Avasant - Outsourcing Vendor Selection Webinar

Outsourcing Vendor Selection Best Practices
Strategic Advisors for the Global Economy

April 5, 2011
Page 1 Confidential - Not For Distribution
Topics Avasant Background Vendor Selection - Avasant Key Lessons Learned
Sourcing Lifecycle Overview

Overview of Sourcing Strategy and Its Impact on the Vendor Selection Process Outsourcing Vendor Selection Steps and Best Practices Q&A
Avasant Background
Based in Los Angeles, California, Avasant experts have performed over 1,000 engagements since 2001 across 40+ countries within three primary disciplines: Enterprise Optimization, Sourcing Advisory and Globalization Advisory services
Enterprise Optimization Services
Enterprise Optimization Avasant assists organizations with managing critical internal IT and Operations initiatives to drive efficiency and effectiveness of service delivery, capabilities acquisition and optimal cost savings Sourcing Advisory Avasant assists public and private sector clients with navigating the complex transaction lifecycle of securing critical IT , Operations and Analytics managed services from global Tier 1 3 service providers by leveraging best practice contracts, service level frameworks and financial analysis Globalization Advisory Avasant assists the governments and the supporting provider ecosystem of emerging markets with targeted economic development solutions designed to foster job growth, education, policy optimization, infrastructure development and global market awareness
Avasant Headquarters
Globalization Advisory Services
Sourcing Advisory Services
Avasant Offices & Client Locations

Avasant Background (contd)

Within Avasants primary disciplines: Enterprise Optimization, Sourcing Advisory and Globalization Advisory; are comprehensive solutions sets which have been hailed across the industry in recent years
Avasant Ranks as the #1 Global Sourcing Advisor for BPO and as a TOP Ranked ITO Advisor . . .
2008 1. Avasant 1. Avasant
2. 3. 4. 5. 6. 7. 8. 9. 10. Hackett Group Nelson Hall Everest Group Gartner PricewaterhouseCoopers TPI PA Consulting KPMG McKinsey
2009 1. Avasant Avasant

2. 3. 4. 5. 6. 7. 8. 9. 10. neoIT TBI Equaterra TPI NelsonHall PA Consulting PricewaterhouseCoopers AT Kearney Global Equations
IAOP Worlds Best - Avasant has also been the recipient of several awards for excellence in Management Consulting and Sourcing Advisory. Avasant has been designated among the Worlds Best Outsourcing Advisors by the International Association of Outsourcing Professionals (IAOP) in 2009, 2010 and for 2011.
Avasant Background (contd)

Underlying comprehensive Avasant Solutions are industry-facing experts, proprietary tools and best practices methodologies steeped in requisite IT, Operations & Analytics domain knowledge
Enterprise Optimization Services Sourcing Advisory Services

IT
IT
o IT Help Desk o Desktop o
Operations & Business Processes

Customer Supply Chain Management & Logistics
o Customer o
Research & Analytics

HR
o Recruitment o Compensation o Perf ormance
Finance & Accounting

o Procure to Pay o Order to Cash o Record to
Procurement
o Source to Pay o Sourcing
o o
Knowledge Processing
o Data o
Legal Processing
o Law Firm Back
o o o
o o o
Support Data Center Operations Server & Storage Management Network Ops Voice Services Application Development Application Maintenance ERP Systems Co-Location
o o
o o o
Service Customer Relations Customer Acquisition Operations Support CRM Support Outbound Telemarketing Specialty Help Desk eCommerce
o Forecasting o Sales &
o
o o
Operations Planning Capacity & Demand Planning Sequencing & Scheduling Distribution Planning Logistics & Transport
Report AP/AR Collections Fixed Assets Treasury Cash Mgt. Financial Planning o Analytics o Tax & Compliance o Expense Mgt.
o o o o o o
o o
o o
Support Supplier Research Supplier Training Contract Mgt. Market Intelligence Procurement Analytics Spend Analysis Perf ormance Reporting
o o
o o o
Evaluation Management Workf orce Management Benef its Administration Training Payroll Employee Data Management Travel Management
o o o
o o
Management Business Intelligence Market Research Insurance Financial Services Industry Analytics Consumer Goods Analytics Marketing Support
Of f ice
o Corporate
Legal
o Document
Review
o Intellectual
Property
o Contract
Management
o Compliance
&
Regulatory Management
Strategy Development
Risk Management
Transaction Management
Change Management
Transition & Transformation Management
End-to-End Solution Lifecycle Management

Public Sector
Engineering & Construction Financial Services
Life Sciences
Manufacturing
High Technology
Retail
Energy
Industry Focus & Expertise

Vendor Selection - Avasant Key Lessons Learned
The sourcing lifecycle steps of strategy, vendor selection, transition, ongoing management must be tightly integrated The vendor selection process begins with a well defined sourcing strategy The vendor selection process must address all expectations of the future client/vendor relationship (services,
SLAs, legal and regulatory requirements, level of scope flexibility etc.)
The vendor selection process should be as interactive as possible There is an increasing number of vendors and services solutions but the fundamentals of vendor selection remain the same
Sourcing Advisory Services Full Lifecycle Methodology

The recommendations and best practices covered in this Webinar are based on Avasants comprehensive sourcing methodology that has supported cross-industry operations and IT initiatives such as Shared Services, Consolidation, Transformation or Managed Services. An outsourcing approach that is comprehensive and that addresses the full sourcing lifecycle in an integrated way helps to ensure long-term successful vendor/client relationships.
PHASE 1: STRATEGY
GATHER INFORMATION & STRATEGY DRIVERS CONFIRM TARGET SCENARIOS & OPPORTUNITIES
DEVELOP COMPARATIVE FINANCIAL MODEL
PHASE 2: PREPARATION
SHARED SERVICES & CONSOLIDATION PLANNING
INITIATE MANDATE & PROGRAM FRAMEWORK
DEVELOP CHARTER & ORG MODEL
DETERMINE TARGET PROCESSES & ACTIVITIES
DEFINE STAFFING MODEL & POSITIONS
IDENTIFY TECHNOLOGY ENABLEMENT REQS
VERIFY FUNDING & FINANCIAL DISCIPLINE
CREATE METRICS & PERF MGMT DISCIPLINE
RATIFY MODEL & EXECUTION ROADMAP
RFP RELEASE GATE CONFIRM STRATEGY & COLLECT BASELINE REQS CONDUCT PROVIDER MARKET SCAN PREPARE SOWs, CONTRACT TERMS & KEY SCHEDULES PREPARE RFP BID PACKAGE & SCORING MODEL MANAGE PROVIDER SELECTION PROCESS
CONTRACT APPROVAL GATE NEGOTIATE FINAL CONTRACT TO EXECUTION
ANALYZE OPERATIONS, MANAGEMENT & TECHNOLOGY
SOURCING TRANSACTION EXECUTION
FACILITATE DUE DILIGENCE
PREPARE NEGOTIATION STRATEGY
ASSESS MARKET MATURITY & SERVICES FIT

COMPARE TARGET SCENARIOS & ANALYZE RISKS
MGT CHKPT
PHASE 3: IMPLEMENTATION AND MANAGEMENT

IMPLEMENTATION & TRANSITION SUPPORT CREATE INITIATIVE PROGRAM OFFICE
DEVELOP DETAILED TRANSITION /EXECUTION PLAN
SERVICES MANAGEMENT
CONFIGURE PERFORM SERVICES MGMT HEALTH CHECKS
FINALIZE SERVICE DELIVERY STRATEGY
FACILITATE RISK & CHANGE MANAGEMENT
VALIDATE VERIFY DEFINE VERIFY CRITICAL SERVICES PERFORMANCE FINANCIAL DELIVERBLES MEASURMENT PROCESSES & MGMT & & MILESTNS & REPORTING BILLING GOVERNANCE
AvaSenseTM
SUPPORT TOOL
DEVELOP SERVICE STRATEGY ROADMAP
Outsourcing Vendor Selection Best Practices
Overview of Sourcing Strategy and Its Impact on the Vendor Selection Process
Sourcing Strategy Overview
Gather Information & Strategy Drivers and Confirm Target Scenarios & Benefits
PHASE1: SOURCING STRATEGY
GATHER INOFRMATION & STRATEGY DRIVERS CONFIRM TARGET SCENARIOS & BENEFITS ANALYZE DEVELOP OPERATIONS COMPARATIVE MANAGEMENT FINANCIAL & MODEL TECHNOLOGY
COMPARE TARGET SCENARIOS & ANALYZE RISK
What are the key strategic drivers that will guide the sourcing strategy and ultimately the field of vendors that will participate in the vendor selection process? For example: Reduce cost
Based on the strategic drivers what service models are available and are there vendors in the marketplace that support each model? For example:
Reduce operational risk and focus on core competencies

Deliver services in new regions Speed up time to market Reduce geographical risk
Shared services
Managed services
SaaS, public cloud, private cloud services Single vendor/multiple vendors
Transform how services are delivered

GATHER INOFRMATION & STRATEGY DRIVERS CONFIRM TARGET SCENARIOS & BENEFITS
Develop Comparative Financial Model

ANALYZE DEVELOP OPERATIONS COMPARATIVE MANAGEMENT FINANCIAL & MODEL TECHNOLOGY
What is our cost baseline that will be used to compare vendor proposed costs? What is the potential market cost for each plausible sourcing scenario?
Outsource Scenario Outsource Scenario Total Vendor Charges
Total Vendor Charges Total Retained Operation Expenses Capital $ $ 130,000 Year 1 Year 2 Year 3 Year 4 Year 5 5-Year Total 5-Year Total
Capital Year 1 Year 2 Year 3 Year 4 Year 5 $ 1,848,180 $ 1,918,800 $ 2,353,800 $ 2,693,400 $ 2,863,800 $ 11,677,980
$ 130,000 $ 1,848,180 $ 1,918,800 $ 2,353,800 $ 2,693,400 $ 2,863,800 $ 11,677,980 $ 2,895,792 $ 3,000,000 $ 3,100,000 $ 3,300,000 $ 3,500,000 $ 15,795,792
Total Retained Operation Expenses Vendor Management Function Total Expenses Income Taxes Paid Vendor Management Function Total Expenses
Cost / Pricing Comparison 3,100,000 $ 3,300,000 - Total $ 2,895,792 $ 3,000,000 $ 92,409 $ 95,940 $ 117,690 $ 134,670 $ 143,190 $ Cost / Pricing Comparison - Total
$ $
$ 3,500,000 $ 15,795,792 583,899 583,899
$ 92,409 $ 95,940 $ 117,690 $ 134,670 $ 143,190 $ $ 4,836,381 $ 5,014,740 $ 5,571,490 $ 6,128,070 $ 6,506,990 $ 28,057,671
$ 4,836,381 $ 5,014,740 $ 5,571,490 $ 6,128,070 $ 6,506,990 $ 28,057,671 $8,000$ (1,257,459) $ (523,832) $ (642,587) $ (735,298) $ (781,817) $ (3,940,994) $7,000 $28 $28 $8,000 Income Taxes Paid $ (1,257,459) $ (523,832) $ (642,587) $ (735,298) $ (781,817) $ (3,940,994) $7,487 Total Expenses (After-Tax) $ 2,092,772 $6,000$ 3,578,922 $ 1,490,908 $ 1,828,903$6,706 $ 2,225,173 $ 11,216,677 $7,000 $26 $7,487 $ 3,578,922 $ 1,490,908 $26 $5,829 Total Expenses (After-Tax) $ 1,828,903 $Client Base $ 2,225,173 Client Base Case 2,092,772 Case $ 11,216,677 $5,000 $6,000 $ (3,578,922) $ (1,490,908) $ (1,828,903) $ (2,092,772) $ (2,225,173) $ (11,216,677) Operations Cash Flow for Argo $6,706 $24 Projected $24 $4,000 Savings $5,829 $5,000 Operations Cash Flow for Argo $ (3,578,922) $ (1,490,908) $22 $ (1,828,903) $ (2,092,772)$22 $ (2,225,173) $ (11,216,677) - 18%) (15% $3,000 Non-Cash Expenses $4,000 Depreciation $2,000 $20 $20 $3,000 $ 424,334 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 2,824,334 Non-Cash Expenses Capital Paid $ 130,000 $ 130,000 $1,000 Depreciation $ 424,334 $ 600,000 $18 600,000 $ 600,000 $18 600,000 $ 2,824,334 $ $ $2,000 Capital Paid 130,000 $ 130,000 $1,000 $0$$ (3,154,588) $ (1,490,908) $ (1,828,903) $ (2,092,772) $ (2,225,173) $ (10,662,343) Net Cash Flow (After-Tax) $ 130,000 $16 $16 Current Cost Market Price Mkt w/Max $0 Net Cash Flow (After-Tax) $ 130,000 $ (3,154,588) $ (1,490,908) $ (1,828,903) $ (2,092,772) $ (2,225,173) $ (10,662,343) NPV ($9,525,413) Current Cost Market Price $14Mkt Offshore w/Max $14 Leverage $12 Offshore $12 NPV ($9,525,413)
Annual $000's
Annual $000's
Projected Savings (15% - 18%) Range of Actual Savings (25% - 37%) Range of Actual Savings (25% - 37%)
Leverage Cost / Pricing Scenarios

Stradling Projected Pricing
2008
2009
2008 2010
2009 2011
2010 2012
Totals 2011
$ 25.8 $123.2 $ 20.3 $100.1 $ 16.6 $ 91.0 $ 14.2 $ 78.2 $ 15.2 $ 81.1
2012
$ 27.1 $ 20.5 $ 16.2 $ 13.6 $ 15.5
Totals $123.2 $100.1 $ 91.0 $ 78.2 $ 81.1
$ 22.4 Client Base Case W/O Change Client Base Case W/O $ 23.4 Change $ 19.5 $ 19.8 Stradling Projected Pricing
$ 22.4 $ 24.5 $ 19.5 $ 20.0 $ 20.2 $ 17.8 $ 19.2 $ 15.0 $ 18.3 $ 15.4
$ 23.4 $ 25.8 $ 19.8 $ 20.3 $ 20.2 $ 16.6 $ 16.2 $ 14.2 $ 16.7 $ 15.2
$ $ 27.1 24.5 $ $ 20.5 20.0 $ $ 16.2 17.8 $ $ 13.6 15.0 $ $ 15.5 15.4
Cost / Pricing Scenarios
$ 20.2 $ 20.2 Service Provider X Pricing Service Provider X Pricing $ 19.2 $ 16.2 Service Provider Y Pricing Service Provider Y Pricing $ 18.3 $ 16.7 Service Provider Z Pricing Service Provider Z Pricing

Analyze Operations Management & Technology

What is the baseline of our operational capabilities, management capabilities and technology? Where do we want to go, what is the gap, and what will be required of us and our vendor(s) to help us get there?
Operational Processes
Incident Management Problem Management Availability Management Configuration Management Change Management Release Management IT Service Continuity Mngement Service Desk Capacity Management Service Level Management IT Financial Services Mgt.
Compliance Rating
Fails Meets Exceeds
Data Center Architecture

Element
Enterprise Database Storage Mainframe Application Server Application Server OS Server Virtualization Physical Environment
Sourcing Program Management Transition Management Sourcing Mgt & Governance Relationship Management Performance Management Delivery Demand Mgt Contract Management Finance Management Compliance & Risk Management License Management
Best Practice Compliance

None 100% Key Deal Mgt Process
Compliance Rating
Fails Meets Exceeds

Assess Market Maturity & Services Fit

Based on strategic drivers, sourcing scenarios and requirements, who are the most appropriate vendors available in the marketplace? It is often helpful to conduct informal vendor solution presentations with a select group of vendors prior to the RFP to assist in refining strategies, requirements and RFP participants.
Historic Market Perspective Score Summary
Weighting
Provider 2
P rovider 3
Provider 4
Pr ovider 1
Selection Criteria*
Strategic Plan & Vision Green Data Center Green Power Management Systems Financial Stabilit y Customer Satisfaction Contract Management Capabilities Flexibility & Adaptability Contract Flexibility Retention Rate / Resourcing Pricing and Resource Weighting Management Practices, Methodology, Quality Geographic Delivery Capabilities (NA Only) Offshore IT Infrastructure Offshore Applications (Development and Maintenance) Business Process Outsourcing
1 3 3 1 1 1 2 1 2 1 2 2 3 1 3
3.0 3.0 5.0 5.0 2.0 5.0 1.0 1.0 5.0 1.0 4.0 5.0 4.0 5.0 3.0 52.0 37
4.0 3.0 5.0 5.0 4.0 5.0 3.0 2.0 4.0 1.0 4.0 5.0 2.0 3.0 5.0 55.0 40
4.0 3.0 4.0 4.0 4.0 4.0 4.0 4.0 3.0 4.0 5.0 4.0 5.0 5.0 4.0 61.0 45
3.0 3.0 2.0 2.0 2.0 3.0 5.0 4.0 3.0 4.0 3.0 3.0 4.0 5.0 4.0 60.0 37
5.0 3.0 4.0 4.0 5.0 5.0 3.0 2.0 5.0 2.0 5.0 4.0 5.0 5.0 4.0 61.0 45
Provider 5
5.0 3.0 4.0 5.0 4.0 4.0 4.0 3.0 4.0 3.0 5.0 4.0 5.0 5.0 3.0 61.0 45
Total Score Weighted Score Ranking
Provider 5
Compare Scenarios, Analyze Risks and Finalize Strategy

GATHER INOFRMATION & STRATEGY DRIVERS CONFIRM TARGET SCENARIOS & BENEFITS ANALYZE DEVELOP OPERATIONS COMPARATIVE MANAGEMENT FINANCIAL & MODEL TECHNOLOGY
Based on strategic drivers, operational-management-technology impact, cost and risks what is the model we will go forward with? What will be our vendor selection approach, participating vendors and additional requirements to be addressed in the vendor selection process (e.g., risk mitigation requirements).
Sourcing Ability to Improve: 1. Scalability 2. Cost (1) 3. Cost Variability 4. Service 5. Risk Profile
People Risk 5 Performance Risk 4 3 2 1
Peo 3.3 13% 3.7
Servers Network Desktop Help App App Comp & Recruit Payroll Train Procure Accts Desk Dev Maint Benefits Payable
6. Meet Current Requirements Legal Risk 7. Future Requirements

Financial Risk
Category Com Fin Legal
Avg Comp (AC) 3.1 3.4 2.9
Wt % High AC*WHR% Risk 3% 15% 3% 3.2 3.9 3.0
Technology Risk
Perf
3.5
15%
4.0
Sec
2.8
0%
2.8
Tech
3.1
3%
3.2
Communication Risk Transition Risk
Security Risk
Trans 3.4 13% 3.8
Legend
Lo 1
Med
Hi 5
Status Quo New Model Scenario A New Model Scenario B

Develop Service Strategy Roadmap

What will be our roadmap for the vendor selection process and transition to vendor services? The RFP should contain key requirements from the roadmap and the vendors ability to meet these requirements should be part of the proposal evaluation criteria.
Outsourcing Vendor Selection Steps and Best Practices
Vendor Selection Steps and Best Practices

Prepare SOWs, Contract Terms & Key Schedules
PHASE 2: SOURCING TRANSACTION EXECUTION
CONFIRM STRATEGY & COLLECT BASELINE REQS
CONDUCT PROVIDER MARKET SCAN
RFP RELEASE GATE PREPARE SOWs, CONTRACT TERMS & KEY SCHEDULES
PREPARE RFP BID PACKAGE & SCORING MODEL MANAGE PROVIDER SELECTION PROCESS
Lesson Learned: The RFP should contain a comprehensive, client developed global outsourcing contract for the vendors to respond to. The global outsourcing contract should consist of all key contract documents (e.g., MSA, SOWs, SLAs, Incentives and Fee Reductions Schedule, Relationship Management Schedule, Pricing Schedule). This approach helps to ensure that 1) all vendors are responding to the same baseline of services and other contractual requirements, 2)vendor proposals can be compared on an apples to apples basis and 3) there are no unexpected pricing increases during contract finalization.
Global Master Services Agreement
1
Master Services Agreement Global Terms and Conditions Schedules
Country Agreements Local Terms and Conditions United States Spain Portugal United Kingdom Ireland Germany
3
MSA Attachments Performance-Based Mgmt. Fee Reductions Benchmarking Pricing Security Change Management Relationship Management Lists: Key Personnel, Etc.
4
Statements of Work Schedules Travel Management SOW Expense Management SOW Credit Card Services
Exhibits
Attachments
Most vendors today operate on a global basis, therefore the MSA must addressed global terms and conditions.
An SOW with roles and responsibilities matrices is required for each service area. Vendors will propose their solutions around these core service Page 16 requirements. Confidential - Not For Distribution

Prepare RFP Bid Package & Scoring Model
Lesson Learned: The RFP must clearly articulate the clients outsourcing objectives and key requirements and must elicit vendor responses in a clear and structured manner.
In addition to the outsourcing contract, the RFP should contain the following key components designed to inform vendors of your underlying strategy and key requirements. The RFP should also extract detailed information regarding each vendors services solutions and pricing.
RFP Cover Letter RFP Instructions Provider Proposal Response Template Pricing Instructions and Pricing Template Master Services Agreement Relationship Management Schedule Statements of Work with Detailed Technology Appendices Fee Reduction Schedule Definitions Benchmarking Procedures HR Attachments Assigned and Managed Contracts SAS 70 Compliance Standards Other Contract Documents
Initial Contract Agreement Is Included In RFP Bid Package
Client information from the sourcing strategy, including: Client Background Sourcing Strategy Drivers
Proposal response template requesting: Provider background and direction
Similar references
Responses to questions and solution descriptions for transition, risk mitigation, technology, management, operations and staffing approach
Key Business,
Technical and Service Requirements
Acceptance and exceptions to the

contract package
Pricing proposal response template aligned to the baseline structure


Prepare RFP Bid Package & Scoring Model (contd)
Lesson Learned: Key stakeholders should be involved in defining proposal evaluation criteria using a model that aligns to the RFP.
Prepare a vendor evaluation and scoring model aligned to the RFP and its key components. Avasant recommends using a weighted, hierarchical model that contains major criteria and sub elements. The evaluation criteria should also align to strategic objectives and service requirements developed as part of the sourcing strategy. Key client stakeholders should participate in establishing evaluation criteria and weighting factors through a consensus-based process. This same group of key stakeholders should form the proposal evaluation and scoring team and should ultimately select the vendor based on a consensus decision process.
Offshore Provider 1 Offshore provider 2

Offshore Provider 1 Offshore provider 2 Offshore Max %
Category A) BUSINESS 1) RFP Process Management Capability 2) Provider Profile
2.8% 0.5% 7.8% 6.0% 0.6% 1.2%
2.7% 0.5% 9.8% 7.0% 0.6% 1.8% 22.4%
5% 1% 15% 10% 1% 3% 35.0%
3) Relationship Management Services and Provider Staffing 4) Human Resources Approach and Acceptance 5) References - Business view 6) Site visit - Business view Business Points: B) TECHNICAL 1) Application Maintenance and Support Services 2) Alternative Approaches 3) References - Technical view 4) Site visit - Technical view Technical Points: C) COST 1) Pricing Cost Points: D) RISK 1) Conformance with Contract Requirements 2) Transition 3) Exit Plan Risk Points: TOTAL POINTS:
1.2 1 0.8 0.6 0.4 0.2
18.9%
10.8% 4.8% 0.8% 1.2% 17.6% 5.4% 5.4%
13.7% 4.8% 1.2% 1.2% 20.9% 6.2% 6.2%
18% 8% 2% 2% 30.0% 10% 10.0%
6.0% 5.8% 0.6% 12.4% 54.3%
7.2% 7.5% 0.6% 15.3% 64.7%
12% 12% 1% 25.0% 100%

Manage Provider Selection Process
Lesson Learned: Interaction with vendor proposal teams throughout the selection process helps to improve vendor proposals and helps to gauge vendor commitment and corporate culture compatibility. Following RFP release, Avasant recommends the following pre and post-proposal activities: Pre-proposal submittal: Vendor Introduction Meetings Conduct informal introduction meetings between the clients RFP executive sponsors and the senior leadership team from each vendor. This is the initial opportunity for the client to gauge vendor commitment to the deal and it provides the vendor an opportunity to inquire about the clients overall vision for the future services relationship. One-one-on Q&A Sessions or Bidders Conference Depending on procurement rules, conduct one-on-one Q&A sessions with each vendor or conduct a bidders conference for all participating vendors. These interactions again allow the client to gauge vendor engagement and cultural compatibility potential.

Manage Provider Selection Process (contd)
Post-proposal submittal: Proposal Evaluation and Scoring The proposal evaluation team should conduct a consensus-based proposal scoring process supported by the pre-defined scoring
model.
Vendor Presentations Vendor presentations can be conducted to clarify vendor proposals and they provide an additional opportunity to interact with proposed delivery teams and to gauge commitment and cultural compatibility. The agenda of the presentation should be planned for each vendor so that it is a focused interaction and not a sales-based activity. Vendor Down Selection Following proposal evaluation and scoring, and vendor presentations, the evaluation team should have enough information to down-select to the top two vendors. The top two vendors will move on to due diligence activities
and best and final offers.


Facilitate Due Diligence
CONFIRM STRATEGY & COLLECT BASELINE REQS RFP RELEASE GATE
PREPARE SOWs, CONTRACT TERMS & KEY SCHEDULES
PREPARE RFP BID PACKAGE & SCORING MODEL
MANAGE PROVIDER SELECTION PROCESS
Lesson Learned: Due diligence is a key activity that is often underemphasized or treated superficially.
It is extremely important to perform due diligence activities on the finalist vendors as a part of the overall evaluation. The vendors will present a glowing account of their capabilities in their proposals so it is important to verify these capabilities with visits to each vendor facility that will be performing services for the client. A typical agenda for site visits should include review of the following:
Management and operational processes with concrete examples Physical and logical security processes with concrete examples Provider support infrastructure and support facilities Technology used in the delivery of services Interviews with key executives Interviews and walkthroughs with service delivery managers and the proposed account executive

Prepare Negotiations Strategy and Negotiate Contract to Execution
Lesson Learned: Managed competition throughout the vendor selection process improves vendor proposals and keeps vendors focused on client requirements. Negotiations Strategy: The client team should prepare a negotiations strategy for each finalist vendor. The negotiations strategy will guide parallel negotiations discussions that focus on priority proposal issues. Parallel Negotiations: Parallel negotiation discussions focus on clarifying priority issues such as vendor contract exceptions and proposed solutions and pricing. The objective is to reduce the number of contract issues and settle on service solutions prior to selection of the preferred vendor. The finalist parallel negotiations approach keeps vendors competitive and focused on meeting client requirements. Best and Final Offers - Following parallel negotiations, each finalist vendor should provide a best and final offer (BAFO) proposal based on the initial proposal with updates and a reduced number of contract exceptions resulting from parallel negotiations. After receiving BAFO responses from the finalists, the evaluation team should conduct a consensus-based BAFO scoring process to revise initial proposal scores to reflect the BAFO responses, findings of the site visits and customer reference calls. As before, the evaluation team reaches a single overall evaluation score resulting in the selection of the lead vendor.

Prepare Negotiations Strategy and Negotiate Contract to Execution (contd)
Lesson Learned: Including the outsourcing contract in the RFP, interaction with vendors, proposal clarification/pre-negotiation discussions and managed competition can significantly reduce the amount of final contract negotiations. Final Contract Negotiations: By the time the preferred vendor reaches this point only a small number of issues should remain to be negotiated. If final contract negotiations break down, the runner up vendor can be quickly teed up as the BAFO proposal should be a completely plausible alternative.
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Outsourcing Vendor Selection Best Practices

Strategic Advisors for the Global Economy

Page 1 Confidential - Not For Distribution

Topics Avasant Background Vendor Selection - Avasant Key Lessons Learned

Sourcing Lifecycle Overview

Page 2 Confidential - Not For Distribution

Globalization Advisory Services

Sourcing Advisory Services

Avasant Offices & Client Locations

Avasant Background (contd)

2009 1. Avasant Avasant

Page 4 Confidential - Not For Distribution

Avasant Background (contd)

Enterprise Optimization Services Sourcing Advisory Services

Operations & Business Processes

Research & Analytics

Finance & Accounting

o Forecasting o Sales &

Transition & Transformation Management

End-to-End Solution Lifecycle Management

Industry Focus & Expertise

Vendor Selection - Avasant Key Lessons Learned

Page 6 Confidential - Not For Distribution

Sourcing Advisory Services Full Lifecycle Methodology

SHARED SERVICES & CONSOLIDATION PLANNING

INITIATE MANDATE & PROGRAM FRAMEWORK

DEVELOP CHARTER & ORG MODEL

DETERMINE TARGET PROCESSES & ACTIVITIES

DEFINE STAFFING MODEL & POSITIONS

IDENTIFY TECHNOLOGY ENABLEMENT REQS

VERIFY FUNDING & FINANCIAL DISCIPLINE

CREATE METRICS & PERF MGMT DISCIPLINE

RATIFY MODEL & EXECUTION ROADMAP

CONTRACT APPROVAL GATE NEGOTIATE FINAL CONTRACT TO EXECUTION

ANALYZE OPERATIONS, MANAGEMENT & TECHNOLOGY

SOURCING TRANSACTION EXECUTION

FACILITATE DUE DILIGENCE

PREPARE NEGOTIATION STRATEGY

ASSESS MARKET MATURITY & SERVICES FIT

PHASE 3: IMPLEMENTATION AND MANAGEMENT

FINALIZE SERVICE DELIVERY STRATEGY

FACILITATE RISK & CHANGE MANAGEMENT

DEVELOP SERVICE STRATEGY ROADMAP

Page 7 Confidential - Not For Distribution

Outsourcing Vendor Selection Best Practices

Strategic Advisors for the Global Economy

Page 8 Confidential - Not For Distribution

Sourcing Strategy Overview

ASSESS MARKET MATURITY & SERVICES FIT

COMPARE TARGET SCENARIOS & ANALYZE RISK

FINALIZE SERVICE DELIVERY STRATEGY

DEVELOP SERVICE STRATEGY ROADMAP

Reduce operational risk and focus on core competencies

Transform how services are delivered

Page 9 Confidential - Not For Distribution

Sourcing Strategy Overview

Develop Comparative Financial Model

ASSESS MARKET MATURITY & SERVICES FIT

COMPARE TARGET SCENARIOS & ANALYZE RISK

FINALIZE SERVICE DELIVERY STRATEGY

DEVELOP SERVICE STRATEGY ROADMAP

$ 3,500,000 $ 15,795,792 583,899 583,899

Leverage Cost / Pricing Scenarios