Building Partnerships Gail F Farnsley Vice President and CIO Cummins Inc. NASSCOM Conference, Mumbai February 14, 2008

Agenda Outsourcing Model Background Management and Measurement Why a joint venture? Evolution of the partnership

Outsourcing Model

Background

Management and Measurement

Why a joint venture?

Evolution of the partnership

HIGH Competitive Advantage/ Strategic Importance LOW HIGH External Partner Capability Insource Invest in internal capability Insource until external partners are capable Invest with partners to build their capability Collaborate Use partners for flexible capacity and while we develop internal capability Outsource Outsource to selected Global Preferred Vendors Outsourcing Model

Model Implications for IT Program/Project Management Infrastructure and Operations Business/Systems Analysis Programming, Testing and Support Strategy and Planning Primarily Insourced Primarily Outsourced

Background IT Applications Sent some Y2K work offshore with TCS in late 1990’s Merged internal India-based IT services company (Cummins Infotech) with KPIT to create KPIT Cummins joint venture Initial outsourcing contracts signed in 2001 KPIT Cummins, TCS, iGate Contracts re-bid in 2003 and extended in 2006 KPIT Cummins, TCS, iGate Contracts re-bid in 2007 KPIT Cummins, TCS, Infosys As of Year-end 2007 65% of IT applications work is outsourced 95% of outsourced work is done by 3 Global Preferred Vendors 68% of Global Preferred Vendor work is done offshore

IT Applications

Sent some Y2K work offshore with TCS in late 1990’s

Merged internal India-based IT services company (Cummins Infotech) with KPIT to create KPIT Cummins joint venture

Initial outsourcing contracts signed in 2001

KPIT Cummins, TCS, iGate

Contracts re-bid in 2003 and extended in 2006

KPIT Cummins, TCS, iGate

Contracts re-bid in 2007

KPIT Cummins, TCS, Infosys

As of Year-end 2007

65% of IT applications work is outsourced

95% of outsourced work is done by 3 Global Preferred Vendors

68% of Global Preferred Vendor work is done offshore

Background Infrastructure and Operations Initial contract signed in 2004 HCL Contract renewed in 2007 HCL Services provided as of Year-end 2007 Multi-language IT Help Desk Global Account Management Server Management (Oracle, UNIX, Lotus Notes, Windows, Web) Network Management (NOC, WAN Support) Appworks Support Storage and Backups Remote Desktop Support

Infrastructure and Operations

Initial contract signed in 2004

HCL

Contract renewed in 2007

HCL

Services provided as of Year-end 2007

Multi-language IT Help Desk

Global Account Management

Server Management (Oracle, UNIX, Lotus Notes, Windows, Web)

Network Management (NOC, WAN Support)

Appworks Support

Storage and Backups

Remote Desktop Support

Supplier Management Follow standard Cummins Supplier Management practices Supplier management team assigned for each partner Measures defined in the contract Regular Customer Satisfaction Surveys Communication plans in place and escalation paths established Quarterly and annual reviews of work and relationship Joint Six Sigma projects to address areas for improvement

Follow standard Cummins Supplier Management practices

Supplier management team assigned for each partner

Measures defined in the contract

Regular Customer Satisfaction Surveys

Communication plans in place and escalation paths established

Quarterly and annual reviews of work and relationship

Joint Six Sigma projects to address areas for improvement

Sample Customer Satisfaction Survey Control Chart 8% 1% 68% 158/114 Q2-07 66% 57% 71% 65% 68% 65% 52% TTB (>= 65%) 1% 1% 0% 0% 0% 0% 2% BB (0 %) 10% 9% 3% 3% 4% 3% 10% BTB (=< 5%) 139/88 91 73 71 90 84 74 Responses/ Respondents Q3-07 Q1-07 Q4-06 Q3-06 Q2-06 Q1-06 Q4-05 3.81 3.86 3.75 3.97 3.96 3.88 3.83 3.60 Weighted Average Score Q3-07 Q2-07 Q1-07 Q4-06 Q3-06 Q2-06 Q1-06 Q4-05

Low High Maturity Low High Offshore Leverage * Sample Capability Matrix Legend Evidence Capability Exists Capability needs Strengthening Building Capability Not an area of Capability

Why a Joint Venture? Evolution of a captive to JV Captive IT services group in India had grown to over 100 people, but managing an IT services company was not a core competency of Cummins But we wanted to maintain an investment in an IT services company as we saw it as a good investment Helped move work faster Concerns about confidentiality of applications lessoned by moving work to someone “inside the family” Senior leadership visibility and attention due to concern about success of JV Gave us insight into cost structure and operation of an IT company Made us more educated when negotiating with other partners

Evolution of a captive to JV

Captive IT services group in India had grown to over 100 people, but managing an IT services company was not a core competency of Cummins

But we wanted to maintain an investment in an IT services company as we saw it as a good investment

Helped move work faster

Concerns about confidentiality of applications lessoned by moving work to someone “inside the family”

Senior leadership visibility and attention due to concern about success of JV

Gave us insight into cost structure and operation of an IT company

Made us more educated when negotiating with other partners

Evolution of a partnership JV formed in late 2001 Traditional IT outsourcing business agreement Launched joint community service projects in 2006 Partnered on a Six Sigma project to identify how to provide low cost IT services to non-profit community agencies in Columbus, Indiana, USA KPIT Cummins employees and volunteers staff a new agency to deliver IT services Expanded nonprofit support to other communities in 2007 & 2008 Started program to provide support for agencies in Pune Plans to expand program to Fridley, Minnesota and Nashville, Tennessee Expand partnership to Purdue University to research new ways to apply technology to societal problems and community organizations

JV formed in late 2001

Traditional IT outsourcing business agreement

Launched joint community service projects in 2006

Partnered on a Six Sigma project to identify how to provide low cost IT services to non-profit community agencies in Columbus, Indiana, USA

KPIT Cummins employees and volunteers staff a new agency to deliver IT services

Expanded nonprofit support to other communities in 2007 & 2008

Started program to provide support for agencies in Pune

Plans to expand program to Fridley, Minnesota and Nashville, Tennessee

Expand partnership to Purdue University to research new ways to apply

technology to societal problems and community organizations

Thank You