles and Responsibilities Customer Meeting Frequency Monthly/ Quarterly Exec. Sponsor Vendor Last Possible Option Approves Major Initiatives Resolves R l Citi Critical lissues Approves Major Changes Prioritizes resource allocations Manages performance/corrective actions Semi Monthly/ Monthly Weekly/ 80 Hours Daily/ Weekly Executive Steering Committee VP/Director Project Manager Project Team Resolves issues escalated from PM Supports the PM Cross project impacts and priorities Change control Board Manages performance/corrective actions Communicates status and actions Escalates issues and conflicts not resolvable; Assigns and monitors resources Manages performance/corrective Action Do work per project baseline Do work per authorized change form 22

PM and Sourcing Performance Management What Key Performance Indicators Should be Tracked? Costs Price/performance Workload/Availability/Capacity Quality Agility and speed Deliverables Schedule, Quality, etc Customer satisfaction Sourcing Process Outcomes Program/Project Process Outcomes Service levels (SLA s) Innovation and Transformation Customer Satisfaction You get what you measure, so it is critical to measure the right things. You get what you pay for. If you demand rock bottom pricing, do not expect world class SLAs. There are no free lunches. 23

Select Key Performance Measures Business and Sourcing Key Performance Measures link Critical Success Factors (CSFs) to Key Performance Indicators (KPIs) for Sourcing (Illustrative Example) Business: Critical Success Factors + Key Performance Indicators Financial (Including Compliance) Revenue, Profit Growth, Cost Management, ROA, ROI, NPV, Compliance Strategic/Customer New product/services development, Intellectual property, asset management, customer satisfaction, share of customer wallet Internal/external processes process transformation, process optimization, process automation Learning/growth people development, education, training, certification, mentoring, R&D Sourcing Engagement: Critical Success Factors + Key Performance Indicators Financial ROI, NPV, Cost Management, Value delivery Strategic Competitive positioning, new market opportunities, differentiation, alignment, growth, innovation and/or transformation Customer (User) Satisfaction Ownership, commitment, product delivery, level of service Employee Satisfaction People development, training, certification, productivity Program/Project Management time/schedule, governance, budget/cost, deliverables, scope, monitoring Service/Operations Process Service levels, availability, timeliness, controls, scalability, reliability, security, privacy, redundancy, backup and recovery, 24

Transition Checklist Sourcing Phase Design Execution Validation Go live Key Objectives Establish PMO and conduct program kickoff Establish transition control process Prepare detailed transition plan Prepare Day 1 readiness Establish process readiness Establish site and systems readiness Conduct knowledge transfer Validate and test knowledge Test the production environment Conduct SLA dry run Prepare for go-live Pilot/simulation Monitor the operations Deliver first SLA report Activate the governance model Close out transition phase Key Deliverables Fully staffed transition team Joint program kickoff Reporting process Change control process Issue/Escalation process Integrated transition plan Control plan for project execution Communication plans Risk analysis/mitigation Training and production ramp-up plans SLA reporting process Acceptance criteria Governance process Process flows Documentation Policies and procedures framework Knowledge transfer Site infrastructure/security Support plan Daily performance reports Process documentation signed off Operational risk review To-be process solution tested and operational SLA verified prior to day one Policies and procedures manual completed Day 1 readiness signed off Daily performance reports First production SLA reporting Governance model deployeded Voice of the Customer in place Transition close-out is signed off Program execution and control 25

Summary Checklist for Managing Successful Outsourcing Initiatives: From Plans to Deals Develop a Plan and Build a Business Case Baseline model Requirements & scope Costs(realistic)/savings Contingency Plan Assumptions/Constraint Obstacles Metrics OLAs, SLAs, Cost, Schedule, Other Go/No Go Communicate decision to stakeholders RFP Preparation Narrow the field RFI, RFQ Invitation to Vendors Vendor briefings Site visits Vendor proposals Evaluation & Selection Multidisciplinary team Qualitative & quantitative evaluation criteria Cultural match/bench strength Due Diligence Final selection Contract Negotiation/Signing It takes two to tango Contract types Fixed price (well defined) Time& material (not well defined) Cost& fixed fee Cost & variable fee Unit price contract Terms& Conditions Change and Risk Management Governance, Metrics and Escalation Contingency and Disaster Recovery Options Disengagement Options & Responsibilities Triggers and Conditions Ownership Transition Roles/Responsibilities Transition Management, Contract Management & Performance Monitoring Transition Planning, Roles, Pilot, Training & Readiness Validation Assure compliance with project or service objectives, scope, schedule, & deliverables Measure and evaluate delivered work Vendor governance and reporting Integrate vendor tasks and deliverables into Project Plan Assign Senior Manager/Director/VP to manage vendor 26 relationship with clout

Case Study Global Manufacturing Organization Environment Annual Revenue Range $ 3.0 6.0 Billion Number of Employees Range 30 40,000 Number of Major Locations 10+ Management Philosophy Conservative and Risk Averse Sourcing Organization: Centralized Around 2003 Number of Employees Approximately 150 Head of Sourcing Organization Chief Procurement Officer. Direct reports are: Direct Sourcing of Manufacturing Indirect Supplies, etc Strategic Alliance and Outsourcing Approach tosourcing Top down decision from executive leadership to align costs to today s business environment Established a Steering Committee Framework : Outsourcing Steering Committee Members Corporate Outsourcing and SBU Representatives. Roles include: o Develop/Execute Outsourcing Strategy o Monitor Outsourcing Performance / Benefits o Approve Cross Functional Outsourcing o Approve Preferred Vendors Functional Outsourcing PMO(s) Governance: o Track Functional SLA s o Conduct monthly operations reviews with Vendors o Provide dashboard rollups on vendor performance to internal sponsors Project PMO Governance: o Define Business Process Requirements o Manage Vendor to Project Requirements o Provide metrics and project status to sponsors Issues, Challenges and Drivers Sourcing Process Drivers Developed and documented following processes Cost Reduction covering Outsourcing: Improve Operating Flexibility Issues Steering and Governance Committee Framework Centralizing the procurement/outsourcing function in a Risk Assessment and Mitigation de centralized environment is complex Create/ Enforce Outsourcing Standards d / Policies/ i Challenges/ Obstacles Guidelines Strategic business unit independence New Sourcing Requirements to Contract Process Developing a uniform business case format and process Requisition to Pay Process for sourcing and enforcing its adoption by business units is difficult Supplier Relationship Management Process Dispute and Escalation Process Contract Management Process 27

Case Study Global Manufacturing Organization (Cont d) Vendor Characteristics Results Transition Number of Vendors Two(2) Vendors for each major category (IT, Call Center, Mfg., etc.) Types of Contracts Vary(E.g.: Fixed Price; Cost+; etc) Duration of Contracts 3 to 5 year for MSA (Master Service Agreement) with SOW ( Statement of Work) for each initiative linked to annual budget process Foreign currency fluctuations are not permitted by company in Vendor contracts Monthly/ Quarterly Strategic Calibration of Work Performance is conducted Results The Deal(s) Executive Sponsorship Varies by Strategic Business Unit Types of Work Varies and includes Staff Augmentation, Total Project, Captive Center (in India), etc. Select Multiple Vendors are used and qualified to be listed on a preferred Vendor list Communicating the Deal Limited intentionally by Management People Impacted and Treatment Very Well Approximate ROI for Deal 20% on average Value of Deals Varies Pre and Post Transition Checklists used as guidelines Business Case monitored and controlled Functional and Project Outsourcing PMOs used to monitor transition and vendor performance based on multiple SLA s and dashboards (which are dependent on specific work being done) Results Governance, Performanceand and Key Metrics There are formal processes and mechanisms established to manage and monitor Vendor performance such as: Multi Disciplinary Steering and PMO Committees, Escalation, Contracting, Payment Authorization, Metrics, etc. 28

Case Study Global Manufacturing Organization (Cont d) Results Future of Sourcing Critical Success Factors Sourcing will continue to grow as a % of business as long as there is a balance of : Cost Reduction Prudent risk taking Solid vendor relationship management Executive Sponsorship Multi unit project PMOs to select and monitor results are essential Formal, consistent but flexible outsourcing processes Establish clear outsourcing objectives and manage expectations of constituents Solid project management skills are a strong asset for superior outsourcing Lessons Learned What Worked? Centralization of Outsourcing has been very beneficial to the company, but difficult to achieve What did not work? Developing business cases for all of the outsourcing initiatives and implementing the benefits has been difficult 29

Outsourcing Steering Committee (Illustrative Example Global Manufacturing Company) To serve as the governing body for outsourcing activity across the enterprise. Execute governance per outlined processes with active roles in the approval of outsourcing strategy, vendor selection, vendor consolidation, business structuring, project management, outsourcing standards, and monitoring of benefit realization. Outsourcing Steering Committee & Governance Execute Enterprise Outsourcing Strategy Monitor Outsourcing Performance / Benefits Approve Cross Functional Outsourcing Approve Vendor Consolidation Approve Outsourcing Business Structures Create/ Enforce Outsourcing Standards / Policies Monitor Business Factors (Ex. Acquisitions) Outreach to New Areas for Outsourcing Opportunities SPMO(s) Governance Monitor Industry Trends Risk Assessment Track Functional Projects, Reporting Conduct Monthly Operations Reviews with Vendors, Continuous Improvement Provide Strategic Alliances, Best Practices, Cross Development Define Business Project Requirements Manage Vendor to Project Requirements Provide Functional PMO: metrics, issues, project status 30

Lesson Learned and Critical Success Factors Project Management is a complementary process to other structured t business and sourcing policies, methodologies and metrics. Executive sponsorship is essential. A formal project management process integrated with a sourcing policy and process increases visibility and tracking of potential impacts of sourcing initiatives on the business initiatives and help to minimize disruptions. Need a formalized way to integrate and capture positive lessons learned from past project management and sourcing experiences and build on them. Continuously improve the project management and sourcing policies, processes, tools and practices based on current and emerging g best practices. Certification in PM and Outsourcing is becoming more important and valuable. 31

References Brown, Doug and Wilson, Scott, The Black Book of Outsourcing, John Wiley & Sons, 2005. Business Week, Special Report on Outsourcing, January 30, 2006. Carmel, Erran & Tjia, Paul, Offshoring Information Technology, Cambridge University Press, 2005. Casale, Frank, Darwin and Outsourcing, Outsourcing Essentials,Vol.2, No. 3 Winter 2004, The Outsourcing Institute. Crawford, Ken, Project Management Maturity Model, Marcel Decker, Inc., 2002. Gary, Clifford F. and Larson, Erik W., Project Management, 4 th Edition, McGraw Hill, Irwin, NY, 2008. IAOP : www.outsourcingprofesional.com ITsqc at Carnegie Mellon University: www.itsqc.cs.cmu.edu cs cmu Kerzner, H., Project Management A Systems Approach to Planning, Scheduling and Controlling, 10 th Edition, J Wiley & Sons, 2009. Palvia, Shailendra, Off Shore Outsourcing Creating a World of Difference, Proceeding of the Second Annual International Outsourcing Conference, Center for Global Outsourcing, New York, July, 2003. Project Management Institute, A Guide to the Project Management Book of Knowledge, 4th Edition, PMI, Newtown Square, PA, 2008. Selig, Gad J., Implementing IT Governance: A Practical Guide toglobal Best Practices in IT Management. Van Haren Publishing, Zaltbommel, Holland, 2008. Software Engineering Institute, Capabilities Maturity Model Integrated Staged and Continuous Model Version 1.l, Documet Numbers CMU/SEI 2005-TR-011, CMU?SEI-2002-TR-028, CMU/SEI 2002-TR- 029SEI, Carnegie Mellon University, 2002 and 2005. 32

Thank You! Dr. Gad J. Selig, PMP, COP Managing Partner, GPS Group, Inc, & Associate Dean, Business Development and Outreach Graduate Studies and Research Division University of Bridgeport Cell: (203) 521-9664 E-mail: gjselig@optonline.net 33