SYSTEMS ENGINEERING APPLIED TO CORPORATE RESTRUCTURING

1. SYSTEMS ENGINEERING APPLIED TO CORPORATE RESTRUCTURING SEDC 2014, SoS-8 Richard Chipman Technical Lead, Surveillance & Reconnaissance Group Leidos, Inc., Reston, Virginia

2. Outline • Background • Objective • The Corporation as a SoS • Application of SE to Restructuring • Requirements and Concept Development • Analysis and Preliminary Design • Detailed Design • Development / Implementation • Integration and Verification • Validation • Go-Live/Transition • Conclusions and Lessons Learned

3. Background • 2012: Science Application International Corporation (SAIC) • Science, engineering, and technology applications company • $11 billion of annual revenue • 38,000 employees • Customers in national security, energy and the environment, critical infrastructure, and health • Problem • Potential conflicts of interest between various SAIC business segments, limited business opportunities that could be pursued >> Limit on growth • Corporate Business Decision • Split the company into two independent corporations • Solutions-focused business • Services-focused business

4. Project Gemini • BlueCo • Solutions focus • Leidos • WhiteCo • Services focus • SAIC

5. Challenge • Restructuring of this magnitude historically took > 18 months • Prolonged process >> turmoil and uncertainty >> impacts to stock price and customer confidence • Inadequate planning & faulty execution >> business decline after the restructuring • Solution enacted by COO >> Application of SE • Core competency of legacy company >> practice what you preach • Objective • Split legacy company into two separate publically-traded corporations • Plan and execute the split within a single year • Assure both corporations are fully functional on “Day One”

6. Composition of a Modern Corporation Operational Components • Aka, Line Organizations • Produce products & service sold to customer Functional Components • Aka, Functions • HR, Finance, Legal, etc. • Administer the overall corporation Corporation Operational Components Functional Components • Develop • Produce • Deliver • Products & Services • Provide & care for resources • Address financial & legal needs • Manage corporate health • Provide vision & strategy

7. The Corporation as a System of Systems Finance • Large corporations have multiple loosely coupled Line segments and many largely autonomous Functions • Each is a system of its own, operating within the parent corporation Contracts Corp HQ IT Segment A Segment D HR Segment C Segment B

8. Each Organization as a System Controls • External Constraints (e.g. laws) • Controls from other functions • Policies Function Inputs Outputs • Structure • Processes • Interfaces to: • External systems • Internal systems • Interfaces to: • External systems • Internal systems Mechanisms • Personnel & roles • IT systems • Equipment

9. Application of SE to Restructuring

10. One-Year Goal Time Line

11. Requirements and Concept Development • Senior corporate management developed a succinct set of top level requirements based on business objectives • Project Gemini team and senior leadership developed CONOPS document describing how each company would operate after split • Gemini sub-teams analyzed and decomposed the top-level requirements to derive detailed requirements, an organizational architecture, and a mapping of each requirement into that architecture using SE-defined template • Total number ~ 5,000 requirements for the two companies • SE team captured those requirements in DOORS®

12. Sample of HR Requirements Mapped to Organization Level in SE Template Corp Org Levels

13. Sample of Requirements Captured in DOORS®

14. Preliminary Design of Both Companies and Their Components • Organizational structure to align with market needs • Key corporate processes and policies • For each Function and Line org • Internal org, policies and processes • Interfaces to other internal & external orgs • External and internal constraints • Staff size, roles, responsibilities, authority • Key IT systems and equipment • Used SE templates to guide & document • SE developed RTM & used DOORS® to analyze traceability • Verified all requirements were allocated • Verified each org component had been allocated at least one requirement

15. Preliminary Design Review (PDR) • Covered BlueCo and WhiteCo designs • PDR Contents • Organizational structure & CONOPS • Changes to processes and policies • Roles, responsibilities and authority • Major changes to each Function with benefits, cost impacts, potential negatives, and risks • Cost savings projections • Risks • Initial implementation schedule

16. Detailed Design • Detailed organization structures and with full headcount by level • Job descriptions for top positions (line and function) • Indirect costs for each function to meet affordability envelopes • Key changes required for policies • Process maps for processes changing due to the reorganization • Used model format most familiar to each organization • Descriptions of Service Level Agreements (SLAs) between Functions and both companies • Detailed Integrated Mater Schedule (IMS) up through separation • Completion gate: Critical Design Review (CDR)

17. Example of Process Map (Swim Lane Model)

18. Example of Process Map (IDEF0 Model)

19. Organization Design Captured in DOORS® • Captured each design artifact in DOORS

20. Process Design Captured in DOORS®

21. Traceability Report: Requirements to Design • SE analyzed traceability of each requirement to the design

22. Development / Implementation • Personnel • Reassignment, retraining, staff reductions and some additional hires • Operational policies • Develop and promulgate modified /new corporate & functional policies • Operational processes • Create, test, refine, document, train, communicate • Legacy information • Determine BlueCo/WhiteCo custody and access rights • Transactional tasks • Multi-functional tasks related to legal aspects of separation • Example: SEC Form 10 required input from all functions and senior mgmt • IT Systems • Clone and configure applications and data

23. Separation AgreementsInterface Control Documents between BlueCo & WhiteCo • Agreement on allocation of customer contracts to each company • Transition Service Agreement (TSA) • Service that functions in one company supplies to the other company • Distribution Agreement • Division of real estate, facilities, equipment, IP • Tax Matters Agreement, • Responsibilities and liabilities of each company • Employee Matters Agreement, • Employee equity, incentive and compensation plans, benefits, etc. • IP Licensing Agreement, • Licenses granted to one company for IP retained by the other • Preservation of Records • Legacy information

24. IT Systems: Major Challenge • Identify systems, data sets, and computer HW needed by each company • Modify & test interfaces with external IT systems • Duplicate/divide/mask data for PPI and business concerns • Systems that use data relating to employees, contracts & organizations need correct subsets of existing data applicable to the specific company. • Example: Computation of revenue from existing contracts • Restricting employee access to the systems and data of the other company • Mechanics and phasing of the cutover from a single set of IT systems to two differentiated sets

25. 332 IT Systems Provided by Internal and External Sources • Every Function, including the Line, had multiple business-critical IT systems • Provided / hosted by Corp ITS, external vendors and internal Line organizations • Majority had interfaces to other systems • All had business sensitive data

26. Complexity of Migrating IT Systems • Install cloned applications and databases • Reconnect each application with its own databases • Reconnect each application to other databases • Re-establish interfaces between applications • Convert data to BlueCo or WhiteCo only • Modify applications for BlueCo or WhiteCo business logic

27. Integration and Verification • Applies to both IT and non-IT organizational systems • Non-IT example: • Process for obtaining, recoding and updating contract-relatedinformation pertaining to a contract involved multiple Functions & Line components • Impacted by changes to components’ structures and processes • Altered processes had to be integrated & verified across organizations • I&V of changes to IT systems required Functions’ participation • Some dependencies between systems arose from the content and semantics of data passed between the systems – unknown to ITS • SE team helped uncover such instances, and plan the necessary I&V

28. I&V Activities • Developed integration plans and procedures for human processes, as well as IT systems • Developed test plans for verifying the integrated systems • Performed system tests addressing dependencies and integration issues • Performed preliminary and final end-to-end tests of the integrated systems

29. Challenges of Validation • Multiple aspects needed validation • Systems function as intended • Systems must use data & processes appropriate to each new company • Must run legacy systems up to cut-over • Could not validate most systems completely until cutover was in process • Could not complete validate for some systems until after cutover • External systems interfacing with ours • Driven by their own business constraints • Impossible for us to dictate schedule & details of their validation activities

30. Pre-Cutover Validation Activities • Planning • Test scenarios for each of the Function’s processes and integrated scenarios for processes that interacted with one another • Pass/fail criteria based on their business considerations • Order and sequence of integration, data refreshes, and validation testing for each process or set of integrated processes • Cutover plans defining validation testing and Go-Live decision point • Testing • Human simulations of changed processes not involving IT systems • IT test using cloned systems in “sandboxes“ including vendor-hosted systems, where possible • End-to-end tests of sets of systems integrated in the sandboxes • TCR of both ITS’ and Functions’ results • Remediation plan for each issue encountered

31. Tracking Pre-Cutover Activities

32. Transition and Go-Live • Many changes transitioned before cutover, such as • Organization of Line components >> 8 months before • Personnel & organization of Functions >> 6 months before • Many non-IT Functional processes >> 5 months before (Soft Split) • Other pre-cutover activities: • Dress rehearsal • Readiness Review • Sequenced communications with entire workforce of each company • IT ”go-live” did not occur on a single day to allow for • System interdependencies • Data refreshes • Final system validation

33. Success • Official split and corporate go-live within 13 months (one more than goal; but five less than normal) • Final validation of non-critical IT systems in weeks following corporate go-live

34. Conclusions and Lessons LearnedCritical success factors • Commitment of senior leadership and strong Project Gemini program management • Willingness of Functions to learn and apply SE • SE Team working daily alongside the Functions and Line Org implementation teams • Incremental application of SE process matched to project phases • Constant communication within Gemini team • Thoroughness of requirements analysis • Ability of SE to anticipate & identify integration points between systems, be they human or IT • Multiple levels and iterations of testing • Extensive cutover planning, scripting, and rehearsal

35. Other Lessons Learned • Learn each other’s technical language • Ask the same question multiple times, to multiple people, in multiple ways • Corporate Functions do not plan and schedule to the level of detail common in SE • Important to work with them to get the granularity appropriate to the project • Deadline elasticity during Functions’ normal operational times can cloud forecasts • Routine process changes normally can take much longer than predicted without noticeable impact on a Function’s ability to perform work • Develop trust among the team • Great challenges provide motivation and enthusiasm necessary to work through issues as a team to produce a joint win

36. Acknowledgements • Systems Engineering was used on Project Gemini because of the vision of Stu Shea, the LeidosCOO • SE was successful because of • Leadership of Charles Kanewske, (Leidos, Senior Vice President and Director for Enterprise Risk Assessment & Execution), Douglas Wagoner (SAIC, Services & Solutions Sector President) • Efforts of the System Engineering Team headed by Chief Engineer Stephen Fine. • Other members of the System Engineering Team • The author, Patrick Kennedy, Eric Bott, Jesse Aronson, and Steven Baur