2006 CMP Global Services Governance Presentation

1. www.neoIT.com
February 2, 2006
Lifecycle Series: Governance
Bill Metz
External Business Development
Manager, Procter & Gamble
Chas R. Mullins
Managing Director, neoIT
© neoIT 2005. All rights reserved

2. P&G Background
In 1999 created Global Business Services, consolidating
more than 70 business services and application systems
in a Shared Services organization
In the past three years P&G has entered five strategic
partnerships worth a total of more than $4B
HP for IT Infrastructure
Jones Lang Lasalle for Facilities Management
IBM for Employee Services
HP for Transaction Accounts Payable
Sykes Enterprises for Customer Inquiries on P&G Products
2 © 2005 neoIT

3. Ensuring Success Through Proper Governance
3 © 2005 neoIT

4. Agenda
Need For Governance
Governance Across the Organization
Key Governance Activities
Critical Success Factors
Key Take Aways
Questions/Answers
4 © 2005 neoIT

5. Question to Audience – Buyers Only
Q1. Are you currently in a relationship with a third
party supplier?
Q2. Do you have a current governance strategy in
place?
Q3. Is executive leadership (VP& above) part of the
governance structure?
5 © 2005 neoIT

6. Need For Governance
Often heard statements from client side:
Not happy with quality of delivery
Why is there so much turnover?
Lack of visibility into resource availability
Not convinced of productivity and performance levels
What is the delivery process?
Whom can I escalate to?
Miscommunications due to differences in culture
Soft skills mismatch
Not sure of value of outsourcing
6 © 2005 neoIT

7. Need For Governance
Often heard statements from the supply side:
Not honoring small commitments which lead to failure in larger ones as
well e.g Monday deliverable slips to Tuesday etc.
Buffer resources not maintained according to contract
High attrition rate in the vendor team
Contract Service levels are no longer relevant in current operating model
Holiday in India and onsite is unaware!
Applications footprint not updated over time
7 © 2005 neoIT

8. Need For Governance
P&G Experiences:
No historic performance data
Retained organization resistant to adopt new rigor required
Perception that things are harder and take much longer with
no offsetting value gains
Value erosion due to lack of productivity measures
Governance gets stuck in the middle vs. simply facilitating a
direct relationship between customers and suppliers
Supplier slow to react to changing needs (i.e. capacity issues)
Maintaining enough competence to be a capable buyer
8 © 2005 neoIT

9. Need For Governance
Most common reasons for failure to achieve full potential in
offshoring
Lack of executive focus after contract signing
Change of guard at client executive team
Change of client business drivers
Lack of monitoring of performance and deliverables
Other performance criteria besides service levels
Quality of service may suffer
Contract amnesia
Lack of enforcement leads to complaisance
Contract loses relevance
Objectives morph i.e, lose track of original objectives for offshoring
Objectives drift
Other than financial – quality improvements, process reengineering
9 © 2005 neoIT

10. Governance as a Component of Global Business Services
Client & Site
Supplier Governance Services
Services
• HP Manages Supplier Global organization Customer aligned
• Jones Lang LaSalle • Relationship Regional service delivery Site representation
• IBM • Performance Service/Product focus
• Etc. • Key Processes
Business Units
10 © 2005 neoIT

11. Governance Across the Organization
11 © 2005 neoIT

12. Governance Model/Framework
Performance Management Financial Management
• Service levels – monitoring, reporting Invoice review
• Schedule management Budget to actuals
• Issues in quality Expense allocation
• Offshore workload management Invoicing procedure
• Process flow for onsite/offshore Change management to base model
delivery
Resource Management Contract Management
Retention
Key personnel
Buffer
Staffing, attrition
Training
Background checks,
Vacation, holidays
Insurance
Onboarding
DR/BCP plans, readiness
Resource transitions
Reformulate service levels for
Conserve knowledge relevancy
transfer
Skills update
Client of choice initiatives
Relationship Management One team
Track issues to closure
Bridge culture gaps
Expect to invest 5-8% of total spend in governance
12 © 2005 neoIT

13. Key Governance Processes
Relationship Management
Service Request Management
Service Receipt Verification
Performance Management
Problem/Incident/Change Management
Project Management
Security, Business Continuity, Disaster Recovery
Financial Operations
Asset Management
Contract Management
13 © 2005 neoIT

14. Common Processes Across Suppliers
HP IBM JLL Others
Service Request Management
Performance Management
Problem/Change/Incident Management
Project Management
Other Key Processes
14 © 2005 neoIT

15. Critical Success Factors
Internal Buy-in
– Organization needs to undertake a realistic internal assessment of their ability and readiness to pursue and scale-up
complex initiatives
Accountability
– PMO Owner is ultimately accountable for success of offshore initiative
Ensures accountable resources are identified for project management and execution
Ensures execution synchronization of schedules and plans for all project constituents
Ensures synchronization and linkage with the Client Business and Operations groups
Responsibility
– Program Leadership has responsibility for communicating aggregate project reporting, risk and issue escalation
LOB IT must determine what technology related measures must be tracked, measured and communicated
regarding progress on off shoring
Leverage Role of Influencers
– While nominating manager/individuals to staff appropriate
Partnership developed through clear definition of roles and responsibilities at project level
Life Cycle Commitment
– Senior level involvement and attention dwindles over time, typically in the 2nd year (known as the “the steady state”)
– Despite comprehensive plans, contractual clauses for service provider to enhance productivity and to provide
additional value, such obligations are neither proactively monitored for positive results nor are they pursued
Definition of Roles & Staffing of Governance Team
– Role definition needs to permeate beyond the three layers of governance (Organizational, Functional, Operational)
Each team member has a defined role and set of responsibilities that outlines their contribution to ensure
effective relationship controls and performance
Investment in time and effort
– Operating staff and management should allocate approximately 15% to 28% of time and effort
– Management Level (CXO) should allocate approximately 5% of time and effort
Adequate Governance Budget
– In addition to time and budget, organizations should budget approximately 5% to 8% of their overall initiative
expenditure on governance
15 © 2005 neoIT

16. Key Take Aways
Successful transition to an outsourced environment
takes considerable time and planning
Operating in and managing an outsourced environment
requires more structure and rigor than most
organizations are accustomed to
Governance needs to happen in all areas and levels of
services globalization
neoIT Governance White Paper
16 © 2005 neoIT

17. Questions/Answers
17 © 2005 neoIT

18. Contact Information
neoIT Global Headquarters
Bill Metz 2603 Camino Ramon, 2nd Floor
External Business Development Manager San Ramon, CA 94583 USA
metz.wp@pg.com
513.503.6159 neoIT Asia Headquarters
210, Bellary Road
Chas R. Mullins Upper Palace Orchards
Managing Director Bangalore - 560 080 India
chas@neoIT.com
816.213.1171 neoIT Philippines
8/F Pacific Star Building
Senator Gil Puyat Ave. cor Makati Ave.
Makati City, Metro Manila, 1200, Philippines
18 © 2005 neoIT

19. Key Governance Activities
Personal interaction/email/phone calls
Weekly scheduled conference calls with vendor
Regular conference calls with client management
Monthly Operational reviews at vendor delivery location
Monthly report to client
Facilitate quarterly client audits
Client visits to vendor delivery location
Annual performance and contract reviews
Issue resolution – ongoing basis
19 © 2005 neoIT

20. What is Governance?
Governance is not mere contract management but is a business process and
structure to continuously ensure that the organizational objectives are realized
1. Contract management
2. Relationship management
3. Performance management
4. Resource management
5. Financial management
Includes active involvement of functional managers and
managers from allied services like legal, finance, HR,
Infrastructure etc.
20 © 2005 neoIT

21. Performance Management
Activities: Benefits:
Analyze trends in SLs Early indications of problems
Reorganize work process flow Forecast of shift scheduling
for offshore delivery Maintain focus on quality
Monitor continuous improvements
performance Consistent level of
improvement efforts performance levels
Review workload distribution Optimal utilization of
across resources resources
Recommend productivity Implementation of global
enhancements delivery model
Perform monthly operations
review
21 © 2005 neoIT

22. Resource Management
Activities: Benefits:
Review resource profiles for Right resource for the right job
recruitment Early on the job productivity
Monitor on-boarding process Attrition management
Ensure smooth transition of Project continuity
key resources Process specific delivery not
Review attrition figures and people specific
retention strategies Knowledge management built
Monitor skills/new process for future transitions, if any
training Prepare offshore for growth
Assist in employee recognition and moving up the value
chain
Increase individual
productivity
Loyalty to the engagement
22 © 2005 neoIT

23. Contract Management
Activities: Benefits:
Track adherence to SLs Contract compliance
Redefine SLs for relevance Ensuring SLs are a true
Review DR/BC planning, reflection of vendor
testing performance
Review compliance to Recommend new SLs for
insurance requirements raising the bar
HIPAA compliance/data Ensure planning for 24/7 365
security days operations
Track volume levels for pricing Mitigate regulatory risk
model triggers Achieve next level of economy
Monitor sufficiency of of scale of outsourcing
connectivity/infrastructure Ensure offshore center
availability
23 © 2005 neoIT

24. Financial Management
Activities: Benefits:
Facilitate renegotiation of Value for money, quality,
pricing model when triggered flexibility
by volumes Industry benchmarking of
Validate one-time expense market rates
allocations Proper utilization of allotted
Help modify pricing model for one-time costs
moving up the value chain Improved global sourcing
24 © 2005 neoIT

25. Relationship Management
Activities: Benefits:
Maintain vendor’s focus on Executive level of vendor
client as ‘Client of Choice’ remains involved on
Ensure continuity of clear engagement
organization escalation Avoid issue accumulation due
path on both sides to executive level changes
Track issue logs and days to Early issue resolution
closure Seamless integration of client
Clear up any cultural and supplier
miscommunications ‘One Team’ atmosphere
Facilitate offshore-onsite
interactions
25 © 2005 neoIT