IT Process Organization

1. IT Process Organization (Provided by Booz-Allen & Hamilton)

2. Technology Issues

3. Business Imperatives are Putting Challenges on the I/T Capability

4. Taking a Process View Has Helped Several Organizations Improve the Value Received from the I/T Capability • Improving the value and return on I/T assets by focusing resources on critical market driving capabilities (e.g., “Advantaged Systems”) • Positioning the I/T Organization to support growth • Improving service management disciplines using process based organization concepts • Capturing cost reduction opportunities of up to 40%

5. Capturing Information Technology Opportunities Requires the Implementation of Best Practices on a Global Basis • Simplifying I/T Operational Processes • Separate supply and demand, fixed and variable • Eliminate low value added work and redundant support systems accumulated over years of growth, acquisitions, etc. • Optimize I/T processes for low cost delivery…benchmark to best practices • Develop processes to share expertise and internal best practices • Restructuring I/T Delivery Model to Achieve Operational Effectiveness • Centralize operations where strong economies exist • Develop service level agreements to create accountability to the line • Balance sourcing of I/T capabilities (insourcing vs outsourcing)

6. Capturing Information Technology Opportunities Requires the Implementation of Best Practices on a Global Basis (Cont.) • Leveraging Information Systems Investment • Enforce common technical architecture standards (hardware, software, network) • Implement rigorous cost/benefit standards for new application software investments • Optimize application software maintenance requirements • Reducing Headcount Costs • Strip out redundant support systems and staff accumulated over years of growth, acquisitions, etc. • Staff to “base case” I/T delivery model and streamlined I/T processes

7. I/T Transformation is a Long-Term Program for Change Corporation Staff Design Approach BusinessProcess Redesign Phase I Phase II Phase III Identify/Validate/Prioritize DetailedDesign ImplementProcess PolicyDecision Go ScopingtheOpportunity ContinuousImprovement Iterate/Streamline/Structure Accountability/Alignment Action StructureDecision Go Segment/Roles/Responsibilities TransitionPlanning ImplementOrganization Each Phase is Based on Facts and Analysis to Drive the Business Change

8. Lost Economies of Scale in Help Desks(FTE’s Versus Call Volume) HelpDesk(FTE’s) Client’sHelp Desks Were TooSmall and Did Not LeverageEconomies of ScaleSufficiently Help Desk Call Volume(Calls Per Month)

9. Root Cause Analysis Highlights Common Themes That Erode Value

10. Once the Opportunities are Understood, Objectives are Set to Guide the Design: • Achieve best in class cost savings • Redirect cost efficiencies to fund new business opportunities • Deploy a flexible organization that will support a growth strategy • Respond proactively to strategic changes -- e.g., new JVs, deregulations • Facilitate entry into new markets • Establish partnerships with service providers • Respond promptly to business needs • Establish clear accountability over key services • Create global organization to facilitate cooperation • Establish priority over delivering services -- not technology • Develop reliable solutions, more cheaply and more quickly • Consolidate Infrastructure -- on a global scale • Leverage learning and expertise on a global basis • Fund and create a global, standard infrastructure -- new applications will “plug in” to the infrastructure • Develop global, common application solutions

11. Benchmark Studies on Growth Companies and Leading Edge Practices are Useful to Guide Design • Growth company benchmarking concluded successful companies were leveraging scale and standards to control overhead costs and deploy quickly in new geographies • Best practice process benchmarking revealed options to improve value • Demand and supply management • Cost restructuring • Leveraging the market • Knowledge sharing • Our benchmarking confirmed a new approach to HR management is needed: • Demand for I/T resources will continue to outpace the supply • Traditional HR practices are challenged by rapidly changing business and technology environments • Existing retention and reward practices are not always market competitive and can hinder I/Ts ability to attract and retain key talent • Employee training and development practices often lack a strategic focus on business, organization and people requirements

12. Fundamental Reengineering Starting With a Service Mission and Definition Allows the Organization to Redesign Itself Based on Priorities Identify KeyServices 1 • Process Improvements • Development • Computer Operations • Telecommunications Networking • Problem Support ReengineerProcess 2 Measure, Benchmark,and ManageService Levels Deploy Process-Based Organization 3 EncouragesNewBehaviors Clients

13. The Analysis Starts by Prioritizing the Key Services and Processes to Redesign These marksrepresent the focus of the reengineering effort

14. See Overhead Slide

15. The New Processes Address All Key Management Issues Identified in Phase I and Drive the Organization Design

16. A Key Aspect of the Change is to SeparateDemand and Supply Management I/T SHARED SERVICE ORGANIZATION ManagementCouncil I/T BusinessManagers(Embedded) GlobalInformationManager GlobalNetworkComputingService I/T BusinessLeaders(Embedded) RegionalI/TSupply Service &AssetManagement GlobalSystems DEMAND SUPPLY Focus = I/S Service Delivery

17. Separate Demand and Supply Organizations are Needed to Maximize Sharing While Maintaining Strong Business Focus • Enable I/T to meet two separate goals • Reduce I/T supply costs by increasing sharing and by standardizing I/T services -- throughout the embedded organization • Increase I/T value by prioritizing I/T solutions aligned to specific business strategies and filtering discretionary, low value-added requests -- through I/T shared services • Create constructive tensions between both groups which enables the organization to make cost/service tradeoffs effectively • Formalize a demand management process and organization which helps control and eliminate “shadow” costs

18. An Implementation Guide Defines the New Organization and How It Operates TABLE OF CONTENTS I. Implementation Guide Summary II. Products and Services III. Major Processes IV. Major Process Changes V. Organization VI. Governance VII. Demand Management VIII. Organization Linkages IX. Organization Capabilities X. Roles and Responsibilities XI. Accountabilities XII. Budget XIII. Service Agreements XIV. Related Projects IMPLEMENTATIONGUIDE

19. See Overhead Slide

20. Regular Benchmark Analysis Ensures That the Organization Remains Market Competitive and Focused on Supporting the Business Strategy Market Input InitialTargets Benchmark Periodically- Cost- Service Levels- New Investments Deliver I/TServices,MeasurePerformance Establish“Balanced”Scorecard ReengineerFor Growth Updated StretchTargets NegotiateCost, ServiceLevels • Identify “Market” competitive performance targets -- especially in a high-growth environment • Review current performance against market cost and service levels Client Requirements

21. The Organization Must Implement Best Practices for Continuous Improvement • Assign accountability for continuous improvements to those responsible for each service -- not to a dedicated quality management group • Establish a close link between scorecard performance and performance based systems -- in process • Define periodic market competitive “stretch” targets through benchmarks • Continuously improve I/T cost and service structure • Ongoing Service -- Organize I/T buyers’ committees to review cost and service performance and to negotiate future targets • Current Investments -- Appoint “process professionals” to maximize the value of current applications/investments on an ongoing basis • Discretionary Investments -- Review value proposition for new projects and perform “post-audit” reviews to capture benefits • Negotiate cost and service levels with clients