Maximizing Value by Innovating Managed Services

Time Warner Ashish Malhotra VP, Global IT Workforce Management

Neo Group Atul Vashistha Chairman

sig.org/eval MAXIMIZING VALUE BY INNOVATING MANAGED SERVICES

A presentation by Time Warner and Neo Group ASHISH MALHOTRA, TIME WARNER ATUL VASHISTHA, NEO GROUP SIG GLOBAL SUMMIT 2016 Carlsbad, CA 3 4 NEO GROUP OVERVIEW

Since 1999, we have been helping clients accelerate benefits and minimize risks associated with global in-house services and sourcing

We have a Singular focus on the global services and sourcing supply chain

We achieve outcomes through deep IP, real-time analytics, globally recognized experts, proven methodologies and co-creation with our clients

We deliver results through three distinct and linked solutions and services:

GOVERNANCE ADVISORY SERVICES SUPPLY WISDOM SOLUTIONS

• Globalization Strategy • Design • Country • Sourcing • Run and support • City • Location strategy • Ongoing Governance • Supplier • Health Checks Services, such as, Resource, • Outsourced Service Desk • Renegotiations Contract and Performance • Monitoring Subscription Management Services • Governance Services

. How do we ensure what is right for managed services? . How do we manage risks of sourcing in a managed services model? . How do we minimize the liabilities - contractual staff and with suppliers? . How do we ensure performance and relationship alignment with suppliers?

BASIC STRATEGIC

Functional & Technical Expertise Soft Skills + Global View

Project Team Task Management Stakeholder Influence

Process & Methodology Compliance Strategic Alignment (Quality + Value Delivery)

Project Issues Management Managing Risks in Delivering Value

Manage Project Inputs Own Program / Project Outcomes

Types of WHY WHAT WHO WHEN WHERE HOW Engagement should a Buyer is the is responsible does the are the team is the Delivery Manager use Buyer really for managing engagement members engagement Models this model purchasing the team end located being paid for

Staff  Unstructured  People  Buyer Manager  When the Buyer  The Buyer  Time & Materials Augmentation body of work Manager no longer Manager decides  Brains by  Billable hours requires the skill the location of the  Able to manage the hour based on team members individual resources Individual rates and skills  Willing to endure all risks

Capacity  Ongoing, highly  A set of  Combined Buyer,  When the work  The Buyer  Pre-established repeatable work related skills Manager, and activity has been Manager and block of work 3rd-Party Provider shifted to another Provider Manager hours  Able to manage a  Production Manager set of resources agree on the process/factory capacity  Blended rates (internal or location of the  Willing to share risk external) team members with a provider

Fixed  Defined beginning  Deliverables  3rd-Party Provider  When the  The Provider  Firm Fixed Fee Deliverable and defined end deliverable is Manager decides  Based on completed on the location  Able to manage to reaching of the team a workplan milestones members  Willing to share risk with a provider

Managed  Ongoing engagement  Outcomes  3rd-Party Provider  When the work  The Provider  Monthly Fixed Service with specific outcomes activity has been Manager decides Fee  Performance shifted to another on the location of  Able to manage  Based on set of resources the team members compliance to SLAs performance (internal or  Willing to share external) risk with a provider

6 7 POLL

• What portion of your outsourcing Managed Services?

• What portion do you expect it to be by 2020?

While it is important to understand and manage all of the components of a sourced engagement, there are a select set of management activities that require a considerable level of focus, on an on-going basis, in order to ensure the success of the engagement.

Critical Success Factors (CSFs) must be closely managed to ensure the opportunity successful engagement Staff Fixed Managed Capacity Management Activities Augmentation Deliverable Service Activities In Scope Activities Not In Scope List of Deliverables Acceptance Criteria List of Responsibilities Assumptions and Dependencies Risks and Mitigation Plans Communication and Escalation Change Control Pricing and Invoicing Schedule Knowledge Transfer/Transition Governance and Reporting Service Level Agreements & Credits Productivity Improvements Quality Improvements Warranties

8 CHOOSING THE APPROPRIATE OPERATING MODELS

The selection of one operating model over another will be primarily driven by the Manager’s desire to manage and control the outcome of the engagement, coupled with the need to assume responsibility for managing inherent risks.

L Low M Medium H High

Level of Level of Outsourcing Perceived Control Endured Risk Operating Example Models Engagements Buyer 3rd Party Buyer 3rd Party • Oracle Database Analyst Staff • Java Application Architect Augmentation H L H L • Business Analyst • Testing Centers of Excellence Capacity • Virtual bench of common M M M M or repeatable skill • Requirements Analysis Phase Fixed • Application Construction Phase Deliverable M M L H • Full life-cycle App. Development • Legacy Application Maintenance Managed • Infrastructure Maintenance Service M M L H • Remote Server Monitoring

The Buyer Manager can significantly reduce their risk by engaging Third-Party Providers to provide Fixed Deliverables or Managed Services whenever possible.

9 ROLES AND RESPONSIBILITIES

The responsibilities for each engagement activity can be best portrayed in a responsibility assignment matrix, often referred to as a RACI chart. Based on the selected type of sourcing engagement, certain responsibilities will shift from Buyer to the Provider.

R Responsible for completing that step in the process C Consulted prior to the completion of the step A Accountable for ensuring that the step is completed I Informed of the results once the step is completed

Buyer Roles Provider Roles Buyer Roles Provider Roles STAFF FIXED

AUGMENTATION DELIVERABLES

Tester Proj. Mgr. Proj. Analyst Architect Developer Tester Mgr. Proj. Analyst Architect Developer Mgr. Proj. Analyst Architect Developer Tester Mgr. Proj. Analyst Architect Developer Tester

Proj. Mgr. Proj. Proj. Mgr. Proj. Analyst Architect Developer Tester Analyst Architect Developer Tester Mgr. Proj. Analyst Architect Developer Tester Mgr. Proj. Analyst Architect Developer Tester Plan Project R,A C,I Plan Project R,AA C R,IR Analyze Req. C,I R,A Analyze Req. I A,CA I R Design Software I C,I R,A I Design Software I A,CA I C R I Build software I C C,AA I R Build software I A,CA I C R I Test Software I C,I R,A Test Software I A,CA I C R

Buyer Roles Provider Roles Buyer Roles Provider Roles MANAGED CAPACITY

SERVICES

Tester Proj. Mgr. Proj. Analyst Architect Developer Tester Mgr. Proj. Analyst Architect Developer Mgr. Proj. Analyst Architect Developer Tester Mgr. Proj. Analyst Architect Developer Tester

Proj. Mgr. Proj. Proj. Mgr. Proj. Analyst Architect Developer Tester Analyst Architect Developer Tester Mgr. Proj. Analyst Architect Developer Tester Mgr. Proj. Analyst Architect Developer Tester Plan Project R,A C,I C,I Plan Project A,CA R,AR C,I Analyze Req. C,I R,A Analyze Req. A,IA C,I R Design Software I C,I R,A I Design Software A,IA I C,I R I Build software I C.I A,CA I R I Build software A,IA I C CR I Test Software I A,CA I C R Test Software A,IA I C,I R

10 THE STATEMENT OF WORK (SOW)

The (SOW) defines the specific components of a sourced engagement, with each requiring differing levels of detail, based on the type of engagement model that is selected. (e.g., Staff Augmentation, Capacity, Fixed Deliverable, Managed Service, or Hybrid)

Staff Fixed Managed Capacity L Low M Medium SOW Components Augmentation Deliverable Service H High VH Very High Activities In Scope L M VH H Activities Not In Scope – M VH H List of Deliverables – L H H Completion of all SOW sections Acceptance Criteria – L VH H is important but there is a key List of Responsibilities L L H H set of components that must be Assumptions and Dependencies – M H H well thought out to ensure the Risks and Mitigation Plans – M H H greatest opportunity for Communication and Escalation L M H H success. If these components Change Control – L VH VH are not fully understood prior Pricing and Invoicing Schedule L L VH H to engagement initiation, the Knowledge Transfer/Transition – L M H result is likely to be Governance and Reporting L M H H mismanaged expectations between Buyer management and SLAs & Credits L M H VH the Provider. Productivity Improvements – H L H Quality Improvements – H L H Warranties – M H VH

11 OUTCOMES VS. TASKS

The focus and activities of internal staff differ when managing outcomes vs. tasks.

Manage Manage Outcomes Tasks the Result the Work

Clients Manage

 Requirements  Scope  Communication  Time  Performance  Resources  Results  Activities  Relationships  Process  Expectations  Deliverables

Critical Success Factors  Service Level Agreements  People  Knowledge Management  Talent Management  Provider Governance  Domain Expertise  Program Reporting  Project Management  Steering Committee  Facilities  Escalation Process  Quality Assurance

12 13 FOCUS WILL BE ON MANAGING PERFORMANCE

“Not everything that counts can be counted, and not everything that can be counted, counts.” - Albert Einstein

. Any managed services model is based on expected results / outcomes – achieved through adoption of leading practices and embraced by stakeholders and followed with the right spirit and rigor

. Effective measures to monitor and deliver on the service levels (expected outcomes) is critical to the adoption of managed services - adoption is typically slower than expected across organizations

. Continuous improvements is an on-going process – maturity is reached over a period of sustained efforts

. Monitor and measure performance indicators that “actually” impact the business when service levels aren’t met

It is important to follow a consistent service level framework MONITOR – SOURCES EVALUATE & DEFINE “What Really Matters”

Used In-house Impact

- What affects the business CRITICAL New Created SERVICE LEVELS (CSL) In-house Influence Leading & Lagging Indicators – Will it have an influencing effect on the outcomes Supplier Provided – Will it manage stakeholders expectations REPORTING Business Provided SERVICE LEVELS (RSL) Measurable – Can it be measured Co-Developed objectively

Relationship Peer Shared - Will the measures contribute to CRITICAL DELIVERABLES knowledge sharing and on-going improvements

Process Frequency Rationale Client Provider

SLA Monitoring Daily / Weekly Review 

SLA Analysis and reporting Monthly Control 

Calculate & monitor utilization Daily Capacity Estimation/Productivity  

Calculate Performance Credit, Earn-back Yearly Financial Impact 

Validate Performance Credit, Earn-back Yearly Financial Impact 

Validate RCA and track progress Ongoing Operational Excellence 

Manage Continuous Improvement (SLAs) Ongoing Continuous Improvement 

Review service level applicability Quarterly Redefining SLAs  

Publish Business/IT Availability Index Monthly Business Continuity 

Hiring Fulfillment / Metrics Monthly Business Continuity 

Monitor critical deliverables Yearly CSAT  Notes Engagement Operational Health - check Quarterly Ops and Relationship Improvements 

Cultural Integration – One-Team-Team On-Going Operational Excellence  

Project Reporting Monthly Control 

Contractual Compliance Audits Yearly CSAT Legal Compliance 

Governance reports should include a select set of lagging indicators, in the form of SLAs, and an even smaller set of leading indicators, in the form of KPIs.

Selection of SLAs and KPIs The governance reports should contain 4 to 6 SLAs, and 1 or 2 KPIs, that are felt to be the most important factors to the business. These 5 to 8 items will form the basis of meaningful ‘heads-up’ metrics on the Manager’s dashboard.

The Provider is meeting the SLAs, but the engagement is failing Even though a Provider is meeting their contractual obligations, the KPIs may indicate a downward trend in the performance of the business which should warrant action.

The value of choosing the right KPIs If the correct measures have been used in the governance report, and the KPIs are truly leading indicators, then critical issues can be dealt with proactively versus managing failed actions or results.

The selected SLAs and KPIs may change over the life of the engagement, based on the changing needs of the business and the area of engagement that require management focus.

16 ROBUST APPROACH TO GOVERNANCE

Consider implementing a robust governance model with simple interfaces that increase delivery options and efficiency.

Line of Business Impact: Function Cost ––– Risk Key Success Factors 1 Service Management • Proactive vendor management (VMO) • Detailed metrics and KPIs Service • Process automation with multi-vendor 1 Management H H 2 control capability 3 4 • Effective problem management PMO Build Operate • Understand demand impact on invoice

Towers • Clear projection by categories PMO M H 2 • Actively manage risks and issues • Run projects to audit ready methodology 5 Strategy • Demand process clarity • Change mgt. controls 3 Build M L Governance • Predictable releases 6 • Clear resource levels (e.g. shared roles) • Efficient “one & done” metrics Flexible • Proactive management More Operate H H Workforce 4 • Problem management remediation Balanced and • Automation aligned with delivery Contractors Employees efficient sourcing • Clear priorities for Cost, Risk, and Quality based upon: • Enterprise reference architecture • Service clarity 5 Strategy H M • Standard • Defined application objectives • Close alignment with business operation Vendors Partners procedures • Stable processes • Maintain compliance with standard • Simple interfaces technology and processes Governance M M Less • Measures and 6 • Oversight to achieve standardization Tactical Strategic controls • Manage issues based on strategic priorities

17 AVOID COMMON PITFALLS

Lack of buy-in from demand  Ensure that internal staff is informed about the managers negatively impacts managed service model and strategy. the provider’s ability to  Train managers for their new roles and deliver and may negate SLAs responsibilities in a managed service operating put in place for the outcome mode.

 Providers that are unprepared for managed outcome models rarely deliver the product on time Make sure provider is or within the budget allocated. New negotiation qualified to deliver a ensues related to change order and overtime. managed service  Understand providers capabilities and examples of how previous engagements were delivered during selection process.

 Set the right expectation up front and in contracts. Often, the client thinks they are contracted for managed service and the provider Beware the T&M thinks the client is ultimately responsible for the engagement masquerading outcome. as Managed Service  Similarly, a client may sign up for managed service but consume on a staff augmentation model, which may also lead to unexpected outcomes.

Understand the level of  If you do not devote enough time to this, there is knowledge transfer effort no way a provider can deliver the desired outcome. required

18 19 ENSURE GOVERNANCE IS ALIGNED TO GOALS

. Align business strategy & global services initiatives . Guide execution of enterprise wide global sourcing initiatives . Ensure adequate risk mitigation and controls . Program sponsorship

Strategic Governance . Coordination, communication & control between process owners . Provide for knowledge management . Opportunity Identification & enable demand aggregation Functional Governance . Cross-functional, cross-geography, cross-vendor alignment

. Manage global sourcing activities and contracts Project Governance . Manage vendor relationships, performance and resources . Manage scope and integration . Reporting

GOVERNANCE – RELATIONSHIP MANAGEMENT ESCALATION PYRAMID FOCUS

Corporate Services Escalation Categories Participants

Procurement

Global Audit Global

Security Finance

Legal Client Provider CORE TEAM / HR GMO . Continuous Low Performance / SLA ratings . Unresolved Client / Provider difficulties CIO, GMO, CEO, SBU Head, . Issues impacting MSA / SOW Level 4 Procurement, Delivery Head . Issues Unresolved at Level 3 HR, Finance, Legal Financial Performance Contract Relationship Resource Management Management Management Management Management Pillar Head, SBU Head, . Falling Performance / SLA ratings Project Manager, Delivery Head, . Non- Action on Action Item (ATRs) / Recurring Issues Level 3 Resource Program .Issues Unresolved at Level 2 Manager Manager

. Fall in Performance / SLA ratings . Client of Choice initiatives . Unresolved Task Request Prioritization Project Manager, Program . RACI . Work Load Adjustments Level 2 Resource Manager / . Tracking issues to closure . Quality / Productivity / Other issues not Manager Offshore Delivery Manager . Communications strategy & management resolved at Level 1 . Meetings and visits (meeting cadence) . Project Issues . CSAT . Process Deviations / Non- Project Teams Project Teams . Employee recognition programs Compliance Level 1 . One Team . Task Request Prioritization . New opportunities . First Level for Quality/ . Relationship feedback Production Issues The key steps in the dispute resolution mechanism is to conduct periodic reviews of all project issues. The periodic reviews largely help in resolving the disputes at an early stage. ENGAGEMENT ISSUES PRIORITIZATION CUSTOMER SATISFACTION Urgency Impact Prioritization Example Timeline

. Continuous Low Performance / SLA ratings New Sourcing Opportunities . Unresolved Client / Provider difficulties 90% in 6hrs & High High High . Issues impacting MSA / SOW 100% in 12hrs . Issues majorly impacting business Relationship Requirement Management Fulfillment . Falling Performance / SLA ratings . Non- Action on Action Item (ATRs) Low High Medium . Recurring Issues on Quality / Productivity . Unresolved Task Request Prioritization 80% in 12hrs & 100% in 24hrs . Work load adjustment issues CSAT High Low Medium . Issues impacting business Solution Performance Framework . New resourcing issue Design & & Reporting . Reporting validation issue Delivery . Project Issues . Process deviations / non-compliance 75% in 24hrs & Low Low Low . Task request prioritization issues 100% in 48hrs

FOCUS ON PERFORMANCE / OUTCOMES

GOVERNANCE – KNOWLEDGE MANAGEMENT Corporate Services

Procurement

Global Audit Global

Security Finance Legal Share Point Folder Management Structure CORE TEAM / HR GMO

Syntel Engagement Governance Owner: GMO Relationship Manager

Performance Management Contract Management Relationship Management Financial Performance Contract Relationship Resource Financial Management Resource Management Knowledge / Research Owner: Project Managers & Owner: GMO Relationship Owner: GMO Relationship Owner: IT Admin / Finance Owner: Resource Managers Owner: GMO Resource Managers Manager Manager Management Management Management Management Management

Issue Resolution / Invoicing Process SL Validation & Change Request Resource Industry Best Escalation Documentation Reporting Process Process Selection Process Practices Process

Monthly Invoices Weekly / Monthly Change Request Engagement Issue Requirements Knowledge with Time Sheets Reports Approval Forms Log – as a listing Form / JD Artifacts – as a listing

Monthly Payout – Quarterly / Annual Change Request On-boarding / Off- Reference CSAT as a listing Reports Log – as a listing boarding Process Documents . Service Levels / Performance Metrics monitoring & reporting . Analyze trends in service areas (Service Levels)

Governance Service Credits Service Credit Documentation Resource Tracker . Schedule Management - Reorganize work processes to include offshore teams Adjustments – as Computation MSA / SoW - Structure – as a listing a listing Model - RACI . Offshore workflow / workload management – monitoring & validating time-sheets & utilization All documents to be uploaded / archived in . Review workload distribution across resources Key Contractual Overall Operational Issue Terms – Ready Performance Share Point within 48 hours of finalization / Log – as a listing . Recommend productivity enhancements Reckoner Dashboard publication . Monitor continuous performance improvement efforts . Perform monthly operations reviews

GOVERNANCE – QUALITY IMPACT BEYOND PROJECTS GOVERNANCE - REPORTING Process Frequency Rationale Client Provider Reporting Flow SLA Monitoring Daily / Weekly Review  SLA Analysis and reporting Monthly Control 

Calculate & monitor utilization Daily Capacity Estimation/Productivity  

Calculate Performance Credit, Earn-back Yearly Financial Impact  Resource Validated Reports Consolidated Reports Validate Performance Credit, Earn-back Yearly Financial Impact  Manager  Variances Reports. Validate RCA and track progress Ongoing Operational Excellence Pillar Heads Continuous Improvements CIO / Manage Continuous Improvement (SLAs) Ongoing Continuous Improvement  Provider Review service level applicability Quarterly Redefining SLAs   Stakeholders Publish Business/IT Availability Index Monthly Business Continuity 

Project Hiring Fulfillment / Metrics Monthly Business Continuity 

Manager GMO Monitor critical deliverables Yearly CSAT  Notes Reports copied to GMO and Feedback Loop Feedback / Action Items Engagement Operational Health - check Quarterly Ops and Relationship Improvements  Cultural Integration – One-Team-Team On-Going Operational Excellence  

Project Reporting Monthly Control 

Contractual Compliance Audits Yearly CSAT Legal Compliance 

Sourcing has evolved from a tactical labor arbitrage model that started in the manufacturing sector, to a much broader strategic model. As Providers mature by commercializing their services, they have begun to provide more value-based offerings that are being leveraged by companies for business transformation.

Sustaining Value Transforming

Capability Asymptote: marks Operational Processes Service • Sourcing Traditional IT Transformation service constraint without Capabilities Virtualize Standardize Rationalize Optionality Outsourcing Outsourcing transformation investment Potential • Resilient Limited benefits: Process Processes cost reduction fueled by labor arbitrage • Increased Cost based on Throughput Resource technical complexity New service continuum Independence • Economic and process where costs decline as Transparency Transform service increases Continuous C1 Improvement • Reduced “Run” Risk C2

Scalable Demand Response CBI IT Infrastructure Predictable Service Quality Service Portfolio 1 2 3 4 5 Chaotic Reactive Stable Proactive Predictive Service capabilities grow as cost per transaction declines Asserting a new service continuum • Control reactive operations by systematically addressing complexity drivers, • Operational Efficiencies: establishes service control based on transformed services while improving service delivery processes • Optimization: iterative transformation addresses complexity and value potential • Service demand and capacity improvements result from changes designed increases as services improve to control volume while increasing response speed • Service Excellence: predictable quality results from process improvement, • Transformed enterprise environment produces a service delivery continuum team knowledge, and tool enhancement while simultaneously improving cost basis and service quality • Measurable Results: business benefits that optimize bottom line and improve responsiveness

22 23 THANK YOU

NEO GROUP GLOBAL HEADQUARTERS 6200 Stoneridge Mall Road, 3rd Floor Pleasanton, CA 94588, USA

ASIA-PACIFIC HEADQUARTERS ATUL VASHISTHA No 13, 1st Floor, C Block, Embassy Heights, Magrath Road, Chairman, Neo Group Bangalore - 560025 [email protected] 978.707.9769 AMSTERDAM, NETHERLANDS ASHISH MALHOTRA AUSTIN, TEXAS VP, Workforce Management, Time Warner BOGOTA, COLOMBIA [email protected] LONDON, UK NEW YORK, USA ATLANTA, USA [email protected] SAO PAOLO, BRAZIL www.neogroup.com SILICON VALLEY, USA SYDNEY, AUSTRALIA

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COMPLETE & SUBMIT EVAL Workshop # 6 www.sig.org/eval

Maximizing Value by Innovating Managed Services

Speakers: ATUL VASHISTHA Chairman, Neo Group [email protected] 978.707.9769

ASHISH MALHOTRA VP, Workforce Management, Time Warner [email protected]

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