Outsourcing Opportunity: “Strategic and Operational Level”

1. Outsourcing Opportunity:“Strategic and Operational Level” H. Srikrishnan Executive Director January 31, 2006

2. Contents • Outsourcing – “Strategic or Operational” • Outsourcing Drivers • Risk Factors - Inhibitors • Key Considerations for Outsourcing • YES BANK Case Study

3. Strategic ?

4. Or Operational ?

5. Business Value Transformation Competitive-Advantage-Focused A Transformational relationship is characterised by a partnership focused on innovation and new business, changing the very nature of the basis on which an enterprise competes ~ Strategic Strategic Enhancement The Contract Utility The Contract EffectivenessFocused The Utility relationship focuses primarily on cost reduction, with the goal of maintaining consistency in the delivery of services ~ Operational The Contract EfficiencyFocused Operational Relationship Impact = Contractual Management Key: = The Partnership = Relationship Management Adaptation of Gartner’s Model on Sourcing Strategic or Operational

6. Opportunity – Both Strategic & Operational Reasons for Outsourcing Source: Outsourcing Institute

7. Outsourcing Drivers

8. Risk Factors - Inhibitors Outsourcing has the potential to transfer risk, management and compliance to third parties who may not be regulated and who may operate offshore BASEL Committee on Banking Supervision

9. Collaboration Collaborative & Competitive Evaluation Fair & Just Contracting Technology, Business, Regulators, Legal, SoW, Living Agreement Provide for Business Dynamicity Communication Key for successful implementation Camaraderie Balance of Relationship & Contractual Management Partnership Spirit Continuance Not a transaction but it’s a lifecycle Key Considerations for Outsourcing

10. Costs Consideration Consider All Costs When Making Outsourcing Decisions Current internal cost of Providing IT Services (annual) Savings Delivered by the vendor Real Value Termination Costs Annual Real Cost of the deal Perceived Value Management Costs Penalties Vendor Capital recovery costs Re-evaluation, Selection, and negotiation costs Transition Costs Governance Cost Retained in-house capabilities Innovation & Evolution Contract Negotiation Vendor Margin Annual Face Price of the deal Setup Cost Parallel Operating Costs Severance Costs Asset write-downs Economies of Scale Economies of Scope Economies of Specialization Other Factors Source: BCG Analysis

11. Defining Sourcing Strategy Identification of Drivers for Outsourcing Core Competence Analysis Outsourcing Risk Analysis Scanning the Market Deal Type Assessment Strategic Alliances IT Investment Portfolio Strategic Total Outsourcing Technology Framework and Relationships YES BANK – WIPRO CASE STUDY Deal Recognition • Rated among India’s Most Wired 20 Companies (Business Today) • Exclusive Gartner Case-Study • On IBM Infrastructure-on-Demand Model • Networking Case Study by CISCO Evaluation Framework • Managed Services Capabilities • Hardware & Equipments • Strategic Fit Assessment • Financial Decision Making • Soft Factors

12. Core Competence & Business Drivers Analysis Competence in Banking, Relationship & Building Human Capital Retention of Intellectual Property related to Application Development Technology Decision making driven internally Caters to Branch Expansion and Growth Plans Dynamic Business Environment ~ Vendor Commitments YES BANK – WIPRO CASE STUDY Deal Uniqueness (USP) • First-of-its Kind in Indian Banking Sector • Unique Pay-per-use pricing model: Branch Expansion based • Complete Asset Based Outsourcing: Conservation of Capital • Access of World-Class Partners: IBM, CISCO, Intel • Stringent but flexible Service Level Agreements • Continuous Improvement on Service Delivery