Building Partnerships

Gail F FarnsleyVice President and CIOCummins Inc.

NASSCOM Conference, MumbaiFebruary 14, 2008

Agenda

Outsourcing Model

Background

Management and Measurement

Why a joint venture?

Evolution of the partnership

HIGHC

ompe

titiv

e A

dvan

tage

/ S

trat

egic

Im

port

ance

LOW HIGHExternal Partner Capability

Insource

Invest in internal capability

Insource until external partners are capable

Invest with partners to build their capability

Collaborate

Use partners for flexible capacity and while we

develop internal capability

Outsource

Outsource to selected Global Preferred

Vendors

Outsourcing Model

Model Implications for IT

Program/Project Management

Infrastructure and Operations

Business/Systems Analysis

Programming, Testing and Support

Strategy and PlanningPrimarily Insourced

Primarily Outsourced

Background

IT Applications

Sent some Y2K work offshore with TCS in late 1990’s

Merged internal India-based IT services company (Cummins Infotech) with KPIT to create KPIT Cummins joint venture

Initial outsourcing contracts signed in 2001

• KPIT Cummins, TCS, iGate

Contracts re-bid in 2003 and extended in 2006

• KPIT Cummins, TCS, iGate

Contracts re-bid in 2007

• KPIT Cummins, TCS, Infosys

As of Year-end 2007

• 65% of IT applications work is outsourced

• 95% of outsourced work is done by 3 Global Preferred Vendors

• 68% of Global Preferred Vendor work is done offshore

Background

Infrastructure and Operations Initial contract signed in 2004

• HCL

Contract renewed in 2007

• HCL

Services provided as of Year-end 2007

• Multi-language IT Help Desk

• Global Account Management

• Server Management (Oracle, UNIX, Lotus Notes, Windows, Web)

• Network Management (NOC, WAN Support)

• Appworks Support

• Storage and Backups

• Remote Desktop Support

Supplier Management

Follow standard Cummins Supplier Management practices

Supplier management team assigned for each partner

Measures defined in the contract

Regular Customer Satisfaction Surveys

Communication plans in place and escalation paths established

Quarterly and annual reviews of work and relationship

Joint Six Sigma projects to address areas for improvement

Sample Customer Satisfaction Survey Control Chart

Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07

Responses/ Respondents 74 84 90 71 73 91 158/114 139/88

TTB (>= 65%) 52% 65% 68% 65% 71% 57% 68% 66%

BB (0 %) 2% 0% 0% 0% 0% 1% 1% 1%

BTB (=< 5%) 10% 3% 4% 3% 3% 9% 8% 10%

Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07

Weighted Average Score

3.60 3.83 3.88 3.96 3.97 3.75 3.86 3.81

Low HighMaturity

Low

High

Off

sh

ore

Levera

ge

*

Sample Capability Matrix

Legend

Evidence Capability Exists

Capability needs Strengthening Building Capability Not an area of Capability

Legend

Evidence Capability Exists

Capability needs Strengthening Building Capability Not an area of Capability

Why a Joint Venture?

Evolution of a captive to JV

Captive IT services group in India had grown to over 100 people, but managing an IT services company was not a core competency of Cummins

But we wanted to maintain an investment in an IT services company as we saw it as a good investment

Helped move work faster

Concerns about confidentiality of applications lessoned by moving work to someone “inside the family”

Senior leadership visibility and attention due to concern about success of JV

Gave us insight into cost structure and operation of an IT company

Made us more educated when negotiating with other partners

Evolution of a partnership

JV formed in late 2001

Traditional IT outsourcing business agreement

Launched joint community service projects in 2006

Partnered on a Six Sigma project to identify how to provide low cost IT services to non-profit community agencies in Columbus, Indiana, USA

KPIT Cummins employees and volunteers staff a new agency to deliver IT services

Expanded nonprofit support to other communities in 2007 & 2008

Started program to provide support for agencies in Pune

Plans to expand program to Fridley, Minnesota and Nashville, Tennessee

Expand partnership to Purdue University to research new ways to apply technology to societal problems and community organizations

Thank You