Vendor Management and Metrics

1. Vendor Management and Metrics Date: 03/05/2007

2. AT Kearney’s IT/Telecom Vendor Facts • IT/Telecom service, software and equipment vendors play a vital role in the our organization… • Use approximately 200 vendors in 35 countries throughout the world • These vendors generate 3,400 invoices annually • Vendor purchases account for 67% of total IT/Telecom spending

3. Internally Operated Overall Service Management Technology Architecture and Design Network Systems Applications Security Infrastructure Administration Data center management Network administration Systems administration Voice PBX administration User security administration Event monitoring, escalation and tracking Problem management, Change management Client Services User desk side support Software configuration and distribution PC and software asset management Procurement and asset management Financial administration External / Vendor Purchased Data network provisions Telephony services Fixed line Mobile Remote access services Application development Consulting / temporary labor Data center facilities Help Desk Hardware and software purchases Internally Managed Vs. Vendor Provided • AT Kearney retains the most strategic business functions internally • Nonetheless, numerous critical services are purchased from third party vendors… many of which require formal arrangement and significant management time

4. Vendor Size Distribution • 80% of our vendor spend comes from 20% of our vendors globally • Most management effort is concentrated around the largest vendor relationships Less formal arrangements, often no contract, one off purchases, non-strategic product or service Includes telecommunications and data network services and major hardware and software providers. The strategic importance and large annual spend drive a formal contractual and relationship management approach.

5. The most critical vendors require a carefully managed relationship • Seek to centrally manage vendor relationship and contract • Unify spend commitments globally whenever possible • Minimize risk by avoiding minimum spend requirements – clearly understand how much savings are gained by making the commitments • Establish the SLA at contract signing -- do not wait until after the agreement is signed to establish the SLA) • Ensure SLAs are achievable for supplier and relevant to the business • Tie penalties and/or material breach to SLA performance; ensure contract leverage to cancel agreement based on non-performance • Understand that metrics are easily manipulated -- Clearly define measurement calculation, measurement frequency and allowable exclusions and exceptions • Do not agree to automatic renewal provisions • Attempt to establish dynamic pricing that ensures prices will drop as general industry pricing drops; if this is not possible, keep contract duration as short as possible • Clearly define all applicable charges and billing calculations

6. The vendor’s performance and the relevance of the vendor’s service should be continually monitored and assessed • Carefully track contract start and end dates and minimum spend commitments for each supplier • Understand financial objectives of the agreement and monitor whether the expenses associated with the vendor are within the planned estimates • Monitor service performance and metrics • Ensure ATK service objectives are being met • Ensure that vendor service commitments are being met • Ensure that vendors pricing commitments match agreed upon pricing • Schedule regular vendor review meetings to review services • Periodically audit the underlying data driving the published metrics • Don’t rely only on metrics to determine whether the service is successful; monitor whether the service as purchased is meeting the requirements of the business • Compare vendor performance to published industry metrics where available

7. Vendor service metrics are generally reported on a monthly basis; some of the key metrics reviewed include… • Help Desk • Average Time to Answer (ATA): Less than 30 seconds • Abandonment Rate: Less than 10% of calls on average • First Call resolution Rate: More than 75% of requests • Customer Satisfaction Index: Based on survey response after the case is closed • Data Center (ATK uses a co-location facility) • Availability – based on power, fire detection and suppression, environmentals and physical security sufficient to keep the data center operating and available • Data network and fixed line voice provisions • Network availability (i.e. up time) • Network performance – (i.e. round trip delays) • Time to respond / repair – by event priority • Equipment procurement and delivery • Order to delivery cycle time

8. Continually renegotiate service requirements and implement improvements • Early in the relationship, engage vendor personnel as part of the overall support team so that overall project objectives are known and adopted throughout the extended team • Use regular vendor meetings to discuss how the service is working from both perspectives • Seek feedback from the supplier regarding our own internal business procedures that could be hindering service quality • Establish a vendor improvement plan when necessary • Identify actions to be taken and time frame for when results will be realized • Promptly escalate service issues to supplier’s Sr. management • Where a service is being delivered as requested, but the service is failing to meet user requirements, the service terms must be renegotiated • At the end of the agreement term, re-negotiate from a position of power • Leave enough time to seek alternate suppliers if necessary • Make sure the vendor knows that you have a credible alternative • Obtain proposals for long and short contract terms and for large and small spend commitments in order to assess the risk reward relationship between the options