CIO Speak: Trends in IT Spending and Multisourcing – Keys to Sourcing Success ,Kurt Potter Gartner, Inc.

Slide 1: CIO Speak: Trends in IT Spending and Multisourcing – Keys to Sourcing Success Ken Brame, CIO, AutoZone Dr. P.P. (Daru) Darukhanavala, VP & CTO British Petroleum Sandeep Chouhan, CIO, Barclays Bank PLC Kurt Potter, Research Director, Gartner Notes accompany this presentation. Please select Notes Page view. These materials can be reproduced only with official approval from Gartner. Such approvals may be requested via e-mail—vendor.relations@gartner.com.

Slide 2: Kurt Potter – Research Director, IT Services and Outsourcing for Gartner, Inc. • Research director with Gartner Research's Technology and Service Provider group. • Specializes in trends for the North American IT outsourcing market. • Outsourcing research include data center, desktop, help desk, enterprise applications and network management. • Co-leader for the Gartner IT Outsourcing Research Community, an internal Gartner forum for innovation in IT outsourcing. • Lead analyst for “Gartner on Outsourcing, 2007-2008,” the flagship annual report on the state of IT outsourcing and BPO. Previously • Led the Gartner Best Practices Council for IT Sourcing, a peer exchange forum dedicated to organizations who manage large outsourcing engagements. • Research lead for IT Spending and Chargeback Strategies

Slide 3: Ken Brame – CIO for AutoZone AutoZone, a $6.2 billion chain of auto parts stores with over 4,000 locations in the US and Mexico. Previously, CIO for several leading retail companies including: • Bass Pro Shops, a leading multi-channel outdoor and sporting goods retailer • Service Merchandise, a large multi-channel jewelry and hard lines specialty store chain. Other Experience • CTO for a leading software company that developed solutions for retailers. • Various IT and business management positions with other leading Department Store, Fashion Apparel, Grocery, and Drug retail companies. • The first half of career was spent on the business side of retailing and the second half on the IT side. • Past Chair of the Retail Industry Leaders Assn.’s (RILA) Technology Leader’s Council and the Association for Retail Technology Standards (ARTS). Education • MBA and BBA – Texas Tech University, USA

Slide 4: Dr. P. P. (Daru) Darukhanavala – VP & Chief Technol gy Officer, o Digital & Communications Technology for British Petroleum • His team matches external technology innovation to BP’s business requirements using a VC-type approach to rapid adoption. • His team applies digital technologies and services to force major business process transformation as well as cost efficiencies across all of the business segments. • Led the IT integration programmes for the BP-Amoco merger and the Arco acquisition. Previously • Director, Global IT Services for the BP Group, responsible for establishing standard IT infrastructure services world-wide. • IT Functional Chief for BP Exploration globally based in London. • CIO for BP Exploration in the Continental US and Alaska. • Director, Corporate Supercomputing Center and Head of the Corporate Management Science Group for The Standard Oil Co. Education • PhD and MS degrees in Operations Research from Case Western Reserve University, Cleveland Ohio, and B. Tech in Mechanical Engineering from the Indian Institute of Technology, Bombay.

Slide 5: Sandeep Chouhan – CIO & Global Head of Application Delivery Services for Barclays Bank PLC • Leads the execution of his vision and strategy for Global Application Delivery to help Barclays realise its global growth ambitions. • 20 years experience of developing and implementing IT Strategy within Global Banking & Finance organisations. • Through standardised global platforms, greater control and transparency of processes he has already made significant inroads in improving the delivery of IT services to Barclays. • Focus on establishing trusted partnerships with external vendors and providing people with clear focus and enhanced career paths. Previously • Morgan Stanley, CIO, International Consumer Banking Group. • Citigroup, several Senior Management roles and establishment of Offshore Delivery Centres to support the business globally.

Slide 6: IT Spending & Multisourcing © 2006 Gartner, Inc. All Rights Reserved.

Slide 7: Multisourcing: Conventional Wisdom and Facts • Organizations that develop the necessary competencies and treat multisourcing as a discipline will be successful • For some organizations, multisourcing is a train wreck waiting to happen • Some organizations with advanced sourcing capabilities will consolidate providers and reduce the number of providers used • Late adopters to IT outsourcing will use one or two providers • Strategic reasons to use multiple IT outsourcing providers • Gain access to best of breed services • Create healthy competition between providers for better service and competitive pricing • Allow for less disruption if replacement of a service provider is necessary

Slide 8: Multisourcing Defined Multisourcing is the disciplined provisioning and blending of business and IT services from the optimal set of internal and external providers in the pursuit of business goals. Multisourcing is NOT: • Doing a lot of outsourcing • Using a lot of providers • Offshoring • All the above

Slide 9: Enterprises Will Spend $17 Billion on Managing IT Outsourcing Engagements in 2008 - WW 800 • Enterprises spend 3% to 10% of contract value on managing IT 600 outsourcing engagements 400 • A range of 5% to 7% is reasonable to manage IT 200 outsourcing deals 0 • 1.5% to 5.0% of internal IT spending is devoted to managing 2006 2007 2008 2009 2010 2011 IT outsourcing • Multisourcing may force the Managing ITO (Internal Spend) typical enterprise to be closer to Other Internal IT Spending 10% IT Outsourcing $ USD, Billions. Excludes Discrete IT Services & BPO

Slide 10: Worldwide, 112% Increase In the Number of Providers Used for ITO Since 2005 Not sure 11.3% 100 or more ESPs 9.2% 25-99 ESPs 7.9% 10-24 ESPs 13.3% 5-9 ESPs 21.9% 4 ESPs 10.1% 3 ESPs 11.6% 2 ESPs 9.0% 1 ESP 5.7% 0% 5% 10% 15% 20% 25% Averages WW NA EU A/P 2007 9.1 5.5 8.1 13.9 2005 4.3 4.1 3.9 3.4 N=631, Infrastructure and Applications Outsourcing

Slide 11: Outsourcing vs. Multisourcing Outsourcing Actions Multisourcing Disciplines Ad hoc/reactionary Strategic and repeatable Tactical event Studied, operating model Problem-focused Outcome-focused Reactive, compulsive Predictive, monitored, measured Situational reaction Comprehensive and disciplined Separated Integrated Managed metrics Governed outcome \"Supplier\" relationship \"Partner\" relationship Command and control Trust and control

Slide 12: Are You Multisourcing-Competent? Program Management Financial Management - Managing sourcing-related strategic - Sourcing funding, pricing, invoicing, and change activities chargeback, and price and performance benchmarking Performance Management - Sourcing performance standards and People Management continuous improvement - Change management, training, recruitment and transition of Strategy Management retained organizational - Sourcing, business, operations and competencies and design IT strategy alignment Relationship Management Demand Management - Alignment of objectives for service - Consistent approach and standardized relationships to achieve the strategic processes for meeting business objectives of all parties demands Contract Management Services Management - Sourcing-related contract - Seamless, integrated delivery of internal development and contract and external services administration activities

Slide 13: Multisourcing Requires Leadership High-Value \"Sweet Spot\" Contextual The Versatilist Orientation Leadership Industry, Process Roles and Experiences Local Knowledge Aptitude Capacity for Generating Future Historical \"Sweet Spot\" Business Value The Specialist

Slide 14: Multisourcing Roles and Competencies Service- Behavioral Business Specific Service leadership: Sets strategic direction and business value expectations Architecture and standards development: Sets direction, both internal and external Business enhancement: Directs innovation and monitors service value Provider management: Vendor relationship management Key: Low Medium High

Slide 15: Sourcing Governance Defined Sourcing governance is the assignment of rights and responsibilities for decisions regarding internally and externally provided resources and services, with the objective of ensuring service coordination and achieving business results, according to the organization's sourcing principles.

Slide 16: Sourcing Governance: Responsibilities Policies Actions Socialization Councils Committees Communities Resources: Solutions: Operations: Sourcing Coordination Evaluation • Market analysis • Business case • Standards • Vendor analysis (ROI, risks) • Metrics, evaluation • Selection • Planning and • Documentation • Negotiation design • Quality assurance • Contract • Coordination • Best practices development • Delivery • \"Broker\" relationship

Slide 17: Maxims Link Strategies to Business Sourcing Actions Alignment Sourcin gStrateg y Business Business Maxims Maxims Business Strategy IT Operation Strategy sStrategy Sourcing Maxims Sourcing Actions

Slide 18: Start Out With the Right Focus; Business Change the Decision Sequence Alignment Tactical Disciplined Options/Choices Outsourcing Multisourcing Cost improvement, Who Why operations improvement or business performance What What Level of competency and differentiation Where Who Internal or external or hybrid How How Custom or standardized Why Where Domestic or nondomestic

Slide 19: Relationship Co-Management Integration Strategy Responsibility Integration Equity Audit Feedback • Goals • Demand • Planning • Funding • Continuous • Reports improvement • Directions • Skills • Program • Assets • Forecasts management • Performance • Policies • Resources • Cost assessment • Lessons • Change control • Procedures • Supplier management and • Deal • Commun- selection estimating evaluation ications • Standards • Scope and • Relationship service levels • Pricing • Risk analysis • Conflicts • OLAs • Corporate • Set up audit change and exit management

Slide 20: Developing Trust While Relationship Maintaining Appropriate Controls Integration Elements of Trust Control Mechanisms Employee Group Organization Communications Goals & standards Responsiveness Capability Roles & responsibilities Behavior management Compatibility Predictability Feedback Peer-group parity Reputation Congruency Demand management Continuous improvement Mutuality Dependability Change management Decisions Consistency Financial management

Slide 21: Key Elements of Successful and Disciplined Multisourcing  Strong sourcing governance model  Business-aligned sourcing strategy  Market intelligence  Demand management competency  Sourcing relationship management competency  Co-management discipline  Service integration  Continuous performance improvement

Slide 22: IT Spending & Multisourcing © 2006 Gartner, Inc. All Rights Reserved.

Slide 23: Multisourcing and IT Spending Our Panel • Ken Brame, CIO, AutoZone • Dr. P.P. (Daru) Darukhanavala, VP & CTO, British Petroleum • Sandeep Chouhan, CIO, Barclays Bank PLC • Kurt Potter, Research Director, Gartner

Slide 24: Multisourcing and IT Spending Our Panel • Ken Brame, CIO, AutoZone • Dr. P.P. (Daru) Darukhanavala, VP & CTO, British Petroleum • Sandeep Chouhan, CIO, Barclays Bank PLC • Kurt Potter, Research Director, Gartner