Shared Services Outsourcing Delivering More than Cost Savings

1. 2010 National University Finance and Procurement Conference 26 - 28 July 2010 Shared Services Outsourcing Delivering More than Cost Savings Presented by: Matt Easdown, Chief Financial Officer University of Canberra

2. UC’s Story • Our drivers for change • Outsourcing at UC • The process • Outcomes • Sector opportunities?

3. UC facts • One of the nation’s smaller Universities placed in the lower third in size based on student numbers and revenues. Recognised need to grow to a more optimal size. • One of the nation’s fastest growing universities with 15% increase in student numbers in 2009 and 2010. • Can’t allow growth to consume all additional revenues generated - need to rebuild capital and retained earnings • The University of Canberra or “UC” is Australia’s Capital University. • Established in 1969 as a CAE to service the Capital Region. • Is the only CAE to have been converted to a full University. • Total student population of around 12,000 (10,000 EFTSL) with around 1300 resident on campus.

4. Financial Stress • In 2006-2007 following a period of falling student numbers and rising costs, UC faced a financial crisis. For FY2007, UC booked a financial deficit of $16m on a small revenue base of $123m • A new VC initiated a period of substantial reform built around a new Strategic Plan “The 39 Steps”. • “Step 4: Streamline our procedures and cost structures, making full use of information technologies and eliminating paper transactions wherever possible.” • Focus on developing a strong platform that will support growth but relatively inelastic impact on service unit costs

5. The Capital Region Population:549,135 Area:58,700 sq km Major cities and towns: Canberra, Bega, Cooma, Goulburn, Queanbeyan & Young Region overview: • Higher Education is a key employer and generator of economic growth with around 20,000 EFTSL and around 2000 staff • Contains the nation’s capital with the majority of federal government and national institutions located within the ACT • ACT has one of the nation’s lowest rates of unemployment and the highest average weekly earnings (source: ABS)

6. Competitive context • The region is rich with Higher Educational opportunities • ANU & UC educate around 90% of the HE students in the region • Five Universities service a local population around the same size of Newcastle, NSW with one University.

7. Drivers for Change UC identified outsourcing as one of its main change delivery tools

8. Why outsource? Source: www.theoutsourcerzone.com

9. What does UC Outsource?

10. UC’s Journey to India • Started as Process Simplification Project which developed into an Outsourcing Initiative • AT Kearney engaged in to advise on process improvement options/streamlining. • They found: • Admin processes are tangled and create significant frustration • There are a large number of fragmented processes which are thinly resourced or which lack access to specialist skills • Process inefficiency plus a lack of scale of economies pushes up internal costs

11. UC’s Journey to India • Why India? Why not? • Global leaders in ITO & BPO • Highly educated and ambitious workforce • Very cost competitive • Program goals: • Cost savings • Capacity • Expertise “India outsources the education of it’s best and brightest, so why can’t we return the favour?”

12. UC’s Journey to India • A political sensitive decision • DEEWR consulted & Unions engaged • Passionate debate at all levels including Council • “I thought you said Bungendore?”

13. Recommendations & actions • ATK recommended: • Outsource some IT and general admin business processes offshore • Consider both onshore and offshore providers • July 08 - Commenced a detailed RFP process inviting local and offshore providers to participate. • 3 responses received – all from Indian providers • Detailed assessment process commenced • 2 trips to India by assessment team in 6 months • January 09 - WIPRO short listed and detailed negotiations commenced • TPI and Gilbert & Tobin engaged as negotiation and legal advisors

14. Due diligence and execution • UC Council approved deal in February 09 • WIPRO’s Due Diligence March 09 • 2 weeks on site at UC • Agreed on phasing on functions • Contract signed June 09 for 5 years • Includes on-site account manager • Detailed and regular KPI review processes

15. Due diligence and execution • What we have implemented: • BPO - Core transactional processes • Finance (AP, AR, reconciliations, expense management) • HR (payroll, super, benefits) • Student Admissions (applications, qualification checking etc) • ITO - core ITC support processes • Helpdesk & desktop support, • Server & infrastructure support, and • Applications development & support • Approach was generally “lift, drop and develop”

16. Transition to steady state • Transition • June 09 - WIPRO team on site for knowledge acquisition and transition management. • WIPRO staff then returned to Chennai and trained colleagues • UC staff visited Chennai to further train and validate processes. • Some UC processes were more complex and transition period extended.

17. Transition to steady state • Stabilisation • Wipro responsible for all work, but could seek advice/assistance from UC as needed. • In some cases (Service Desk) stabilisation process was delayed and extra knowledge acquisition required. • Stabilisation achieved from August 2009 to February 2010. • Steady State • Steady State achieved by March 2010. • Wipro now have full responsibility for delivery. • First Year anniversary achieved in June 2010

18. Why WIPRO? • An account like UC is normally too small for a major outsourcing provider like WIPRO • But WIPRO identified a UC account as a stepping stone to more University and Government accounts • Were prepared to invest and develop their products to match our needs • Intelligent Outsourcing – NOT “My Mess for Less”

19. About WIPRO • Global turnover USD 6 billion • One of the top 3 India ITO/BPO providers • Over 100,000 staff comprising 70 nationalities • 72 plus global delivery centres in over 55 countries • Services span financial services, retail, transportation, manufacturing, healthcare services, energy and utilities, technology, telecom and media. • More than 800 active clients that include governments, educational institutes, utility services, and over 150 of the Global Fortune 500

20. Lessons learnt • In some areas the work was more complex work expected, so additional learning time required. • Careful selection of staff to interface – seasoned business people – commercial focus is essential • Context of the UC environment is essential for success. Campus visits essential – particularly service desk. • Return regular visits by UC functional managers is also essential – maintain contact in addition to weekly status calls • Language/cultural differences can’t be ignored and need regular attention

21. Lessons learnt • Scope of Work documents need to be comprehensive and updated regularly • Generic processes transition well (eg: Finance), with more University specialist processes taking longer (Student Admissions) • ICT took longer due to the University IT environment and expectation gaps – a university is not the same as a large Corporate • Expect some offshore staff turnover – experienced BPO staff are in high demand • Process improvement focus now underway

22. Non financial benefits achieved • Tangible improvements in • Processes • Internal Control & • Accountability • Larger and better educated team • Dedicated to UC work • Able to work to our changing requirements • Extended hours of coverage • Educational and other partnership opportunities

23. Sector opportunities • Australian universities are more alike than different • Common financial and performance reporting • Similar employment arrangements • Sector wide Shared Services opportunities • Already run shared services and cooperative arrangements • Student applications (UAC, QTAC etc) • Procurement (AUPN) • Expansion options include transaction processing for.. • Finance • Payroll/ Hr • Student admin

24. Sector opportunities • Cost and effort sharing • Common interfaces • Base requirements (data centre operations etc) • Enabling power of a single Vendor ERP • Common chart of accounts and hierarchy • Consistent processes • Outsource, alliance or controlled entity? • Advantages & risks?

25. Conclusion • Outsourcing is critical in the delivery of UC’s Strategic Plan • Working well • Needs consistent and focused management • Our future is looking strong

26. Q&A