Tampa Bay Technology Leadership Association May 8, 2008

Speaker  Natasha Veltri, Ph.D.  Assistant Professor at UT  Researching backsourcing for 6 years  Reasons for backsourcing  Outsourcing vs Backsourcing  Success factors in backsourcing

Panelists  Frank Edwards  Knowledge Quest Education resident Professor and Director of Education  32 year background working for Equifax, EDS, and Washington Mutual/Citigroup holding VP/CIO positions  specializes in soft skill training that includes Business Administration, Customer Service, Team Leadership, Executive Leadership, Organizational Psychology, Diversity, Customer Service, Team Building, and Project Management Methodology

Panelists  James Garoutsos  leads the technology direction for all the departments under the Board of County Commissioners in Pinellas County since 2005  previously served as Director of Architecture and Store Systems for the Eckerd Corporation and was in charge of the Enterprise Architecture and Business to Business Centers of Excellence

Panelists  Eileen Peitsch  technology executive specializing in Pharmacy, Governmental Healthcare Programs and Project Management  27 years of experience in various IT roles at WellCare, Eckerd, IBM Global Services and most recently held the CIO position at Eliant  has extensive experience with onshore and offshore vendor management

JPMorgan Chase Story  December 20, 2002 signs outsourcing agreement with IBM  $U.S. 5 billion 7-year deal  Largest outsourcing contract at the time  September 15, 2004 backsources IBM agreement  Merged with Bank One on July 1, 2004

OUTSOURCING REASONS BACKSOURCING REASONS  Technology as a key competitive advantage  Create capacity for efficient growth  Accelerate the pace of innovation  Reducing costs  Increase quality  Best for the long-term growth and success of the company  Competitive advantages  Accelerate innovation  Become more streamlined and efficient JPMorgan Chase Story

IS Backsourcing  Outsourcing: BIG Global Industry  70% of outsourcing clients have negative experiences with outsourcing; 25% of them backsourced (Deloitte Consulting, 2005)  96% of 70 surveyed N. American companies would consider outsourcing (Compass, 2006)  Almost one-third of the canceled contracts are eventually brought back in-house (Lacity and Willcocks, 2001)

 Business practice in which a company takes back in-house assets, activities, and skills that are part of its information systems operations and were previously outsourced to one or more outside information service suppliers IS Backsourcing

Companies that backsourced  Xerox  Washington Mutual  UMass Memorial Health Care  UBS  Sears  Prudential  Karolinska Hospital in Stockholm  Halifax Bank of Scotland  Gateway  Farmers Group  Continental Airlines  Bank One  Amtrak Express Parcels, UK  ABB Power

REASONS FOR BACKSOURCING  Reaction to problems  Higher than expected costs  Poor service quality  Loss of control over outsourced services  Response to opportunities  Recognition of a new role for IS  Changes in executive management  External pressures or changes

 Outsourcing cost savings are often overestimated  Cost savings may be short lived (18 months)  Additional costs:  Employee time coordinating provider activities and transition period  Disruption of current work processes  Increased turnover of IT employees  Lowered employee morale Higher than expected costs

 Companies that backsource experience lower service and product quality than those that switch providers or continue outsourcing  70% of outsourcing clients have negative experiences with outsourcing Poor service quality

 25% of companies that backsourced had originally mislabeled IT functions as non- strategic  Critical success factors  Client and provider incentives do not align and the power shifts to the provider  Client-facing vs core Loss of control

 Business strategy undergoes modifications  Impact on IS strategy  Happens at the executive level  Core vs non-core  Need for innovation New role for is

 New executives are three times more likely to trigger a radical change in their new organization  Shifts in corporate power  New hire to lead the change  Executive sponsorship Leadership changes

 Executive leadership  Well understood processes  Documentation of outsourcing  Detailed plan  Support of in-house personnel Successful backsourcing

 Outsourcing arrangements are not forever  Backsourcing is costly and difficult  Poor morale, loss of employee trust  IT projects slow down  Keep your customer in mind Lessons learned

Does your company outsource? 1. Yes, IT outsourcing 2. Yes, BPO outsourcing 3. Both IT and BPO 4. No

If your company outsources, what was the main reason for outsourcing? 1. Cost 2. Access to expertise and resources 3. Outsourced non-core activities 4. Streamline operations 5. New executive leadership 6. Pressure from another company 7. Merger, spin off, acquisition etc.

Have you experienced backsourcing? 1. Yes 2. No, we are continuing to outsource 3. No, we never outsourced

If your company backsourced, what was the main reason? 1. Cost 2. Problems with outsourcing contract 3. Redefinition of the role of outsourced services 4. New executive leadership 5. Merger, spin off, acquisition etc. 6. Pressure from another company