Outsourcing and offshoring as enablers for innovation in Global companies

1. Outsourcing and offshoring as enablers for innovation in Global companies Jean-François LOCHE Nissan Europe VP, CIO St Petersburg June 29th, 2007

2. What the theory says on outsourcing… • 10 steps to mastering outsourcing • Make multisourcing your core competency • Align all sourcing actions to the Enterprise business strategy • Before outsourcing, articulate distinct expectations for business outcomes • Weigh the value of customized vs. standardized services • Select the delivery model that best suits business and financial goals • Define the relationship model and incentives for mutual benefits. • Negotiate and re-negotiate a win-win deal • Depend on a network of providers to deliver business solutions • Develop and apply deal-centric management disciplines • Balance trust and control to optimize outsourcing relationship Efficiency

3. Ranking among the foremost in the world; enjoying an international standard of excellence; belonging to the highest order Cobit L4+ What the theory says on World Class… Best Practice Leader ITIL L5 CMMI L5 Effectiveness ISO9000 Top Tier by Gartner Benchmarking

4. NISSAN background after the Alliance with Renault: the mid-term plans NISSAN Value-Up NRP NISSAN 180 “Revive the company ” “Complete revival on track for profitable growth” “Value up with sustained performance” Commitments • Profitability in FY00 • Operating profit margin >4.5% in FY02 • 50% debt reduction by FY02 • +1M units by Sept ‘05 • 8% operating profit margin • 0 automotive debt • 4.2M units by FY09 • Top level operating profit margin • ROIC average 20%

5. Infiniti globally recognized luxury brand Light Commercial Vehicles Leading Competitive Countries Geographicexpansion NISSAN Value-Up Plan major breakthroughs

6. In the industry, innovation does NOT mean… • Running ahead of technological innovation at all costs • Implementing breakthroughs independently the one with the other • Trying to implement alone strategic enhancements which have already been implemented by others • Pleasing the Company’s Executive Committee Members by providing them with up-to-date smartphones… • … In other words, sacrificing effectiveness for efficiency

7. But achieving excellence via innovation means… • Developing and implementing a Global well-defined business-oriented strategy dealing with innovation • Making sure breakthrough projects do have business cases and ROIC meeting the company rules • Using innovative solutions in areas where the company can get a competitive advantage from them • Accepting to learn from skilled and trusted IS/IT partners and rely on them for help in implementation • … In other words, focusing as always on improving the business processes while enjoying both efficiency and effectiveness

8. Nissan IS/IT Value Up Strategy - BEST Program SCM M&S Engineering GRM Business Contribution Time to Market & Productivity Productivity and Business Efficiency Production Cost Logistics Cost CS Improvement & Sales Increase and Volume Growth Business Alignment Global Investment Prioritization, New Accountability for IS Enterprise Architecture Selective Sourcing Technology Simplification BEST Program • IT platform Standardization • Infrastructure Consolidation • Seamless and Secure Network Infrastructure • Improve Repeatable Processes • Application Rationalization • Promote Reuse and Standardization • Outsourcing Restructuring & Optimization • GSE usage expansion • Global Vendor Management

9. A new deal with external partners • Forget contracts built to last. Build contracts to accommodate change and be prepared for contract co-management • Rely on cost-efficient partners • IT production and help desk outsourcers, on top of operational excellence • IS development offshore company, on top of high QCT ratios to help increase the effectiveness by for example • Moving the infrastructure environment to ITIL standards • Implementing ISO9001-2000 certification process and obtaining the certification on a sustainable basis • Moving Application Development capabilities to CMMI level 3 and above in a given timeframe • But never delegate the core business: targeting COBIT standards, developing and implementing IS/IT strategy, consolidating Enterprise Architecture

10. A new deal with IS/IT staff and business partners • Shift_Management • Recognize that contract co-management demands a new set of competencies • Move from a team management culture to a contract co-management culture thus become process-oriented while remaining focused on results • Identify complementary sets of objectives with commitments and targets linked to knowledge transfer • Explain the strategy an its labor consequences to works councils and employees • Stop communicating using IS/IT metrics; focus on business performance: define IS/IT services in business terms and ask external partners to translate them into technical terms • And continue to bear the total responsibility of the deliveries to customers and senior management of the company

11. From Cost Center to critical Asset

12. From Cost Center to critical Asset 2006: we are here 2005: we were there 2007 Target

13. Global multi-sourcing is a long journey… • Is there a theory to get right the insource / outsource balance? • Are captive companies a solution to deficiencies of outsourcing / offshoring or a complement to them? • Is the management of the Company ready to learn to work with suppliers • Remotely instead of locally • Low cost instead of high cost • With a lower quality assurance • With higher natural lead times • With potential cultural and language barriers? • Does anyone here know of a single winning formula? Destination will not be the same…

14. THANK YOU