1. Chad Doiron / Michael Saunders April, 2007
IT Outsourcing
Chad Doiron / Michael Saunders April, 2007

3. Today’s Presentation
Why are companies outsourcing?
What is being outsourced?
How are companies outsourcing?
Challenges
Benefits

4. Why are companies outsourcing?
Percent of companies indicating key drivers of IT Outsourcing
Source: Aberdeen Group “The Business Value of IT Outsourcing Benchmark Report”, 2006

5. Why are we outsourcing? 44% (4 out of 9) 33% (3 out of 9)
AAFA Members
Expertise & Domain Knowledge
44% (4 out of 9)
Industry Best Practices
Offshore Opportunities
33% (3 out of 9)
Easily Augment Staff
67% (6 out of 9)
Drive Down Costs
78% (7 out of 9)
Leverage Buying Power
11% (1 out of 9)
Rapid Growth Through Acquisitions
Build Competencies Quickly
Other: Company Growth; Process Transformation; “Near to Customers”; Data “Security”
Most AAFA members who are outsourcing are motivated by the goal of cost reductions.

6. Why will companies outsource:
The future…
Why will companies outsource:
Focus On Internal Core Competencies
Labor Arbitrage
Improve (Predict) Service Levels
Enterprise Transformation

7. What is being Outsourced?
Percent of companies indicating some degree of IT Outsourcing
Only 30% of AAFA members indicated that they are doing any kind of outsourcing.
Source: Aberdeen Group “Outsourcing Application Development and Maintenance”, 2006

8. What is being Outsourced?
$203 Billion Dollars in 2005 (7.4% Growth Rate)
Data Center Outsourcing
Network Outsourcing
Enterprise Application Outsourcing
Desktop Outsourcing
Source: Gartner 2007 Key Issues for Outsourcing, Infrastructure and Applications

9. What do we Outsource? 100% (9 out of 9) 22% (2 out of 9)
AAFA Members
Application Development & Maintenance
100% (9 out of 9)
End User Computing (Pc’s And Helpdesk)
22% (2 out of 9)
Data Center
44% (4 out of 9)
Data Network Management
Disaster Recovery
IT Security
11% (1 out of 9)
Business Continuity
Voice Network Management
All AAFA members who are outsourcing are doing so in the area of application development and maintenance.

10. What will be outsourced:
The future…
What will be outsourced:
Increased mix of off-shore/on-shore resources
Additional business processes (A/P, customer service, human resources, etc.)
Enterprise Architecture
Research & Development

11. How are companies outsourcing?
First Generation
Second Generation
Third Generation
Generation “X”
Scope Of Role
Primary Objectives
Resource
Expertise
Competency
Innovation
View Of Relationship
“Vendor”
“3rd Party”
“Extended Employees”
“Partner”
Organizational Implications
Projects
Functions
Categories
Limited Organizational Impact
Senior Involvement
Integrated Organizational Roles

12. Example of Third Generation Organization
Company retain ownership of applications, finance, security, infrastructure, technology, etc. by maintaining key management resources in place.

13. Additional Contract Considerations
Outsource Services Contract:
Base services include service level agreements, scope and support requirements
Metrics used to establish minimum requirements
Monetary penalties if metrics not achieved
Costs tied to benchmarks
New projects structured under change controls that describe the scope, cost, and deliverables
All projects managed according to single overall governance model

14. How will companies outsource:
The future…
How will companies outsource:
Greater Focus on Partnership (Less Focus On The Company / Vendor Relationship)
Greater Focus On Innovation
Use multiple vendors
Shift in Budget Spend (From Operational “Keeping The Lights On” To Strategic)
Shorter Contracts With More Flexibility

15. Satisfaction Levels with Outsourcing Activities
Challenges
Satisfaction Levels with Outsourcing Activities
Source: Aberdeen Group “The Business Value of IT Outsourcing Benchmark Report”, 2006

16. Top Challenges with Current Outsourcing
Source: Aberdeen Group “The Business Value of IT Outsourcing Benchmark Report”, 2006

17. Challenges The Outsourcing Paradox:
“A successful outsourcing requires trust, understanding and alignment, yet, the interests of the customer and the service provider are not naturally aligned…
A successful outsourcing must strive to be a partnership, yet the nature of the transaction can produce complex agreements, lengthy deal cycles and adversarial negotiations.”
Source: Edward J. Hansen Morgan Lewis & Bockius, LLP

18. Benefits Value Drivers Transformation Innovation Quality
Reduced Operating Cost
Improved Version Control and Lifecycle Management
Improved Documentation of Procedures and Best Practices
Improved Development Quality
Broad-base Expertise
Internal Staff Focus on Strategic Issues
Faster Turn-around for Greater Solution
Access to Superior Expertise
Innovation
Quality
Administration
Value
Cost
Drivers

19. The Future…

20. Questions