Driving Payroll Excellence –

Microsoft & ADP Partnership

Srini Krishna

Director, Finance Operations – Commercial & Global Supplier Management

srikrish@microsoft.com

April 17, 2012

Agenda

Context The Early

Steps

Vision

Governance

BPO Footprint

Service

Management

The Future Sustainable

Controls

Context

Microsoft’s Finance Transformation Programme

Transform the way Finance drove Shareholder Value

The Finance Vision

“Best in class Finance functions, enabled

by process standardization, solid internal

controls, and effective performance

management. Achieved by hiring and

developing the best people and using

integrated applications that showcase

Microsoft technology”

Business Insight

Business Excellenc

e

Personal Leadershi

p

oProcess execution

oPerformance

management

oSustainable Controls

oPersonal value-add

oPersonal

Performance/

Influence

oTeam performance

oStrategic thinking

oStrategic planning

oKey decision

support

Finance Operations chartered to drive… Process standardization, reduced complexity and move

non-strategic activities out of subsidiaries

Efficient compliance processes that create sustainable controls environment

Powerful business insight and performance management and provide single view of truth

Drive down overall cost of delivery of Finance Operations

Transform Finance processes to best in class levels

…leading to the outsourcing of F&A and Payroll processes

Payroll Outsourcing

Footprint

International Payroll Contract

International Payroll Contract with ADP Signed in 2006

Five year term

Scope covered 20 countries - GlobalView

Contract renewed in 2011

Two more countries added

Scope

Geography – 22 countries (EMEA – 14, Asia Pacific – 8); approximately 20% of Microsoft presence

Employee coverage – 24,000 (EMEA – 13,000, Asia Pacific – 11,000); approximately 26% of Microsoft headcount

14 languages

Payroll Outsourcing relationship with

ADP

The Early steps – Voyage of Discovery

… journey to Ithaca

Inadequate knowledge of the challenges of International payroll

Little idea of what to expect from or how to manage an outsourcing contract

Subsidiaries/Countries not prepared for outsourcing

ADP too had its own challenges

Its “one-to-many” model while efficient could not flexible to manage a global delivery model that was focussed on enhancements and transformation

Customer satisfaction fell to abysmal levels

Payroll Outsourcing relationship with

ADP

The Vision

Vision for International payroll

Create a vested outsourcing relationship

Vested

relationship

Clearly

defined

OUTCOMES

The WHAT

not the

HOW

INSIGHTFUL

Governance

Mutually

BENEFICIAL

Economics

Clear articulation of the desired outcomes

Focus on the WHAT not the HOW?

Governance model emphasising more insight than oversight

Commercial model that fosters flexibility, partnership and collaboration

The Partnership

Global Payroll Contract

Focus on Outcomes

Clear articulation of what we wanted from the outsourcing relationship over the long-term Programme/business

Customer

Partner

Agree on clearly defined and measureable outcomes

Getting Governance right, a sine qua non

Alignment and mirroring of the governance structure between the two organisations

Encourage collaborative behaviour

Peer-to-peer communication down to the lowest levels

Collaboration tools to provide transparency

Encourage insight to complement oversight

Built Around Four Competencies

Service delivery &

management

Efficient and effective

delivery of service

Responsive customer

engagement

Ensuring statutory,

regulatory & internal

policy compliance

Process

Championship &

Transformation

Process stewardship &

thought leadership

Leading service

excellence and

transformation to

world class levels

Alignment of process

design to evolving

business & regulatory

needs

Controls &

Compliance

Drive a work class

controls environment

Ensuring statutory,

regulatory and internal

policy compliance

Ensuring Controls

environment is aligned

to evolving business

needs

Commercial &

relationship

management

Managing the

commercial and

contractual aspects of

the outsourcing

arrangement

Managing the global

relationship with the

service providers

Driving service

excellence &

transformation through

appropriate commercial

arrangements

Finance Operations International Payroll Mgmt.

Aligning Governance and delivery models

Service delivery &

management

Process

Championship &

Transformation

Controls &

Compliance

C

Commercial &

relationship

management

Finance Operations International Payroll Mgmt.

Microsoft & ADP Points of Contacts

ADP back-end service delivery centres

Leveraging ADPs “one-to-many” model with ability to deliver “one-to-one” customer focus

Service management & Controls - driving accountability

PFCs &

FSDMs 1:1

Serv

del.

Leads

Global

Ops

review

• MS Head Payroll

Mgmt + ADP Pgm

Dir 1:1

Trans

Leads1:1

Jt Ops

Grp

•MS Head Payroll Mgmt

+ ADP Pgm Dir1:1

Commercia

l teams 1:1

Contracts

teams 1:1

Jt Ops

Grp

•MS Head Payroll

Mgmt + ADP Pgm

Director 1:1

Reg SD

leads, PFCs

FSDMs &

CAs 1:1

C&C

Team 1:1

Jt Ops

Grp

•MS Head Payroll

Mgmt + ADP Pgm

Director 1:1

Service Delivery

Process Stewardship &

Transformation

Commercial, Contracts & Vendor Mgmt Controls & Compliance

Commercial model – design principles

Global commercial model

Built-in flexibility grounded in a set of agreed principles

Balancing risk and reward appropriately

Fair economic return to both sides

Avoidance of the need to price the “unknown”

Drive collaborative behaviour to achieve transformation and excellence

Drive Microsoft internal behaviour, foster discipline

What have we achieved

Avg. SLA performance 99.6%

S-Ox & Internal Audit certification Green

Customer Satisfaction (Microsoft Finance & HR community)

Year 3 of relationship(Out of 5) 2.0

Year 6 of relationship (Out of 5) 4.3

External recognition – awards from Industry associations 1

BPO relationship at its 6th Anniversary

The Partnership

The Future

Grow the Partnership

Consolidate the current governance model

Expand the current footprint into new geographies and business areas (e.g., LatAm)

Drive collaborative transformation through alternate commercial structures