Achieving Business Transformation through Outsourcing IOF Prague Conference

1. Achieving Business Transformation through OutsourcingIOF Prague Conference Les Mara, Head BPO Services EMEA February 2008 The content of this presentation is proprietary and HP confidential and not for disclosure or onward transmission without HP’s written consent

2. Agenda • Drivers for Shared Services and Outsourcing • HP Shared Services Journey • Business Process Outsourcing - Considerations • Q&A

3. Shared Services is an attractive option to increase shareholder value H = high risk L = low risk HP share price has benefited from a Global SSC Operating Model & strategy

4. Hewlett Packard • Providing the IT Infrastructure of the White House, Kremlin, British Cabinet Office, and Vatican City • Powering 106 of the World’s 120 Stock Exchanges • Enabling 100 Million Cell Phone Users • Processing 95% of the World’s Securities Transactions • Handling 2 out of 3 Credit-Card Transactions • Shipping 1 Million Printers/Week • Delivering Solutions to 100% of the Fortune 100 Innovation Culture Diverse Businesses • 30,000+ Patents • $3.5B+ in R&D Annually • Palmtops / Sftw / Hdw • Financial Services • Industry Solutions • ITO/AO/BPO Svcs Financial Stability • FY06 Rev of $91.7B • FY06 Cash of $16.4B Global Operations Large-Scale Change Mgt Client-CentricTechnology Based Solutions Provider • Business in 178 Countries • 150,000 Employees • 210,000 Sales Partners • M&A: Compaq, DEC, Tandem, & 12 Co.’s Last 2 Years • F&A for Large, Global Companies

5. HP portfolio EMPLOYEES Human Resources Personnel Admin Payroll Payment Cycle Revenue Cycle F&A Procurement Support CRM Support Procurement Sales & Marketing CLIENTS SUPPLIERS

6. Support Centers Onshore Centers Main Global Hub The result a flexible and integrated Global Delivery Footprint Scale of Operations:~12000 professionals Presence: 11 Global Business Centers 56 Regional/Local Centers Language capabilities: Expertise in 30 languages Global Delivery/ Support CentersSpecialized Language Transaction Processing (Guadalajara, Barcelona, Bucharest, Singapore, Dalian) Activities • Country-specific regulatory transactions • Customer support for exotic languages (e.g., Serbo-Croatian, Chinese) • Back-up and disaster recovery services America Centers (Colorado Springs & Houston) Activities • Call center support (A/P) • Vendor refund & escalation • Tax reporting • Mail room & scanning Global DeliveryHubs Low-Cost, Transaction Processing Center[Bangalore (2), Chennai(2), Costa Rica, Wroclaw] Activities • Finance & Accounting • Billing • Order & rebates management • Customer fulfillment • Employee services & payroll • Procurement/SCM • Reporting Legends Global Delivery Centre

7. Transformation – what do we mean? • Do same things in different ways – effectiveness • Do new / different things – innovation • Target defined outcomes • Fixed G&A reduction of x% • DSO reduction of 1 day • Execution strategy • Speed V risk profile • Change Management capabilities • Transition & Transform V Transform then Transition!

8. 4th Order Effects Agility Gaining Competitive Advantage • Benefits • Respond quickly to changing business needs • Scalable solution • Predictive view of business trends • Strategic partnerships • Drivers • Innovative & adaptable process and technology architecture • Business decision support and predictive analytics • Front office / consulting 3rd Order Effects Freeing Up Capital Value Generation • Drivers • Technology Enablement and optimisation • Integration of partners, customers, suppliers • Benefits • Freed up capital from fixed asset investments • Fully leverages employees, satisfied customers / business partners Order Effects 2nd Mitigating Risk Business Compliance • Benefits • Enhanced regulatory compliance e.g. SOX • Improved external risk perception • Reduced errors across the board • Maximized data security • Drivers • Compliance Assurance • Business Performance Reporting • Stringent quality / six-sigma plus assessment and testing • Business Continuity & Security 1st Order Effects • Operations Cost Reduction Operational Excellence • Drivers • Operations consolidation/ offshoring & scale economies • Process standardisation & BPR • BPM • Benefits • Reduced costs for labour and infrastructure • Reduced number of FTEs, Increased productivity and faster processing times • Enhanced business controls Transformation - keeping ahead of the power curve Strategic Priorities

9. OPERATIONAL EXCELLENCE VALUE • Cross-Tower F&A Process Integration • End-to-End Process Reengineering • ERP/Process Technology Enhancements/Integration • Extensive Use of Analytics & Business Intelligence PROCESS EXCELLENCE • Waste Elimination in Process Activities • Process Digitization & Automation • Self-Service Web-Enabled Tools • Best Practices Applied to Processes • Value-Added Services Applied SHARED SERVICES EXCELLENCE • Regional/Global Consolidation • Process Rationalization, Standards & Stabilization • Economies of Location, Assets & Utilization • Implement Workflow Tools • SLA/KPI Measurements TIME Value capture

10. Transformational Outsourcing can deliver both significant cost savings and provide a platform for value creation Achievable cost savings through global BPO transformation + 15-20% +3-5% 48-75% + 10-15% + 20-35% Cost savings (%) 80 Aggressive potential estimates 60 40 Conservative potential estimates 20 Actual achievable savings depend on specific company scope

11. Why good / clear Solution design is critical – and on one page! • Clarify non negotiables • Agree who is accountable for the what and how • Agree how to ring fence scope, expectations, budgets, time frames, deliverables, outcomes • Agree KPI’s / Measures – Transition and Transformation • Agree collaborative process for dealing with conflicts / escalations • Publish / be transparent regarding programme goals, objectives, scope and constraints

12. Answering some basic questions will help identify which BPO provider will be the best partner Capability • Does the provider have the required capability (Process, Technology, Delivery, Service)? • Does the provider have the capability to expand into other process and services? • Is the supplier capable of being a strategic partner? Capacity • Does the provider have the requisite scale? • Does the provider have the capacity to meet current and future demand? • How secure is the access to the provider’s capacity? Viability • Is the provider financially strong? • Are there market/competitive developments that are likely to threaten the provider’s survival? Track-Record • Does the provider have a proven track record of delivering successful results? • Does the provider have a history of innovation in the space? Cultural Fit • Are the provider’s values and culture compatible? Do to, do for , do with……………… Source: Analyst reports; HP Analysis

13. What are the characteristics / attributes for successful BPO implementation? • Business case • Strategic agenda • Management Support • Quality • Compliance • Continuous Improvement • SLA definition and measurement • Governance framework • Investment in training • Staffing models • Investment in recruitment • Transition & transformation approach • MoC across implementation lifecycle • Identify MoC experts • Knowledge transfer • Solution design

14. PLANNING:Setting up for success Define the strategic intent • Cost reduction • Value creation • Improved controllership • Improved business controls • Enhanced flexibility / Plug and Play • Operational Excellence 1 2 3 Define the operating and organization models Develop the business case Senior Management Sponsorship • Project benefits • Project risks and mitigation plans • ROI and payback • Scope of operations • Process model • Technology architecture • Pricing model • Service Level Agreements • Organization model Robust program management

15. PLANNING:Aligning the “WHY?” with the “WHAT?” Establish the strategic intent • Develop senior managementconsensus regarding vision for the Outsourcing and why it needs to be implemented • Essential to define prior to defining operating model and organization design • ALL downstream decisions require a clear understanding of the ultimate goal Define the model 1 • Define comprehensive Front Office/ Back Office process model covering • shared transaction services • Centres of Excellence • Business partners • Understand real business opportunities and constraints • Take holistic approach to org, design including ‘retained operations’ • Leverage technology Develop the business case • Critical input for the investment decision • Necessary to convince management and businesses to pursue Outsourcing • Forms baseline for measuring progress and success • Identifies constraints / requirements for later design • All subsequent steps undertaken if the business case is attractive 2 3

16. PLANNING:Addressing “HOW?” – “Make or Buy” Strategic Fit Which structure will best help us meet our strategic and operational goals given our core competencies, competitive landscape, and growth objectives? Economic Impact What are the required investments (time and money) versus the anticipated benefits (savings and service level improvements) of each option to our shareholders and stakeholders? Required Timing What is the required timeframe to reach steady state and achieve payback on investment? Operating Model Which structure will best enable us to achieve best-in-class performance in our required timeframe? Cultural Fit Can we view an outsourcer as a partner and will an outsourcing partner offer best-in-class capabilities vs. In-sourcing? Risk Management What are the regulatory, operational, socioeconomic, and financial risks of each option and how can they be mitigated?

17. PLANNING:Aligning the “Make-Buy” outcome to the strategic intent How to Decide? “Make”: In-source “Buy”: Outsource Strategic Fit • Process is not unique and/or core to company Economic Impact • Significant investment required to make internal processes competitive • Constraints on capital spending Required Timing • Required payback period is 2-3 years Operating Model • Need to upgrade systems and technologies to be competitive • Need to leverage multi-client volume to gain maximum scale advantages Cultural Fit • Suitable outsourcing partners available • Senior management support for outsourcing Risk Management • Low risk of intellectual property loss • Need to leverage outsourcers’ disaster recovery infrastructure • No regulatory constraints • Strategic Fit • Process is unique and/or core to company • Economic Impact • Internal processes are competitive • Few constraints on capital spending Required Timing • Required payback period is 4-6 years • Operating Model • Fully integrated systems environment in place with access to innovative technologies • Adequate volume to achieve maximum scale advantages Cultural Fit • Lack of suitable outsourcing partners available • Lack of senior management support for outsourcing Risk Management • High risk of intellectual property loss • Disaster recovery infrastructure in place • Regulatory constraints / uncertainties

18. PLANNING:What goes wrong • Mis-alignment between strategic vision and operating model • Organisational model does not support strategic objectives • Insufficient investment in supporting technology • Sub-optimal scope through: • failure to address areas outside transactional shared services • lack of fact based analysis of potential functional scope • weak project sponsorship • Mis-alignment between financial business case and strategic vision • Business case built around labour arbitrage and efficiency only • Lack of clarity around the As Is • full current costs • baseline performance and service levels • Over-promise on financial business case to help drive buy-in

19. GOVERNANCE:Avoiding ‘Them’ and ‘Us’ Executive Governance Council “Set strategic directions and develop long term outcome goals” Management Steering Council “Manage overall service performance and changes” Operations Control Committee “Manage day-to-day operations” • Managing the relationship • Define structured processes to manage the relationship effectively and efficiently • Service delivery should be monitored at eachlevel at a predefinedfrequency • Performance measurement should cover the end-to-end process • Should include members from all business units being serviced by the Outsourcing Services Organization

20. GOVERNANCE:What goes wrong Executive Governance Council • Fails to set direction and update vision for changing business environment • Fails to set challenging targets • Does not promote culture of ‘one finance organisation’ Management Steering Council • Narrows focus to performance of Outsourcing organisation • Loses sight of overall process health and process performance Operations Control Committee • Not empowered to resolve issues • “Talking shop”

21. Management of Change (MoC):What goes wrong • It doesn’t happen!

22. Performance Management:Measuring what matters Defining structured Service Level Agreements (SLAs) is essential • Defines accountability • Assures businesses that service levels would not suffer “Helps build trust among stakeholders” • SLA / KPI definition • Linked to overall strategic objectives for Outsourcing • Based on genuine business requirements – Output based • Defines roles and responsibilities of all parties involved • Measures overall health of process not just spot performance As the relationship matures, move from measuring operational SLAs to business objectives linked SLAs for maximum benefits

23. Performance Management:What goes wrong No baseline • performance of current operations not baselined Poor design • not built into process / technology design so difficult to measure on a timely or reliable basis • insufficient involvement from stakeholders reduces buy-in to measures Poor definition • too many / too detailed • used as a tool to gain project buy-in so based on current finance performance (or belief) not real business requirements • wrong focus - measuring shared services only, not process as a whole Poor reporting • reduces trust in Outsourcing services organisation Weak review process • not updated for changes in business environment and priorities so fail to provide ongoing challenge to performance of Outsourcing organisation

24. Operational excellence:Not just about engineering Data Production Line Continuous Improvement post implementation of Data Production Line CONSOLIDATION QUALITY C0MPLIANCE • Drive out process defects through programs like Six Sigma • Embed quality at the source • Ensure standardization through certifications (like ISO), documentation standards etc. • Economies of place Operational Excellence STANDARDIZATION • Economies of scale • Improved processes and policies • Information harmonization PROCESS IMPROVEMENT • Eliminate waste through techniques like Industrial Engineering, Lean etc. AUTOMATION • Improved processes (Straight through processing) • Reduced touch-points and errors Operational Excellence should not be bolted on after implementation – it needs to be built into each stage and workstream of the project

25. Operational excellence:What goes wrong • Costs (infrastructure and headcount) and benefits (value creation and cost avoidance) not identified and built into business case • Operating and organisation model do not incorporate elements required to deliver long term operational excellence • Performance monitoring encourages focus on narrow, tactical issues and misses broader, and more significant, strategic benefits available • Objectives and challenges not renewed and updated based on external benchmarks and changing business requirements and priorities • Recruitment, training, mentoring and development not established to support operational excellence • HR, reward, recognition and promotion policies not aligned to needs of operational excellence • Management of change does not address changes required in retained organisation and other stakeholders to deliver end-to-end excellence • Solution and technology focuses on enablement of remote operation not enablement of value creation, process efficiency, control and excellence Operational Excellence must be embedded into all aspects of the BPO Transformation programme

26. Compliance • Transition controls • Process documentation • Ownership definition • Knowledge transfer procedure • GAAP compliance • Policy compliance • Operations controls • Segregation of duties • Transaction audit trails • SOX • Steady-state controls • SAS 70 reporting • Self audits • Forensic audits • Account reconciliation • Privacy impact assessment • Operational risks • External disasters • Internal process breakdowns • Brand risks • Non-compliance • Accounting lapse • Privacy breach • Information breach Data privacy and information security • Meet all legal requirements with minimum intrusiveness • Policies for collection, storage, usage and sharing Continuity • BCP planning, testing and execution built into our price • Global team for pre-incident planning and post-incident response and recovery • Financial risks • Customer defections • Revenue leakage • Fraud impact Transparency • Standard and proprietary tools to monitor and report operations • SLA violation prediction • Resource optimization Creating the Value - Mitigating Risk

27. Reduce finance transaction processing cost by 20 – 30 % through global consolidation • Further reduce cost by 20 – 30% by automation Develop a compelling business case • Strive to be in the first quartile by cost in the industry • Improved controllership Define the strategic intent • Define accountabilities – For O2C (Debt Management – Retained, Cash Application – Shared Service) • Pricing – local controllers charged based on transactions Set expectations upfront Senior management support • CEO / CFO / COO responsible for SSC / Outsourcing • Position Shared Services leader as a peer of business leaders Develop a tiered Governance structure • Plan what needs to achieve over the next 3-4 year • Monitor performance through SLAs Ten tips to ensure success

28. Develop a communication plan targeted at various stakeholder groups • Anticipate and manage risks proactively Manage organization change • Train internal resources for new responsibilities • Invest in hiring resources with skills in Shared Services implementation Invest in training and recruitment Manage transition risks • Give the organization time to digest changes due to Outsourcing and then transforming • Standardize processes – Challenge legacy and move towards best practices • Automate to reduce touch-points Set up a data production line Embed Operations Excellence in Shared Services DNA • Focus on quality and build quality at all stages and in all workstreams of the programme • Focus on compliance and improvements • Focus on building a sustainable operation Ten tipsto ensure success

29. Achieving Business Transformation through OutsourcingIOF Prague Conference Les Mara, Head BPO Services EMEA Les.mara@hp.com +44 7768 008611 The content of this presentation is proprietary and HP confidential and not for disclosure or onward transmission without HP’s written consent

30. HP – Business Process Outsourcing Operational Excellence Transition Expertise • Completed more than 1,000 transitions – 98% on time • Rigorous transition methodology with proven risk mitigation tools • Global organization focused on Transition • Country based resources expert in local languages, legal/HR issues, customer, etc. • 100+ dedicated and experienced transition managers • Experienced Management of Change team • 15+ years of global shared services experience • World class process performance • Six sigma plus (3,600 green belt, 80 black belt) • 83% workforce college Grads and 70% with Accounting degrees • Dedicated & experienced compliance & business controls teams • Robust and tested disaster recovery infrastructure We have lived and are living the journey Collaboration & Creativity The Power of HP Technology Innovation • Leading-edge Service Oriented Architecture (SOA) platform to access & operate multiple client environments/business applications • Global alliances with technology leaders (e.g. Microsoft, SAP, Oracle, Soluziona, GetPaid, etc.) • HP Leverage – $3B annual R&D investment towards innovation • Flexible, customized solutions to meet complex customer requirements • Ability to start small and expand in terms of process, business, and geography • Performance metrics tied to at risk fees • Gain-sharing to support continued process and technology innovation • Robust governance model • Leverage operations in 178 countries to meet clients’ unique business requirements • Ability to handle regional needs e.g. language, currency, regulations • Financial stability of large corporate parent - HP • Attract and retain top talent around the world through HP brand • Leverage our F&A investments over one of the largest customer bases

31. HP recognized for its collaborative partnershipapproach Industry recognition Ranked 3rd and a "leader" in the International Association of Outsourcing Professionals list ‘The Global Outsourcing 100’ 2007, 4th in 2006 Named to the “Top 50 Best Managed Global Outsourcing Vendors of 2007” by the Black book of outsourcing Ranked 2nd in the Black Book of Outsourcing’s “2007 Top Ten Global FAO Vendors” Named to the IAOP's Top 30 BPO Providers list – 2006 India’s HP BPO Global Delivery Hub Awarded the best Six Sigma quality improvement project of the year from the Indian Statistical Institute and Quality Council of India Ranked 2nd among Most Trusted Company for Privacy by TRUSTe and The Ponemon Institute – Mar 2006 Les Mara, Head of HP BPO EMEA recognized as thought leader in FAO Today’s 2007 FAO Superstar list HP named to FAO Today’s “Lucky 13” list of leading enterprise FAO providers – 2007 Ranked No. 2 on the American Society for Training & Development’s (ASTD) 2005 BEST Awards list – while claiming the top spot for technology companies – Oct 2005 HP ranked as a Multifunction BPO Provider in the F&A space - 2006 Ranked a “Top Specialized Learning Process Provider” by TrainingOutsourcing.com 2006 and 2007 Winner of one of the eight 2006 Outsourcing Excellence Awards. ‘Outsourcing Center’ - 2006 HP ranked as a Multifunction BPO Provider in the Procurement space - 2006