Migration of Outsourced ProcessesHow E&Y can partner with you

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Table of Contents 1Migration of Outsourced Processes (MOP) 2Ernst & Young Approach to MOP 3Advantage, partnering with Ernst & Young

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1Migration of Outsourced Processes (MOP)

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Migration of Outsourced Processes (MOP): Program SummaryWhat is Migration of Outsourced Processes (MOP)?In what scenarios could the need for MOP arise?Price or performance issues with the vendorFinancial/Operational instability of the vendorChange in the buyers environment leading to a change in the requirements and fit with the existing vendorChange in vendor landscape leading to more competitive vendor choices in the marketVendor rationalization initiatives on part of the buyer in a bid to consolidate its vendor portfolio for better cost and operational managementWhat are the key action steps in MOP?Exit Readiness Assessment for portfolio of outsourced processesSelection of alternate vendorProgram management and transitionWhat does EY bring / how do we differentiate?Robust approach based on industry / subject matter knowledge and experienceAbility to analyze and manage risks along the outsourcing roadmapRapid and efficient delivery utilizing robust methodology and supporting toolsProgram management tailored to meet the needs of a outsourcing programWhat are the key risk areas in MOP?Knowledge transitionAccess to human resources on the processesData security and confidentialitySeamless transition of processEnsuring business continuityHigh exit costsLegal and compliance risksMigration of Outsourced Processes refers to transition of processes on an exit from an existing outsourcing contract on normal termination of the contract or termination of the contract for a cause. Industry best practice is to have a well planned exit strategy at hand for ensuring minimum disruption to business and customer relationship, in the event an existing contract needs to be terminated.

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What is your current outsourcing scenario?High risk exposureHigher turnaround times for identification of alternate vendorHigh exit costs

Multi VendorSingle VendorUnderstanding buyers risk exposure and available alternatives for migrating outsourced processesLow risk exposurePossibility to migrate processes to the Shared Services Centre/CaptivePossibility to work immediately with other vendors for migrationMulti vendor with Shared Services/Captive setupThe first step towards developing a companys MOP program would be to have a clear understanding of the current portfolio of outsourced processes and the model/unique arrangements of sourcing.

The key factors that would influence the MOP program are:

Portfolio and nature of outsourced processes (strategic importance, criticality, ease of transition, level of complexity, availability of expertise for said processes)

Vendor/Sourcing portfolio (as illustrated below which impacts available choices/routes for MOP)Moderate risk exposurePossibility to work immediately with other vendors for migration

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What happens in a MOP situation?Exit CostsLegal & Compliance MOP situation could arise due to.. MOP requires focus on key risk areas such as..need to develop a Mitigation StrategyKnowledge TransitionChange ManagementHuman ResourcesData Security and ConfidentialityTransitionBusiness DisruptionExit/ Switch Vendors Migration StrategyExit Readiness AssessmentAlternate Sourcing Plan Program Management and TransitionChange in Customers EnvironmentLeading to change in requirementsChange in Vendor LandscapeLeading to more competitive vendor choices in the marketVendor Rationalization InitiativesCustomer initiative to consolidate vendor portfolioPerformance IssuesInstability of vendor/business continuity issuesA MOP situation due to an impending termination of contract or termination due to performance issues provide the buyer an opportunity the plan the MOP with adequate time to mitigate risks. MOP risks are heightened in situations where the buyer needs to terminate an outsourcing contract with very limited time to plan its MOP strategy in situations such as bankruptcy of the existing vendor.

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What are the key risks to be addressed in MOP?Contractual ObligationsExit CostsBusiness DisruptionKnowledge TransitionKey Risks in MOPExit Costs: In absence of relevant legal clauses in the contract, legal and consultancy charges could be significant for the buyer and hence the termination and transition costs are a key consideration in the transition processKnowledge Transition: A key risk in migration is ineffective knowledge transfer between incumbent vendor and the new vendor. Complete access to documentation and information would be essential for seamless transition to a new vendor.Human Resources: An exit strategy should cover possible employee transfer scenarios, allowing transition of outsourced processes along with the human resources involved in the project.Data Security: A key risk in migration is ensuring continued data security and privacy. The buyer would need to take custody and manage transfer and/or destruction of data residing with the outgoing vendor.DataSecurityHuman ResourcesContractual Obligations: Review of the relevant clauses in the contract related to exit from the outsourcing contract is essential to understand legal and compliance related risks to be addressed in the exit strategy.Business Disruption: An exit strategy should plan for seamless business continuity and should prevent disruption of business in moving from one outsourcing arrangement to the other.In the event of an urgent MOP situation, ensuring business continuity and data security while minimizing exit costs pose a serious challenge to a buyer.

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2Ernst & Young approach to MOP

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What is the risk mitigation strategy or MOP strategy?Performance of service requirements during transition periodRecover/Transfer proprietary information and information about systems, operations and businessRigorous knowledge transfer and documentationsStep 3: Program Management and TransitionUnderstand financial and non-financial implications of the exitIdentify key gaps in exit readiness and strategize action points to address themExit Readiness AssessmentIdentify and evaluate potential vendorsUndertake detailed vendor due diligenceSelecting Potential VendorIntegrated program management elements:Project management officeProgram assuranceTransition/MigrationInformation technologyOrganization/People

Program Management and TransitionFinalize contract elements:Terms and conditionsPricingService levelsExit routesContract FinalizationStep 2: Alternate Sourcing PlanStep 1: Exit Readiness AssessmentRecovery of physical assets supplied to the vendor for the outsourcing arrangementEnsure that key personnel and resources with expertise stay on the processMinimize legal risks/costs and other exit costsMethodology - Key StepsKey imperatives for MOP strategy

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Step 1: Exit Readiness Assessment Estimate Financial Impacts on Outsourced ProcessesEstimate Non FinancialImpacts on Outsourced ProcessesExit Readiness Quotient = f( Financial Impact, Non- Financial Impact)Prioritization of Outsourced ProcessesIdentification of recovery objectives, financial impact and interdependencies of Outsourced ProcessesDetermination of mitigation measures for other non financial impactsDisruption in mission critical business processesDisruption in customer facing processesLoss of tangible assetsPenalties or Legal liabilitiesUnforeseen exit costsLoss of competitivenessEffect on customer serviceEffect on vendor relationThe approach for Exit readiness assessment is as stated below:

Key areas for readiness assessment include:Outsourcing contract implicationsBusiness Continuity Exit costsHuman ResourcesTechnologyProcess

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Step 2: Alternate Sourcing PlanProfiling and evaluating alternate vendors / partners scientificallyIdentify alternate vendors / partners that would fit buyers outsourcing objective:Profile of Vendor / PartnerNote:Weights provided by EYScores: 3-high, 2-medium, 1-low, 0-noneMax score possible: Xx3= 3XIllustrative

WeightsEY scoreCommentsRelevant service delivery expertise32Industry experience 33People management21Quality management22Scalability21Cultural fit22Financial strength22Management bandwidth21Past track record of service delivery and Pot / Joint-Ventures22TOTAL SCORE6048

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Step 2: Alternate Sourcing PlanVendor Due Diligence

Support and advise the site visit team during onsite vendor assessment (s)Provide inputs on Vendor capabilities in the following areas:

Assist in keeping the team on track and ensuring objectivity during team meetingsFacilitate in summing up the observations, major findings, strengths & show stoppers for various site visitsFacilitate in documenting inputs from team members & undertaking SWOT analysis for better assessment of potential vendors vis--vis competitorsManagement DepthGovernance ModelCulture Fit Transition Expertise & ScalabilityValue Addition PotentialIntegrated (End to End) Service Offering Delivery CapabilityCost Quality ContinuumIT Operability

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Step 2: Alternate Sourcing PlanContract FinalizationSourcing Strategy DevelopmentIndustry StudiesLocation StudiesFinancial Feasibility StudiesDraft ContractsImplementation AssistanceBusiness PlansVision Development & Enterprise SWOTStrategic PlanningIndustry analysisCompetitor BenchmarkingLocation selectionRelocation strategyFinancial analysis and modelingCapital structuringFunds Flow planningProject Configuration & PhasingOrganisation structuringRoll Out planningImplementation schedulingFormulating draft agreementsExit PlansGovernance RequirementsService ExpectationsGains share Due DiligenceAgreement Terms & ConditionsPricing MechanismsAnnexure The business sideT&CExit RoutesService LevelsMaster Service Agreement

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Step 3: Program Management and TransitionIntegrated Program ManagementAlignment with StrategyAlignment with program principlesIndependenceDue DiligenceRisk AssessmentProject AssessmentIndependent Program AssuranceProgram PlanningProgram CoordinationResource ManagementRisk & Issue ManagementProject & Program Status Reporting PMO

Organisational ReadinessPeople ReadinessBusiness Process ReadinessIT Systems ReadinessKnowledge TransferUAT Handover & BCP

Transition / MigrationJob DesignRetrenchment / Redeployment / RedundancyRetentionCommunicationsStakeholder Management

Organization & PeopleGovernanceProgram GovernanceScope & Change ControlIssue ResolutionAdvisoryStrategic AssessmentRelationship ManagementSupport to partners / vendors

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3Advantage, partnering with Ernst & Young

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Why Ernst & Young?We will ensure that we bring the best skills on the engagement for you

We have global reach through other country practices UK, Europe, USA

Our team will consist of skilled team members across practicesOur global outsourcing methodology is tried and tested across industries and geographies

We have successfully engaged in outsourcing engagements since the past 4 years in India

We have a skilled team of people, many of whom have first hand experience of both outsourcing and transformation environmentsPeopleProcessTechnologyWe have breadth of skill across outsourcing implementationsWe are a global practiceCHANGE MANAGEMENTCreating consensus-oriented project teams with both cross-business unit and cross-functional membershipEstablishing communication and coordination that transcends the projectIdentifying key barriers and enablers for implementation success

ALIGNMENT WITH BUSINESS STRATEGYDeveloping an approach which links local and global strategiesFocusing on the value proposition to drive the outsourcing roadmapSPEED AND VALUE-FOCUSEDUsing proven accelerators and highly-rated methodologies Providing a diverse group of professionals with applicable experienceLeveraging knowledge from our Center for Technology Enablement, other research centers, and similar engagements

RESULTS-DRIVENIntegrating business strategy and operating model, process, infrastructure, technology and organizational dimensionsProactively managing project risksCreating waves of implementation that realize benefits sooner and make long term implementation more manageableOur approach integrates E&Y professionals with stakeholders to help create a Outsourcing Roadmap that increases value and optimizes investments.

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We are the Market Leaders in India*CNBC Survey: 2004-05ASSURANCE AND ADVISORYAABS practice (includes BAS) a leader in Big 4Advisory relationships with over 90 of the top ET200 companiesMarket Leaders in relationships in the Telecom sector and the Real Estate sector over 65% market share in both sectorsExpatriate partners/ managers who bring in world class best practicesTAX ADVISORYBest Tax Advisory Firm by ITRLargest Tax Practice ~30 % market share (Big 4 & niche tax/legal firms)TRANSACTION ADVISORYRanked # 1 by Bloomberg in terms of number of deals & in Top 3 in terms of value since 2002Largest Diligence PracticeOur People110 partners & growing ; 8-10% from overseas EY practices: Strong collective experienceExpatriates from Europe, Far East & Americas part of our senior client service teams~40% of client serving staff with overseas exposureFocus on KnowledgeMore than 5% of revenues invested in training and knowledge management

Churning thought leadership reports on a continual basisService QualityClearly identified account teams with the right skill mixStrong and positive client feedback with ~99% clients saying Will recommend EY services Dedicated quality and risk management team aligned globallyMarket Leader: 33% share of Big 4 by revenue*Indias largest professional services firmOffices in 8 cities in India5,348 employees

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We have the Largest Dedicated Outsourcing Advisory team in IndiaDedicated outsourcing advisory team of 20+ professionals with 80+ years of experience in strategic sourcing . A multi-disciplinary team of experienced industry professionals with in-depth understanding of sourcing markets, customers and technologies. We service Outsourcers, Captives and 3rd Party providers across the strategic sourcing landscapeOur depth of industry expertise in India has resulted in EY India being one of the nerve centers for the Global Strategic Sourcing Advisory practice we not only serve companies in India but are also exporting our skills to serve clients around the globeErnst & Young is the leading provider of services to the organizations involved in shared services activities in India. We have a strong presence in providing sourcing & transition advisory, business process and controls framework improvement, risk management, information security IT risk management, tax and transaction advisory services. We serve diverse clients, including global Telecom companies, captive shared service / software development centers of Fortune 500 companies, leading Indian IT & BPO companies, Venture capital funds and large Indian conglomerates outsourced operations. We, therefore, have a deep understanding of global and Indian shared services market, and are fully conversant with international cultural & regulations, sourcing issues and service delivery challenges and have developed significant capabilities to serve client on diverse assurance and advisory needs.Well-established service delivery methodologies & teams with extensive experience serving clients globallyGood knowledge of strategic sourcing market. We have worked with 80% of top 15 IT & BPO service providers in various capacitiesPartner extensively with industry forums like NASSCOM and industry chambers in conducting industry studies to address opportunities and pain points of the industry.Our Global Footprint Across Industries

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E&Y Credentials in Outsourcing AdvisoryIntroductionE&Y provides advisory services for captive set-ups in the following areas:Feasibility and Business Case analysis Transition AdvisoryChange ManagementGovernanceRisk ManagementE&Y follows a Global Advisory model to bring the right competencies together for global engagementsDifferentiating FactorsIndependence E&Y does not act as either management or as the sourcing host. Our independence enables us to focus on fact based situation assessment, and advisory. Full Lifecycle Capability E&Y has full lifecycle and multi-disciplinary capability in the area of Shared Services Advisory.Complex Business Transformations E&Y teams have undertaken complex, global business transformations spanning multiple continents. Global Advisory Model E&Ys global service capability and operating expertise enables it to bring the right mix of global and local talent together to serve our clientsCredibility E&Y is recognized world-wide as a premier shared services advisorApproach E&Y has a proven method and approach to assist global firms through the entire shared services life-cycleGlobal Sourcing of Knowledge ServicesErnst & Young presented this report on KPO for the Global Offshore Outsourcing Summit 2006 organized by the Indo-American Chamber of Commerce. In thisreport, we have provided a supply side overview ofthe KPO business in India with specific emphasis on three key horizontals.Outsourcing Insights Even as the global sourcing debate hots up, there are questions galore on the rise and sustainability of India as the number one destination for outsourced work. This report is an attempt to visit the key drivers and challenges of Indias outsourcing businesses, & to ascertain the likely outcomes in the coming years.Outsourcing TrendsThis article examines the benefits of business process outsourcing (BPO) and examines some of the issues, such as the impact it may have on an organization's human capital. It also argues that the growth in popularity of BPO will lead to its commoditization and potentially to the rise of numerous small providers offering more bespoke and cheaper services EYe on Outsourcing EYe on Outsourcing provides information on trends and events in the outsourcing world. The journal gives our perspective of the industry, latest on companies outsourcing to India and the deals being signed across different verticals and industries.

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Representative Clients Outsourcing AdvisoryAmerican Express FCAXA IT ServicesBank of America Continuum Cambridge Integrated ServicesChemoil Dell International ServicesFidelity Shared Services Future GroupGeneral Motors Shared Services Goldman Sachs Shared ServicesHindustan Lever National Branch Holcim IndiaJohnson & JohnsonJP Morgan ChaseMorgan Stanley Advantage GlobalPrudentialSiemens Shared Service IndiaTescoVirtusa Unilever (Global IT Helpdesk)CaptivesThird Party ProvidersAbbey National Bank PlcBritish PetroleumBritish TelecomCentricaCisco Systems Citi BankDeutsche BankDiscover Financial ServicesGlobal Realty OutsourcingGE Capital Services GSKICI IndyMac BankKey CorpKaiser Permanente Merrill LynchMellon BankNationwidePfizerScottish & NewcastleWalt DisneyXeroxOutsourcersAccentureCapita IRGCognizantCovansysFirstSourceHealth Scribe IndiaIBM BTOi-FlexInfosysIntelenet GlobalMphasisProgeonTCSTransworksWipro Technologies

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