September 17, 2014 Presented by: Alpesh Kadakia & Bill Shirk PwC HP

1. Big D Treasury ConferenceFinance & Accounting Business Process Outsourcing 101or “Everything You Wanted To Know About F&A Outsourcing**(and were afraid to ask!) September 17, 2014 Presented by: AlpeshKadakia & Bill Shirk PwC HP

2. F& A BPO Trivia!! 1 2 3 • What is the size of the Global Finance Outsourcing Market ? • $5 Billion • $10 Billion • $25 Billion What percentage of Fortune 100 companies have placed at least one process with a 3rd party or in a shared services environment? What is the most common finance process to be outsourced? F& A BPO Trivia!! 4 5 • In the SS&O world, what is GBS? • Gigabytes per Second • Global Business Services • Google Branding Session Which Fortune 500 company is largely credited for the establishment of Finance Outsourcing and Global Delivery? • Who is 3rd Party Service provider with the largest share of the F&A outsourcing market? • Accenture • HP • IBM 6 F& A BPO Trivia!! 8 7 What is the top emerging F&A destination for 3rd party service providers and Shared Service Centers in EMEA? In the SS&O world, what does BPO stand for? A) Business Process Outsourcing B) Benzoyl Peroxide C) Banker’s Pay Order F& A BPO Trivia!!

3. Definition of Outsourcing • Outsourcing is the transfer of a process from the buyer to the supplier • Implications: • Supplier now owns the process • Responsible & accountable • Buyer only influences the process • Provide Inputs • Define desired Outputs Outsourcing Offshoring

4. Comparison of Outsourcing vs Shared Services vs GBS

5. Outsourcing vs Shared Services vs GBS (cont’d)

6. How is outsourcing different from contracting? Contracting Outsourcing • Buyer retains ownership over process & results • Buyer retains overall control and cost for investments • Project based services - e.g. limited time and scope of work • Limited involvement of buyer in process • No tools, processes, or methods • Process ownership is transferred to supplier • Supplier owns responsibility for results (accountable-SLs/penalties) • Contracts are long-term in nature (3-7 years) • Supplier sells “solution” • Investment required by either/both parties • Buyer benefits from supplier tools, processes, & methods • Transfer of employees and/or assets • Large economies of scale

7. Why outsource Finance and Accounting processes? – • Finance organizations still face many of the fundamental challenges with people, processes and technology A lack of KPIs and SLAs across functional organizations Managers who perform transactional activities, with 1-3 direct reports Highly compensated staff who perform transatcionalactivities with 8-12 years of tenure 50-60% of processes with manual intervention or touch-points Lack of training to ensure cross coverage of services Unclear career paths for all staff and manager levels Lengthy implementation and upgrade cycles No documentation or desktop procedures Routine and costly maintenance Inconsistent job classifications and responsibilities across business units Disparate ERP systems and versions through inorganic growth Limited to no process standardization No clear demarcation between processes Poor process controls Homegrown legacy applications Costly legacy infrastructure platforms People Process Technology

8. What are the advantages & risks in outsourcing? Advantages Risks • Reduce and control operating costs • Improve focus on business • Gain access to world-class capabilities • Free [up] internal resources for other purposes • Access to resources & skills not available internally • Accelerate reengineering benefits • Increase process standardization • Make capital funds available • Shared risk of investments • Buyer locked in uncompetitive price structure • Supplier over commits, but unable to deliver • Benefits diminished due to treatment as contract over relationship • Inflexibility in contract leads to dysfunctional behavior & over-charging • Disgruntled employees => or reward - cultural change in buyer environment

9. F&A Business Process Outsourcing Common F&A Processes Outsourced

10. Finance and Accounting Value Chain Financial Planning & Analysis (FP&A) Record to Report O2C P2P Performance Mgt/Decision Support Capital Platform Mgt Cash & Disbursements (A/P / T&E) Revenue Cycle (Order to Cash) General Accounting Project & Cost Accounting Financial / External Reporting Business Performance Management Planning Budgeting Forecasting Cash Mgt, Treasury Mgt, Risk Mgt, Tax Planning & Compliance • Transaction processing • Procedure Process maintenance • Business Process maintenance 90% 80% • Accounts Payable • Travel & Expenses • VAT Reconciliation 70% 70% Retained activities 70% 50% • Project Accounting • Cost Accounting • Inventory Accounting • General Ledger • Accounting Policies • Account Reconciliations • Fixed Assets • Tax Accounting • Order Capture • Credit & Collections • Billing / Invoicing • Disputes / Deductions • Accounts Receivable • Revenue Acctg 40% • Financial Consolidations • BU Financial Statements • Statement Prep • SEC Filings 30% • Periodic Budget Prep • Periodic Forecast Prep • Cost Management • Customer/ Product Profitability • New Product Eval • Life Cycle Costing • Performance Management • Cont. Improvement • Cash Mgmt • Compliance Mgmt • Tax Mgmt Sourced vs. Retained functions 20% Centralized activities • Investor Relations • Bank Relations • Financial / Invest Risk Mgmt • Fundraising • Debt Mgmt • Tax Advisory & Planning • Budget Policies/ Procedures • Strategic Planning • Corp. Dev. 10% 20% 30% 30% 30% • Policy management • Strategy development • Decision making • Acceptance /Approval 50% 60% 70%

11. Tax Value Chain • Policy and Execution • Regulatory Compliance • Tax Accounting Transaction Management and Controls • Risk and Dispute Management • Tax Business Planning • Policy Documentation • R&D Credits • Payroll Tax • Withholding Taxes • Maintain Tax systems and tools • Tax reserve • Foreign Tax Capacity workings • Sec 988 database working • Federal Tax Returns • State Tax Returns • Reporting for indirect tax • Regulatory Documentation • Compliance management • Data conversions • Book to Tax walk • Exemption certificates • Tax Accounting & provisioning • Tax Reconciliations • Non- US Tax Accounting & provisioning • Estimated Tax Payments • Reducing attribution errors • Payment and remittance • Manage, monitor and report on controls function • Manage tax plans and transactions • Valuation Allowance • Deferred Tax Analysis • Analysis, monitoring and tracking of disputes • SOX Testing • Control Documentation • Refunds • Incorporate tax and legal entity reporting needs into ERP system configuration • ETR Analysis and reporting • Preparation of K 1s • M&A Tax Due Diligence • M&A Tax Modeling • Transfer Pricing calculations Centralized activities • Establish tax policy and align with corporate vision and strategy • Implement and manage tax policies and procedures • Post Transaction Integration • Choose Tax systems and tools • Provision of compliance information to regulators • Develop tax and compliance policies • Advance Pricing Agreements • Personal Income Tax Returns • Tax accounting and reporting under domestic regulations and international financial reporting standards • Design internal controls • Dealing with Tax Authorities • Resolve classification • Other disputes and issues with the authorities • Cross Border Taxation • ETR Planning • State Strategic Tax Review • Tax Valuations • Impact of Transfer Pricing Policies Retained activities

12. Treasury Value Chain • Treasury Policy & Governance • Planning & Forecasting • Funding Management (Debt & Equity) Surplus Management (Asset) • Cash Management (Working Capital) • Risk Management • Ensure accurate valuation of financial instruments • Ensure accurate accounting of Treasury transactions • Ensure accurate transaction history and audit trail • Intercompany settlements & netting • Cash flow forecasting • Risk forecasting • Operate Treasury systems • Ensure quality standards of service providers • Tax planning • Pensions planning • Reporting • Repay funds • Interest Management • Ensure adequate liquidity to support business and obligations • Investing surplus cash • Manage long term investments • Trading • Cash concentration • Debt factoring • Internal banking • Confirmation and reconciliation of receipts • Disbursement of payments • New vendor approval • Check Management • Cash Collateral Mgmt. • Vendor payments • Interest Rate risk management • Pension risk management • Scenario planning, analysis and stress testing • FX & Commodity risk management • Counterparty risk management • Credit risk management • Liquidity risk management Centralized activities • Establish treasury policy and align with corporate vision and strategy • Provision of covenant tests and info to investors • Provision of compliance info to regulators • Work with internal & external auditors • Co-operate with Board on strategic development • Investment appraisal • Choose Treasury systems • Negotiate, analyze and manage the fee’s and margins of service providers • Set funding requirements • Raise funds • Manage group finance structure • Equity repatriation • Manage short term investments • Manual check management • Petty cash applications • Bank relationship • Open/close accounts • Seek natural hedges and offsets within the business • Involvement in business insurance Retained activities

13. F&A Business Process Outsourcing The Benefits

14. Many do it for cost, but that is table stakes…. – • By deploying an alternative service delivery model, $1-5B organizations typically save 20-30% of G&A costs

15. … Although 50-65% savings coupled with other strategic benefits makes this model highly compelling for many Economic Benefits Strategic and Other Benefits Comparison of US Onshore and BPO Services (US$000s / FTE / Annum) • Access to comparable or better quality talent • Ability to build or enhance critical capabilities (e.g., IT, R&D, Marketing) • “Follow the sun” 24 x7 coverage • Tax advantages especially for moving intellectual property creation offshore • Direct and complete control, without relying on immature supplier capabilities • Platform from which to expand presence in emerging markets • Breakthrough innovation and faster time to market 70-80 4-8 4-8 Operating cost savings 50-65% 60-70 Note: Costs for US corresponds to Tier 2 cities, whereas, costs for India correspond to Tier 1 cities Source: Booz & Company GIC Experience, Booz Allen Hamilton and Duke Offshoring Research , Outsourcing-Center

16. F&A Business Process Outsourcing Trends & Pushing Beyond F&A BPO

17. The Survey Says….Finance BPO is a clear priority Typical Cost Impact • Based on 358 electronic survey respondents and 10 in-depth interviews with senior finance executives across broad range of industries Implement Business Process Outsourcing & Shared Services 20-30% • Outsourcing • Shared Services • Centralization • Cloud services Standardize Technology / ERP 15-20% • Reduce the number of applications and instances of financial systems • Implement accounting hub technology to increase flexibility • Eliminate offline spreadsheets 10-15% • Dramatically reduce business complexity: • Reduce methods of doing business within company, methods of paying a invoice, number of legal entities, management entities, bank accounts, etc. Reduce Business Complexity 5-10% • Simplify the organizational structure through de-layering and increase span-of-control • Rationalize roles/titles, review grading and look at down/up skill certain activities • Eliminate shadow finance functions Simplify the Organization 3-5% • Simplify chart of accounts to support external financial reporting • Rationalize reports to a standard package and enable self-serve reporting, utilize shared services to produce all standard reports Rationalize Reporting and Data Company Profile Integrate stewardship and governance type functions & outsource 2-4% • Consolidate risk/integrate, SOX, Internal Audit type functions • Perform integrated assurance with auditor • Outsource tax compliance and statutory account preparation

18. Operating Model Evolution • Businesses adopt alternative service delivery operating models with major shifts in technology architecture… and we are at such an inflection point Pre-80’s Mainframe Late 90’s - Late 90’s Client / Server. Networking Late 90’s - Present E-Business, Internet-enablement Present – Future Hybrid. On-premise, cloud, (XaaS) Global Business Services (GBS) BPO/Offshorecapture labor arbitrage 50+% 20-40% Multi-functional Integration (Finance + HR + IT) Operational benefits Shared ServicesIn-House 10-20% Finance,HR, IT Coordinated In-House Practices 5-10% Next Generation Operating Model Traditionally Finance& HR SSC Decentralised Operations, Monolithic Systems Increased cost reduction / variable structure, scalability, and agility • Global end to end process standardization • Enterprise wide cloud solutions • Non-monolithic, multi-vendor environment (ERP ++) • “Fabric” of multiple low cost locations, emerging + frontier • Self-service models , collaboration/social tools, millennial workforce • Unified, optimized governance • Disparate systems and ad-hoc solutions • Replicated corporate & SBU activities • Increasing consolidation and improved efficiency and effectiveness. • Some standardization & increase in service level • Single country with single and multi-center structure • Well defined serviced levels, 24/7 & KPIs • Cost effective technology/bandwidth; Web-enabled workflow • Multi-shore, partnering & single global providers

19. COGS • R&D • Sales & marketing • G&A Emergence of Global Business Services • Many companies are looking beyond their G&A functions • Supply Chain • Warranty Management • Logistics • Warehousing • Design & Development • Build & Test • Data Management • Support • Customer Service • Marketing Communications • Inside Sales • Legal • Tax & Treasury • Facilities • Internal Audit • Information Technology • Finance & Accounting • Human Resources • Indirect Procurement • Source: Hfs Research and the London School of Economics Outsourcing Unit, 2011Sample: 336 Buyers of Outsourcing Service

20. Company Size Influences Operating Model Trends • According to IQPC, “84% of CEOs surveyed now consider operating model reengineering as critical to their business success” Co. size tends to drive level of aggressiveness Mid to Large Large National Large Multinational Company Size ($ Revenue) $0.2 B $2.5 B $3.0 B $12.0 B $15.0 B $50+ B • Defining the Operating Model of the Future • Start small, initially with a single function (like Finance) • Global reach to penetrate new markets • Focus on core business functions and hiring • Accelerate path to scale advantage by using outsourcing service providers (if appropriate) • Grow at a reduced cost basis • Strong interest in variable cost models • Optimizing Service Effectiveness & Cost • Most have existing shared service centers and are expanding • Many are pushing into hybrid model – SSC/Outsourcing • More activity in mid-office functions • Beginning the path to Global Business Services models • Further segregation of companies based upon culture and competency • Using the Operating Model to Drive Strategy • Large scale and ability to move operations to emerging markets • Integration of multiple centers and governance become critical • Hybrid delivery models and Enterprise Business Service models are more prevalent • 2nd generation outsourcing – experience • Even aggressive cost cutting companies are reaching plateaus and turning to outsourcing

21. F&A Business Process Outsourcing Considerations

22. Why do outsourcing deals fail? • Lessons learned from our work with clients to remediate outsourcing issues Define value IT leadership Deals done without an integrated client team • Requirements don’t translate to contract • SOW’s don’t capture real needs • Change requests overload • One sided scope • Primary focus on outsourced functions • Lack of attention/definition to retained functions • Poor documentation of current state operations • Leads to service provider ‘conservative’ pricing • Operational breaks in the chain • Incomplete or inaccurate view of total cost of ownership • Lack of focus on root causes • Left with wrong supplier or wrong price (or both) • Not separating services from solutions in contracting • Creates disconnect for service delivery • Can be at odds with continuous improvement • Intermingling projects and operational services • Can lead to duplicate costs • Increases possibility of excessive change orders • Potential for resource misallocation4 Unclear definition of business goals and objectives Business owners Legal Change management/communications HR • Cheaper isn’t good enough • Moving targets for satisfaction • Marginalized SLA’s Finance ? goal goal 1 ? goal Failure to structure the right deal goal Pricing model HR model Service delivery model Contact term

23. Thank you!

24. Appendix

25. Globalization of Operations in full swing as Investment Intentions in both Shared Services and Outsourcing reach record high Sources: Hfs “2014 State of Outsourcing” Study, n = 312 Buy-side Enterprises, “2013 State of Outsourcing” Study, n = 399 Buy-side Enterprises, “2011 State of Outsourcing” Study, n = 226 Buy-side Enterprises

26. Q. How will your level of offshoring change in the next year? (Shared services) Prolific use of Offshoring Continues Decreasing Increasing Q. How will your level of offshoring change in the next year? (Outsourcing) IT Infrastructure Industry -specific Operations Procurement Human Resources Customer Service Application Development & Maintenance Finance and Accounting IT Infrastructure Industry -specific Operations Procurement Human Resources Customer Service Application Development & Maintenance Finance and Accounting Source: HfS“State of Outsourcing” Study, conducted with support from KPMG (Sample 312 Enterprises)

27. Operating Models: Outsourcing forms a Critical Lever for an Integrated Services Model • Over the next 2 years will your company increase / reduce its reliance on the following operating models for your general and administrative functions? Source: Hfs “2014 State of Industry” Study, May 2014. HfS Research in Conjunction with KPMG (Sample 312 Enterprises)