Outsourcing & Application Mgt Discussion With DePaul May 19, 2003

Outsourcing & Application MgtDiscussion With DePaul

May 19, 2003

© 2003 Cap Gemini Ernst & Young - All rights reserved2

Market Perspective


Top 10 Market Factors

• Overall, Outsourcing Is Still A Healthy Market• Maturity of IT Outsourcing• Immaturity of BPO, 2003 Expected To Be Critical Year• Growing Demand for End-to-End Services Requires Focus• Increased Competition Leads To Intense Price and Capital Pressure• Highly Fragmented Competitive Landscape• Outsourcing Market Volatility• New Outsourcing Business Model• Outsourcing Shift to a Long-Term Value Proposition• Impacts of Economic Downturn: Elongated Sales Cycles, Cautious

Spending


Factors, Trends, & Implications

FactorFactor Trends/ CommentsTrends/ Comments Implication for CGE&YImplication for CGE&Y

1. Overall, Outsourcing Is Still A Healthy Market

Outsourcing is the fastest growing segment of professional services Although some aspects of IT have slowed and components of

process are in their infancy, key growth opportunities exist (e.g., AM, Offshore, SCM, F&A)

Enhance efficiency and effectiveness of internal and external sales channels, including consulting, outsourcing, and technology services, market makers, EY, and alliances

Improve awareness in North America

2. Maturity of IT Outsourcing

Big 3 (IBM, EDS, CSC) established as early adopters in IT High penetration; at least 50% of Global 2000 now outsource at least

some of their IT Commoditization of IT assets has caused cost cutting to shift from

assets to cutting labor costs and raising productivity while clients are slow to invest in productivity projects needed for deal profit

Improve deal selection and qualification Bundle ITO with BPO and consulting Leverage CGE&Y’s position in terms of flexible deal

structures and solutions (in comparison to EDS and IBM models geared at big IT deals)

3. Immaturity of BPO

Key offerings that build on existing IT and process expertise, such as SCM, F&A/ERP and CRM, provide strong opportunities to bundle consulting, technology and process

Small number of BPO deals signed in 2002; 2003 expected to be critical year in gaining BPO market share and capability

BPO competitive landscape is in flux. Some of the more aggressive BPO providers are relatively new market entrants. Market consolidation, mergers and acquisitions are affecting other BPO players

Short-term opportunity costs in terms of outsourcing revenue, long-term impact to recurring revenue from consulting

Invest in capability and market CGE&Y as BPO provider with strong focus in 2003

Leverage strengths in SCM, CRM, and Finance Transformation

4. Growing Demand for End-to-End Services

Client demand stems from need to reduce cost and make business improvements

Provider demand fueled by need to achieve profit from deal and maintain other consulting revenues

Few competitors can offer blended outsourcing-consulting solutions Strong value propositions tied to industry and/or process expertise

Develop robust, yet focused service portfolio to enable efficient bundling and quick response to client demands

Identify enterprise-wide incentives for selling and delivering both outsourcing and consulting

Clearly articulate value proposition of consulting & outsourcing to marketplace

5. Increased Competition

Increasing pressure in pricing environment and capital intensity Diverse entrants entering market as their revenue streams decline

(e.g., packaged application, software, and hardware companies)

Focus on sales & delivery efficiency (e.g., offshore model, network of centers, methodology, smarter qualification and due diligence, and shared risk/reward in deal structure)


Factors, Trends, & Implications

FactorFactor Trends/ CommentsTrends/ Comments Implication for CGE&YImplication for CGE&Y

6. Highly Fragmented Competitive Landscape

Shrinkage of consulting services, systems integration and packaged application markets

Consolidation expected which will further alter the landscape (e.g., IBM-PwCC and non-traditional entrants)

Differentiate focused offerings and build capabilities through various strategies (e.g., organic, alliance)

Consider acquisition to complete capabilities portfolio

7. Outsourcing Industry Volatility

Increased deal renegotiation; IBM and EDS have a high dependence on recurring revenue

Although rare, contracts are more frequently going to new providers Risks for service providers are associated with top clients (e.g., EDS-

WorldCom, IBM-Lucent and CSC-Nortel) Questionable accounting standards has brought negative coverage of

industry thus impacting client acceptance of outsourcing (e.g., % completion for EDS)

Market opportunity from contract renegotiation Minimize risk through smart client “portfolio” Maintain strong finance and deal structuring

standards

8. New Outsourcing Business Model

Mega deals have not materialized; Analysts report approx. 1 to 4 signed in 2002

Unable to assess cost structure and complete proper due diligence has impacted profitability and success of deals

Elongated sales cycles and introduction of process and consulting to IT outsourcing has brought new complications to model

Define organizational model to support selling and delivery of end-to-end offerings

Improve due diligence efficiency Focus on deals most likely to achieve financial

success and/or enhance capability, not mega deals

9. Outsourcing Shift To A Long-Term Value Proposition

Outsourcing has shifted from simply reducing costs to driving strategic change and overall business improvement

Due to economic environment, clients not funding innovation/ enhancement projects. In order for service providers to achieve profit, these projects are required

Ensure enhancements/innovation projects are bundled into outsourcing deal to protect profitability

Bundle through a combination of consulting, BPO and ITO, as well as delivery options (e.g. center, offshore)

10. Impact Of Economic Downturn

Elongated sales cycles, cautious spending, and lack of attention from key C-Levels required to close deal

Reduction in scope of existing deals or restructuring of contracts Clients pushing more financial risk on service providers via tighter pricing

and/or more capital-intensive deals

Improve qualification process with sharp focus on Return on Sales (ROS)

Emphasize shared-risk, shared-reward in marketplace Clearly articulate value propositions for C-Level

audience that make the buying decision


Market Growth

Key Findings Gartner’s May 2002 forecast update is

significantly different from the November 2001 forecast

ITO was forecasted to grow at 11.2 % (CAGR) and is now forecasted at 8.0% (CAGR)

BPO forecast was lowered from a forecast of 15.0% to 9.0% (CAGR)

IT outsourcing continues to experience relatively healthy growth during the economic downturn, compared with other IT services, as a result of user emphasis on cost-reduction and efficiency enhancement

The lack of disruptive new technology on which to build new solutions and drive transitional outsourcing had a negative impact on outsourcing overall

Companies are focusing on core business processes, increasingly outsourcing non-core business processes, particularly back-office functions

Note: Gartner published its forecast of the outsourcing market in November 2001 and a revised update in May 2002.

Source: Gartner, Outsourcing Forecast Update: Feeling the Pain. 11 July 2002, Bruce Caldwell, Allie Young, Rebecca Scholl

New Era of Greater Maturity and Moderated Growth for Outsourcing

0

20,000

40,000

60,000

80,000

ITO BPO

2000

2005

North America IT Outsourcing & BP Outsourcing Forecast, 2000-2005(Millions of USD)

Operational ServicesApplications Management

Help Desk Management

Transaction Processing Services BPM Services (business

transformation expertise applied as a part of a BPO contract)

8.0% CAGR

9.0% CAGR


Business Process Outsourcing

Opportunity to improve ROI from mature investment projects such as ERP, CRM and Shared Services, as well as need to focus on core business, fueling demand

Just as ERP systems enabled growth of Applications Management, SCM and CRM systems are expected to support growth of outsourcing technology and process in these areas

Offshore represents opportunity to lower delivery cost— not a mature offering, except in very specialized process areas such as medical claims transcription and some contact center operations

Through CRM, outsourcing plays a stronger role in impacting revenue generation vs. cost reduction only

Increased demand for multi-process outsourcing Increased demand for knowledge-based business

process outsourcing (from non-core/non-critical to non-core/critical to core/critical)

Dependence of service providers on shared service model to offer cheaper, standardized and best-in-class services, and achieve profitability

Growth of specialized industry solution centers that are able to manage both technology and process requirements, and adjust to industry needs

IT Outsourcing (AM, IM)

IM capability as a blended component will impact pricing and service packaging, not as a stand-alone offering

Growing emphasis on offshore capability. Increased acceptance of offshore as providers demonstrate quality cost and customer service. Large outsourcers not moving fast enough to take advantage of this shift.

While IT outsourcing overall has slowed, software development outsourcing has experienced growth and niche providers have prospered (e.g., Infosys revenues were up 32% in 2Q2002)

Applications management expected to be the fastest growing sub-segment of ITO at an 11.6% CAGR in North America through 2005

New and formidable competitors emerging, including packaged application, software, and hardware companies. As systems integration and deployment revenue matures/declines, these companies are looking for new revenue streams in outsourcing

Service Offering Key TrendsIncreased Focus on End-to-End Business Function, Requiring a Combined Look at IT

and Process


Outsourcing Offerings


Operate Americas Outsourcing Vision:“Earning the Right To Be Your Partner”

Contract Type

Same thingsame way

Same thing new way

New thingsnew way

Act

ivit

y

Fixed Charge Transaction Based/ Open Book Shared Risk/Reward

Facilities management• Data Centre Services• Application Support• Desktop Support• Network Services

Operate:• Application Management• Infrastructure Management• Business Process

Management

Providing Service to an AgreedService Level

Responsibility for an ITor Other Business Function

Helping to Achieve YourChanging Business Goals

Strategic Relationship• Business Solutions• Build and Operate• Full IT Outsource


Outsourcing Is a Natural Extension of Consulting Services

Management VisionEnterprise Technology StrategyBranding/Channel Strategy

Systems Development & IntegrationTechnical Infrastructure

Business Process OutsourcingApplications ManagementInfrastructure Management

Health

Strategy Integration Outsourcing

Energy / Utilities / Chemicals

MRD

TMN

FSI

Cri

tical Tech

nolo

gie

s

Su

pp

ort

Serv

ices

Su

pp

ly C

hain

CR

M

Str

ate

gy &

Tra

nsfo

rmati

on

ER

P

Full-Scope Service

Spectrum

Full-Scope

Sector & Service Lines

Ou

tsou

rcin

g


What are Companies Outsourcing?

Operate is a collection of service offerings that provides capability beyond the traditional consulting model to include maintenance and operation of client systems.

Applications Development Applications Development and Managementand Management

(ADM)(ADM)Infrastructure ManagementInfrastructure Management

(IM)(IM)

Information System Management (ISM)

IT-Enabled Business Process ManagementIT-Enabled Business Process Management(BPM)(BPM)

Enterprise Solutions Management (ESM)


Outsourcing Offerings

Applications Development and Management (ADM) Ongoing maintenance, enhancement and development, and new

releases/upgrades for client software applications

Infrastructure Management (IM) Ownership of client’s IT platform hardware and its operations e.g. Data Center Operations, Network Services, Desktop Services,

and Help Desk

Business Process management/Outsourcing (BPM/BPO) Ownership or management of a business process function e.g. Call Center operations or Accounts Payable function


• End User Support

• Distributed System Support

• Centralized System Support

• CyberCenters/Web Hosting

• Network Solutions

• ASP Support

Measured Delivery

Infrastructure Service Centers

Service Management

CUSTOMER

Site

Su

pp

ort

FM

(CC

S)

Site

Su

pp

ort

Call Logging, Incident Management, Query handlingLocal Knowledge - Personalised Call Reception

Problem Diagnosis/Analysis

Local KnowledgeProduct Specialization

Remote Support

Product/TechnicalSpecialists

1st

2nd

3rd

PR

OB

LE

M M

AN

AG

EM

EN

T

CH

AN

GE

MA

NA

GE

ME

NT

SE

RV

ICE

MA

NA

GE

ME

NT

RE

P’IN

G

SIP

/QU

AL

ITY

MA

NA

GE

ME

NT

SE

RV

ICE

Cen

ter

Field

Su

pp

ort

AM 3rdP

arty

Oth

er C

G

Co-ordination ofField Support

CO

NF

IGU

RA

TIO

N M

AN

AG

EM

EN

T

Infrastructure Service Centers - CGE&Y, Customer, Third Parties

Third Party Management

Infrastructure Management


BPM Offerings Are Aligned With Major Non-Core Business Functions

Supported by our Global Network of Centers (BPM, AM, IM)

• Inbound & Outbound Call Center Mgt.

• Billing

• Collections

• Customer Intelligence / Data Warehousing

CRM Transformation

• General Accounting

• Accounts Payable

• Accounts Receivable

• Fixed Assets

• Credit & Collection

• Billing

• Management Reporting

• Payroll

Finance &Employee

Transformation

Supply Chain Transformation

• Lead Logistics Provider

• Sourcing / E-Procurement

• Freight Management

• Fulfilment


Once Non-Core Activities Are Identified, They Can Be Outsourced Or Eliminated

Necessary

Not Necessary

Core Non – Core

Eliminate

OutsourcePerform

Internally


Top 10 Reasons Client’s Choose Outsourcing

Source: Cranfield International Outsourcing Survey—693 US, UK & Continental European companies participated in the survey.

Cost reduction is clearly a decision criteria in any deal but enhancing service and delivery (through business change) is also a key factor. Cost alone is not compelling enough to drive decisions for

outsourcing

Cost reduction is clearly a decision criteria in any deal but enhancing service and delivery (through business change) is also a key factor. Cost alone is not compelling enough to drive decisions for

outsourcing

Cluster 3: New Technology & Capabilities Want to gain access to new

technologies and skills Want to reduce headcount Want to develop new products and

services Want to reduce capital expenditure

Cluster 1: Cost & Efficiencies Want to achieve best practice

throughout the organisation Want tight control over costs

Cluster 2: Service & Delivery Want to improve service quality Want to enhance the organization

core competencies

27.4

28.4

34.0

36.0

36.6

37.1

41.0

42.1

58.6

60.2

Reduce transaction costs

Grow in-house expertise

Reduce capital cost

Enhance capability to develop new product/service

Reduce headcount

Access to new technologies/skills

Focus on core competencies

Improves service quality

Cost discipline/control

Aim to achieve best practice


Change in executive management

Capital spending in non-core business functions

Entry into new markets or customer segments to improve market share

Loss of confidence in internal IT Planned spin-off,

downsizing or merger

Divestiture of non-core businesses

New business alliances in process to broaden services

New quality improvement

programs underway

New project initiatives slow to deliver or huge backlog of

projects

Headcount reductions to reduce operating costs &

increase productivity

CEO Agenda to reduce transaction costs

Business Transformation

ConsiderConsiderOutsourcingOutsourcing

Know How to Spot an Outsourcing Opportunity

Major new systems projects planned

Launch of various programs to improve operational efficiency


Applications Development & Management

(ADM)


ADM Addresses Four Key Sets of Issues

Business IssuesBusiness Issues

Free the organization to focus on its core competence Secure funds & resources for business critical initiatives Improve quality of service & reliability of critical systems Increase competitiveness Concentrate on services innovation to drive future

revenues Share / manage risk across the development life cycle

Free the organization to focus on its core competence Secure funds & resources for business critical initiatives Improve quality of service & reliability of critical systems Increase competitiveness Concentrate on services innovation to drive future

revenues Share / manage risk across the development life cycle

People IssuesPeople Issues

Free up resources for strategic business & IT initiatives Avoid having to find & retain expertise, thus reducing

use of external contractors Avoid need to hire staff on a ‘just in case’ basis Mobilize and demobilize resources quickly Offer better career paths for IT professionals Quickly staff new projects (speed-to-market) Gain network to knowledge through CGE&Y’s network of

centers and resources

Free up resources for strategic business & IT initiatives Avoid having to find & retain expertise, thus reducing

use of external contractors Avoid need to hire staff on a ‘just in case’ basis Mobilize and demobilize resources quickly Offer better career paths for IT professionals Quickly staff new projects (speed-to-market) Gain network to knowledge through CGE&Y’s network of

centers and resources

Financial IssuesFinancial Issues

Gain visibility & predictability of costs Optimize Fixed vs. Variable costs Ensure value for money Increase revenue & therefore profitability Reduce costs – typically by 20% Reduce debt burden

Gain visibility & predictability of costs Optimize Fixed vs. Variable costs Ensure value for money Increase revenue & therefore profitability Reduce costs – typically by 20% Reduce debt burden

Technology IssuesTechnology Issues

Gain access to better methodologies & tools Migrate to new application more quickly Optimize IT systems to handle increasing complexity of

offers & products Align technology with business direction Industrialize the IT systems after launch period Benefit from a partner technology/packages watch

Gain access to better methodologies & tools Migrate to new application more quickly Optimize IT systems to handle increasing complexity of

offers & products Align technology with business direction Industrialize the IT systems after launch period Benefit from a partner technology/packages watch


ADM Critical Success Factors

• Staff Maintain staff with depth of skills required to effectively manage environment

• Demand Management Respond to demand increases/ decreases for support resources

• Solutions Knowledge Effective solutions knowledge to provide consistent, reliable application support

• Proven Methodologies Disciplined methodology for delivering support services in a cost effective manner

• Change Prepare for business and technical environment change


Application Development & Management Solutions

Applications Development and Management ServicesBreak/FixQuality Assurance/TestingApplication Enhancements/UpgradesNew Application Development

Applications Development and Management ServicesBreak/FixQuality Assurance/TestingApplication Enhancements/UpgradesNew Application Development

Configuration ManagementLevel 2 Help Desk SupportVendor ManagementRun/Host Applications

Ad Hoc SupportProcess ManagementRelease Management

Optimizing Clients

Business Models

Optimizing Clients

Business Models

“Run”Management of existing

package and/or custom built applications portfolios

“Build & Run”Management of the entire application lifecycle or specific IT Functions which could include development and support

of new applications

“Run - Build - Run”Maintenance of existing applications

while transforming replacement applications, followed by the

management of the new applications


Build/Run Value Proposition for Clients

• Focus on core strategic competencies and rely on CGE&Y to deliver other needs

• Implementation Planning• Post Go-Live Support

• Reduce operating and capital costs over the life cycle of the application• Accelerate the pace of implementation and smooth the transition to the

maintenance environment• Gain access to scarce technical resources, as needed, rather than

staffing to “just in case”• Share/manage risk across the development life cycle• Increase knowledge continuity of the application implementation into

production, including application and business specific information• Improve service levels


Build/Run Can Deliver Significant Cost Savings Over the Life of the Application

Y1 Y5Y4Y3Y2

Cost

Reduces overall cost of build ANDcost of transition to maintenance team.

Efficiencies, cost reductions further reduce cost over time.


Service Management

User Support

Maintenance

Enhancements

Development

Staffing

• Ours• Yours• New• Combination

Staffing

• Ours• Yours• New• Combination

Location

• On-site• Off-site• Near-shore• Off-shore• Combined

Location

• On-site• Off-site• Near-shore• Off-shore• Combined

Pricing

• Baseline• Fixed• Resource-based

Pricing

• Baseline• Fixed• Resource-based

ADM Provides a Full Range of Services to Maximize Value, Quality & Flexibility

Applications Development and Management (ADM) is:“a set of services which takes the contracted responsibility for any or all aspects of the maintenance, enhancement and evolution of applications systems within well defined service levels to maximize value, quality and flexibility.”

Scope

• Legacy AM• Custom Apps• Third-Party

• Plan, Build, & Run• ASP / Hosting

Scope

• Legacy AM• Custom Apps• Third-Party

• Plan, Build, & Run• ASP / Hosting


CGE&Y’s ADM Solution: Scope of Services

Base Services Extended Services

Service Management• CGE&Y service delivery management• Other 3rd-party provider management

Maintenance• Level 2 help desk• Break/fix & routine maintenance• Software configuration management• System & regression testing• Implementation of required routine vendor-

released software patches• Analysis of routine vendor-released

functional upgrades

Enhancements• Minor enhancements, as agreed

Service Management• CGE&Y service delivery management• Other 3rd-party provider management

Maintenance• Level 2 help desk• Break/fix & routine maintenance• Software configuration management• System & regression testing• Implementation of required routine vendor-

released software patches• Analysis of routine vendor-released

functional upgrades

Enhancements• Minor enhancements, as agreed

Major Enhancement/Development Support

• Enhancements that exceed limits established for Base Services support

• New module evaluation• Implementation of major releases, new

functionality, new modules, new interfaces, etc.

• Process reengineering activities• Decision support

Consulting Services• Supply Chain Optimization• Customer Relationship Mgmt• eCommerce• Shared Services• ERP Extension

Infrastructure Management• Data center operations• Server administration & performance

management

Major Enhancement/Development Support

• Enhancements that exceed limits established for Base Services support

• New module evaluation• Implementation of major releases, new

functionality, new modules, new interfaces, etc.

• Process reengineering activities• Decision support

Consulting Services• Supply Chain Optimization• Customer Relationship Mgmt• eCommerce• Shared Services• ERP Extension

Infrastructure Management• Data center operations• Server administration & performance

management


CGEY’s ADM Solution: Center-Based Support

Client Location ADM Service Center

Service Manager• Management• Service CoordinationUser Liaison/Business Analyst• Requirements Gathering• Problem Resolution

Service Manager• Management• Service CoordinationUser Liaison/Business Analyst• Requirements Gathering• Problem Resolution

Management• Project SupportMaintenance• Configuration Management• Process Documentation• Break/fix support• TestingEnhancements• Applications Tuning• Minor releasesDevelopment• Technical support• Interfaces

Management• Project SupportMaintenance• Configuration Management• Process Documentation• Break/fix support• TestingEnhancements• Applications Tuning• Minor releasesDevelopment• Technical support• Interfaces

Additional on-site CGEY staff

(as needed)

Additional on-site CGEY

delivery sites


CGEYAS Has an Integrated Global Delivery Capability That Is Transparent to the Client

On Site

CGEYAS Center

Near Shore

Off Shore

Near Shore


Prime Integrator


The Prime Integrator Methodology Coordinates the Delivery of

CGE&Y’s Global Delivery Centers


CGEY’s Prime Integrator Is a New Approach Based on Proven Capabilities

Prime IntegratorPrime IntegratorAchieves bothAchieves both quality delivery quality delivery andand lower price point for lower price point for

mainstream systems development projects mainstream systems development projects

• Substitution of lower cost Substitution of lower cost resources for certain development resources for certain development activities which can be performed activities which can be performed offshoreoffshore

• Substitution of lower cost local Substitution of lower cost local contracting resources to support contracting resources to support the local team the local team

• Local client/CGEY control of Local client/CGEY control of all aspects of the projectall aspects of the project

• Proven delivery & methodology Proven delivery & methodology

• Defined activities within eachDefined activities within eachphase – requirements, design,phase – requirements, design,development, test, deploymentdevelopment, test, deployment

• Risk and quality managementRisk and quality management

How Do We AchieveHow Do We AchieveThe Price Point?The Price Point?

How Do We AchieveHow Do We AchieveSuccessful Delivery?Successful Delivery?


What Research Has Shown About Offshore Systems Development

The current market for services delivered via offshore resource remains fairly small at less than 5% of the total IT services market (Gartner)

Interest in offshore providers runs high. While 44% of the firms we spoke with engage offshore providers today, two-thirds intend to do so by 2003 (Forrester)

The number of large firms using offshore providers will grow by 50% in the next two years, and offshore technology budgets will more than double (Forrester(

In the “indirect approach”, pivotal providers carry out activities formerly conducted by user companies…like contract negotiation and project management. Because they assume more responsibility, pivotal providers cost more than going direct… but they also minimize complexity, lock in the right expertise and keep labor costs in check for user firms. By 2005, we believe 64% of firms going offshore will adopt an indirect approach (Forrester)

Prime Integrator builds significantly on the ‘indirect approach’Prime Integrator builds significantly on the ‘indirect approach’


Projects are Complex:

Low definition High complexity High volatility High velocity

Projects Delivered Inexpensive:

• Highly defined• Low complexity• Low volatility• Low velocity

Local Offshore

Onshore

Offshore

Onshore

Offshore 00

1001009595

55

While cost advantages move work offshoreproject attributes determine the team mixWhile cost advantages move work offshoreproject attributes determine the team mix

7070

3030

5050

5050

Typical Projects: Package

Implementations CRM ERP Billing OSS

Custom Development

Application Mgmt

Typical Projects:• Application

Maintenance• Application

Management• Testing/QA • Legacy

application development

The Market is Currently Segregated into Either Totally Local or Totally Offshore


Typical Projects: Package

Implementations CRM ERP Billing OSS

Custom Development

Application Mgmt

Typical Projects:• Application

Maintenance• Application

Management• Legacy application

development

Local Offshore

Onshore

Offshore

Onshore

Offshore 00

1001009595

55

The proration of local versus offshore is preset into the prime integratormethodology based on project type and cannot be modified

The proration of local versus offshore is preset into the prime integratormethodology based on project type and cannot be modified

7070

3030

5050

5050

50/50

40/60

30/70

5/95

Prime Integrator Enables Mainstream Projects to be Executed by a Prorated Combination of Local and Offshore


CGEY’s Prime Integrator Delivery: What Client’s Have Been Concerned About Loss of ‘control’ is resolved:

by local project & technical management within the project team Loss of flexibility is resolved:

by close local relationship with the client, local requirements iteration, design management, and iterative delivery & review

Loss of velocity is resolved:by scheduled prototypes and direct local control

Risks of greater communication flexibility is resolved: by periodic review sessions and standard status, issues and change summary

Security is resolved:by hardware, software and physical location

Business Continuity is resolved:by back-up recovery processand secondary facilities

Capability maturity is resolved:through over 1,500 projects and over decade of prior experience

Risk Management is resolved: by rigid quality control & review and OTACE

RUP Methodology is a constant as in current projects

Project, Build and Architecture Management

ASE RSW Requirements

Offshore Preparation

ASERSW

Prototype Design

Client Review

Integration/Build

Construction Workstream #1


Construction Workstream N


Test Design Test Dev Testing

Deployment Design Deployment

Process Design Process Development

B01

2

3 4

B1 B2 B3 B4

Projects are Complex Low definition High complexity High volatility High velocity

Training Design Training Development

Offshore

Local

Legend

Mixed


Enhancements Have Been introduced Over the Last 2 Years to Assure Quality of Offshore Delivery Initial Project Assessment

Client business environment Client IT Environment

Workplan management Just-in-time activity and task management Daily issues logs & resolution Exploit time difference to project advantage

Communication Discipline Daily activity log Build reviews Video conference reviews

Prime Integrator Methodology Initial requirements ASE’s and prototype Defined contingency points Iterative approach Additional management due to geography Training and certification process Defined communications & process

Prime Integrator QA Process QA Process & OTACE

RUP Methodology is a constant as in current projects

Project, Build and Architecture Management

ASE RSW Requirements

Offshore Preparation

ASERSW

Prototype Design

Client Review

Integration/Build



Construction Workstream N


Test Design Test Dev Testing

Deployment Design Deployment

Process Design Process Development

B01

2

3 4

B1 B2 B3 B4

Projects are Complex Low definition High complexity High volatility High velocity

Training Design Training Development

Offshore

Local

Legend

Mixed

Users

Designers

On-Site CGE&Y ADC

Project Track 1

Lead

Developers

Testers

Project Track n

Project Track 1

Production Support

Users

Designers

Lead

Lead

Developers

Testers

Production Support

Lead

Project Track n

Offshore Project

Manager

Onsite Project

Manager

Integrated Tools and Methods


Distributed Delivery is an Essential Component of Productivity

Offshore savings in unit cost of labor have to be considered alongside the productivity gains resulting from the accelerators and center-based delivery

Off-shore

Near-shore

Productivity Accelerators

1

23

2a

Sav

ing

s fr

om

Off

& N

ear-

shor

e

• Center-based delivery• Methods• Estimation & metrics• CMM

• RSW• Reuse• Standard Process

• Project Management• Knowledge Management

Up to 50%

savings

The route to achieve higher savings depends on the approach• Many organizations are looking to off-shore first & then to improve processes and productivity (1-2-3)• Others are looking to improve consistency with productivity accelerators first (1-2a-3)• The prize is achieved by combining the two areas & delivering incremental savings over time (1-3)

Savings from productivity


Evolutionary Stages in Offshore Models

The distributed Delivery Model and capabilities should be able to support stage 1 to 4

Per

sist

ence

of

Ser

vice

s

Complexity of Service Delivery

Stage 1Onsite Contract Worker

•Delivery team on shore• Charged hourly• Managed by the onshore team

Stage 2Onsite Project Teams

• Delivery team on shore• Charged hourly maybe milestone fees• Managed by the onshore team

Stage 3Pure Offshore Projects

• Fees normally project based•Projects are managed by onshore team•Common processes and tools•Cost is primary driver•Increased transfer of intellectual capital

Stage 4Cross Border Collaborative Services Delivery

• Dedicated offshore/ near shore facilities•Common procedures, methods & approaches•Leverages complimentary skills, capacity &/or lower cost•Sharing of organizational best practices & intellectual capital•Full collaboration between teams•Common development platform(s)•Two-way SLAs in place

Optional Offshore Development Centers (ODC)

• Dedicated offshore /near shore facilities•Commitment required for long term revenue stream•Processes & technology infrastructure is common between ODC & the client•Typically connected to client site by direct telecom link

ComplexSimpleLow

High


We will deliver excellence regardless of the manner or location in which the project is provided

Scoping

Planning

Business Requirements

Design

Development

Configuration

Testing

Deployment

Detailed Design

Development & Testing

Quality Management

Deployment & Testing Support

Maintenance

Training Content Development

Onsite Off Shore

Onsite Offshore

Scoping

Planning

Business Requirements

Design

Development

Configuration

Testing

Deployment

Detailed Design

Development & Testing

Quality Management

Deployment & Testing Support

Maintenance

Training Content Development

Onsite Remote

Onsite Remote


Why CGEY Outsourcing?


CGEY Offers a Full Compliment of Outsourcing and Consulting Services

Strategy Integration Outsourcing

Applications Development & Management


IT-Enabled Business Process Management


The CGEY Advantage: A Global Leader in Applications Development & Management

Outsourcing is a significant focus within the CGEY organization $1.8B in revenue and growing rapidly 13,000 employees worldwide (AM & IM) Over 1,250 past and current clients Critical mass and capability in all key geographic markets

Strong presence in the Americas $400 M in revenue with several recent large contracts 2,500 employees (AM & IM)

An Innovator in the Market Place 1st to market with formal Applications Management offering (late 1980’s) A unique and powerful combination of consulting and full-scope outsourcing

India

New YorkChicago

SingaporeSecure VPN

2 Mbps

Secure VPN2 Mbps

Secure VPN2Mbps

Paris

Secure VPN2 Mbps


Why CGE&Y: Differentiators

Investment

Industrialized AM processes Specialized AM training Diverse skills Proprietary & integrated AM toolset Global network of AM Service Centers

Culture

Easy to do business with, 100% Service focus Customized contracts, living SLAs, OTACE “People matter to us” career paths,

employee surveys Value system of Honesty, Boldness, Trust,

Freedom, Team Spirit, Modesty, Fun

Leadership First to market with formal, stand-alone

AM service offer Industry analyst recognition & rankings Client references

Alignment Global Industry & Sector focus Industry experience on AM teams Vertical application templates

(e.g.,SAP/ERPb)

Delivery SLA performance results Business results testimonials OTACE ratings Contract renewals


State-of-the-ArtConnectivity:• 7 x 24 x 365 Operations & Monitoring• Fully-integrated client development

servers and workstations• Backup & Recovery Systems• Change Management, Escalation &

other operational processes in place

Infrastructure:• Infrastructure as required to provide

remote AM support, including:•Client secured worksite with client configured workstations

•Laptops and mobile phones for off hour support

•Test and Development Servers•Telecommunications

Customers:• 7 x 24 x 365 Production Support

coverage• Development and Production

Support teams manage applications for approximately 10 business areas within one dedicated client

Telecommunications & Network:• In support of client applications:

• Telecommunications Monitoring

• T1 connections to multiple networks using Cisco routers, switches and firewalls

Applications Management:• 120 professionals providing AM

services• 80+ custom applications

supported• Supported development

languages include:• COBOL• Java• C, C++, Visual Basic• Natural / Adabas• Smalltalk

Supported Environments:• Supported development and

operations environments include• Mainframe / CICS / DB2• Mainframe Adabas• Unix / Oracle• Internet (Web Logic,

Vitria, .Net)• Terradata Data Warehousing

Chicago Service Center


The Chicago Center


What Services Do We Offer?

Application Development

& Management

StaffAugmentation

Projects

Production SupportDevelopmentTest Only

DevelopmentTesting

AnalystsArchitectsDevelopersTesters

Application Development & Management Services that take contracted

responsibility for any or all aspects of the maintenance, enhancement and evolution of applications systems.

Projects Services that are discrete. Can take

responsibility for one or more aspects of the SDLC within an engagement.

Staff Augmentation Services where we provide the client

with temporary, high quality and low cost resources to fulfill a variety of IT needs within the SDLC, including project management.


Associates within Affinity Teams work on projects across Sprint Application Areas …Affinity Teams are self-sufficient support systems of a group of people who will work together toward a common goal in a large action.

OO Affinity (LOOP)

Mainframe Affinity

Application Projects

Project Management Affinity

Community Affinity

Value to the Employee• Create an atmosphere for excelling• Provide a form for knowledge enhancement and

sharing• Support the career path

Value to the Customer• Support innovation• Knowledge pool results in faster turnarounds• Reduces time for training

Value to the organization• Improve employee satisfaction and morale• Keep associated focused on skill enhancement• Channel for communication • Indirect feedback on employee requirements

Value Proposition

Unique Quality Processes & Procedures - Affinity Team Model

Major AccomplishmentsOO

• Sponsored, contributed, & founded Smalltalk solutions• Trained 23 associates through “Smalltalk Boot camp”• Established board membership on Smalltalk Advisory Board• Held over 15 brown bag and technical lunches

Java• Built Sprint specific training curriculum for beginner &

intermediate n-tier developers• Attained Sun Certification for 75 programmers, 16 developers,

and 1 architect

• Trained 41 associates through “Java Boot camp”• Presented at JavaOne Conference 2001• Developed & delivered EJB & Unix training curriculum

Project Management• Supported 21 employees through PMP certification• Established presence within national PM community • Established presence at PMI Seminar & Symposium 2001

Production Support• Created standardized Prod. Supt. Documentation used by Sprint• Performed audits of all CGEYAS Prod. Supt. projects


Sprint

Sector Telecommunications, Media & Network Deal Type Applications Development and Management Geography North America Structure Outsourcing Duration 6 years Start Date June 1999 Total Revenue $500 Million

Various business growth initiatives created a need within Sprint’s Long Distance Division to rapidly expand its software development and production support and testing capacity by engaging the services of an outside supplier.

A primary component of this engagement was to free up key resources to focus on Sprint’s core competencies

Solutions and Benefits to Client CGE&Y provides software development, systems analysis, systems design, production support, testing and

related software services and associated deliverables in connection with certain software development and Production Support projects

CGE&Y established, and is delivering to, mutually agreed service levels for all aspects of the engagement The successful transition of applications and the consistent delivery have provided Sprint the ability to

reposition its own critical resources to pursue strategic projects within its core competency Additionally, access to special skills at CGE&Y supports transformation of the enterprise providing less risk,

greater benefit, and higher speed to market. Sprint recognized CGE&Y as an extension of its organization

Documents

Outsourcing & Application Mgt Discussion With DePaul May 19, 2003