1 Managing Vendors In A Rapid Change Environment Ken Horner Senior Vice President Strategic Sourcing and Contracts Administration June 14, 2001

2 AGENDA Background on Washington Mutual Strategic Sourcing Group Managing Vendors Through Mergers

3 Background on Washington Mutual

4 Recent Acquisitions Western Bank American Savings Great Western Home Savings of America Long Beach Financial Bank United PNC Mortgage Fleet Mortgage

5 Distribution Network States540 Financial Centers3091,106 Loan Centers48430 Households737,0005,350,000 Assets $20 billion$186 billion 2001 loans serviced will exceed 2000 by 2-1/2 times

Strategy u Focus on core competency u Access expertise u Save time and money u Capture market share u Reduce risk

7 1995/1996 Outsourced Functions Network and desktop management:IBM Item Processing:EDS Facilities Management:CB Richard Ellis Loan Processing:Alltel Credit Card:Associates

8 Strategic Sourcing Group

9 Mission Create efficiencies through expense savings, cost avoidance and service level improvement while achieving superior customer satisfaction

10 Objectives u Proactive approach to maximizing benefits of size in dealing with vendors (cost savings / service levels) u Coach/partner with company managers to negotiate more effective deals with vendors u Act as an advocate for consistent company negotiating positions u Act as a champion of Supplier Diversity

11 Client Critical Success Factors u Quality of Work u Ability to Deliver u Adherence to Schedule u Vendor Costs u Flexibility u Change Management u Compliance u Exposure Minimization

12 Common Misconceptions u Strategic Sourcing Group should have the final decision on which vendor is selected to provide a given product or service u Competitive bidding is always the best method for driving cost down u A competitive bid process is flawed if it is not on a completely equal playing field u Changing vendors will yield immediate benefits if the new vendor offers a better price, better service levels, etc.

13 Negotiation Practices u “Cowboys” make the worst deals u Bureaucracy is your friend u You really need the right Contract Negotiator u End User Managers must defer to negotiator all the way through the process u Negotiator must report high in organization - direct report to CIO or Shared Services Executive u Negotiator to manage interfaces with Legal, Business Owners, Information Security - must be skilled in negotiating all contract terms and conditions u Authority to negotiate ALL technology contracts - even ASP relationships driven by End User organizations

14 Managing Vendors Through Mergers

15 Existing Vendors u Growth expectation clear (resources, savings) u Hard deadline implementations u Risk avoidance u Internal skills required u Tight T&M project management process u Adherence to project methodology u Resist temptations to change existing systems and processes

16 Acquired Vendors u Establish accountability for each vendor u talk to acquired employees - get the oral history u read every contract u send the right notices on time u know how to recognize need for renegotiation u Renegotiation Situations u their vendor is also your vendor (anticipate this in your own contracts) u no-exit contracts or 100% liquidated damages u there will be vultures - find them early u lotto mentality u return of data

17 “Occasio” Favorable Opportunity

18 Rethinking Banking Occasio sets a new standard in retail banking by combining WaMu’s proven sales and service culture with a contemporary look and feel. Its innovative use of people, technology and design elements converge to provide something banks have never consistently delivered: an inviting customer experience.

19 Technology Elements u Teller towers - you can see the screen u Automatic cash dispensers u Point of sale systems u e-Teller wireless system u Access to wamu.com u Touch screen for product information

20 Vendor Challenges u Multiple critical paths and resource needs u initially difficult for vendors to appreciate importance of this initiative - not in the routine u expansion of need for top vendor project mgrs u New this, new that, new everything u hardware size and location u wiring approach u devices, interfaces and added security requirements u Fast contract negotiation for new vendors u Forming new vendor-to-vendor relationships