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

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

4. 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. 5 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 44% (4 out of 9) Build Competencies Quickly 67% (6 out of 9) Other: Company Growth; Process Transformation; “Near to Customers”; Data “Security” Why are we outsourcing? Most AAFA members who are outsourcing are motivated by the goal of cost reductions.

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

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

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

9. 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 22% (2 out of 9) Disaster Recovery 22% (2 out of 9) IT Security 11% (1 out of 9) Business Continuity 11% (1 out of 9) Voice Network Management 11% (1 out of 9) What do we Outsource? All AAFA members who are outsourcing are doing so in the area of application development and maintenance.

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

11. 11 How are companies outsourcing? First Generation Second Generation Third Generation Generation “X” Scope Of Role Primary Objectives ResourceExpertiseCompetencyInnovation View Of Relationship “Vendor”“3 rd Party” “Extended Employees” “Partner” Organizational Implications Proje cts Categ ories Functi ons Limited Organizational Impact Senior Involvement Integrated Organizational Roles

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

13. 13 Outsource Services Contract: Additional Contract Considerations 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. 14 The future… 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 How will companies outsource:

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

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

17. 17 The Outsourcing Paradox: Challenges “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. 18 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 Benefits Cost Administration Quality Innovation Transformation Value Drivers

19. 19 The Future…

20. 20 Questions