Everest Group experts will highlight best practices in contract development and discuss how a well-crafted approach can significantly reduce risks and increase value capture.

1. Today’s webinar is brought to you by
Outsourcing Center
Today’s webinar Upcoming webinars
Proven Approaches – Developing an Effective Key Market Developments in Q4-2009: Market Vista
Outsourcing Contract Report Briefing
Everest experts will highlight best practices in contract Date and time:
development and discuss how a well-crafted approach Wednesday, February 17, 2010
can significantly reduce risks and increase value 8:00 a.m. CST / 9:00 a.m. EST
capture.
capture
Presented by:
Ray Anthony Roxas-Chua III
Secretary, Council on Information and
Communications Technology
Office of the President of the Philippines
About Outsourcing Center
Outsourcing Center is the world’s most prominent internet Oscar Sanez
portal for authoritative information on outsourcing, serving President and Chief Executive Officer
the outsourcing community through: Business Processing Association Philippines (BPA/P)
Trusted and objective third-party perspective Eric Simonson
Database of over 81,000 opt-in subscribers Managing Principal – Research
Relevant media including editorials, whitepapers, and Everest Group
the annual Outsourcing Excellence Awards
Anand Ramesh
Email Peter Bowes at pbowes@everestgrp.com f more
E il P t B t b @ t for Research Director – Global Sourcing
information. Everest Group
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2. Q&A
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3. Introductions
Steve Haas Michael Hedegard
Principal Senior Consultant
Everest Group Everest Group
shaas@everestgrp.com
h @ t mhedegard@everestgrp.com
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4. Proven Approaches –
Developing an Effective Outsourcing Contract
February 2010
F b

5. Everest’s methodology consists of six phases with the
Service Agreement beginning to be created in the
Solution Development phase
Opportunity Business Case Solution
Transition Optimization
Identification Development Development
Identify the Develop Identify target Planning and Production
scope of financial delivery preparation Continuous
work to be model source Implementati improvement
outsourced Benefits Develop and on Process
Develop analysis issue RFI to Risk improvement
financial Risk analysis candidates Mitigation
baseline Select
Identify risks supplier
Negotiate
a d sign
and s g
SOW
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Proprietary & Confidential. © 2010 Everest Global, Inc.

6. Table of Contents
Overview of the components of an outsourcing contract
Elements of a Statement of Work
Detailed discussion of Service Descriptions
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Proprietary & Confidential. © 2010 Everest Global, Inc.

7. Outsourcing contracts are typically structured as a
set of Statements of Work under a Master Service
Agreement
Overall
Master Service Agreement Service
exhibit #1
Service
Levels
Levels
SOW #1 SOW #2 Additional SOWs
Service Description Service Description
Pricing Pricing
& Service Levels & Service Levels
Service #1
Service #1 Service #1
Service #1
Service #1
Service #1 Service #1
Service #1
A typical outsourcing contract is structured as a Master agreement with subordinated
Statements of Work (SOW)
Each SOW normally contains a Service Description(s) & Service Levels, and pricing for
the services performed
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Proprietary & Confidential. © 2010 Everest Global, Inc.

8. The Statement of Work describes the exact nature of
services to be performed by the supplier
Description
Term Term of master relationship between parties
Termination Total and partial termination options and flexibility
Performance standards
P f t d d Guiding i i l for ll
G idi principles f all procured services
d i
Business Personnel Guiding principals for transfer of personnel
rules (MSA) Details the confidentiality requirements of shared
Confidentiality
information
Account management/change control
g g Management p
g principles/hierarchy for account
p y
governance
Risk (limitations/liability, indemnification) Details boundaries of financial risk
Charges/invoicing & payment Process, timing, and structure for payments
Services Principles of services, service levels, and exclusivity of
services
Service Description Description of services to be provided
& service levels Performance requirements and penalties
Statement of
Work Pricing
g Pricing for services
g
Termination options Termination for convenience/cause
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Proprietary & Confidential. © 2010 Everest Global, Inc.

9. While the MSA is rarely modified, the Statement of
Work and its related documents are more frequently
modified depending on the circumstances
Frequency of
When appropriate to change Typical changes changes
Master Services Only when there is a significant Addition of a new SOW Almost never
g
Agreement change environment surrounding Ownership change during the life
(MSA) the buyer-supplier relationship (
th b li l ti hi (e.g., of a contract
f t t
merger, regulatory changes)
Increa
Statement of Change in conditions specific to a Pricing structure change Yearly
Work SOW (e g regulations innovation)
(e.g., regulations, Change to a Service Level
asing level o detail
Project work
Service Change to the specific services in Modification of the service, Measured in
Descriptions
p scope, responsibilities, or desired shift in responsibility or quarters or
of
results deliverable years
Exhibits to Change to the boundaries for Adjustments to responsibilities Measured in
Service delivering the services (e.g., Updated Desired Results weeks or
Descriptions volumes, l
l locations)
ti ) Addition f l
Additi of a location
ti months
th
Change in regulatory
requirements
“Operations Whenever the “how” of the service Processing schedule Daily, weekly
manual
manual” changes; owned and managed by Disaster recovery plan
the supplier Escalation procedures
Contact information
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Proprietary & Confidential. © 2010 Everest Global, Inc.

10. Table of Contents
Overview of the components of an outsourcing contract
Elements of a Statement of Work
Detailed discussion of Service Descriptions
10
Proprietary & Confidential. © 2010 Everest Global, Inc.

11. Elements of a Statement of Work describe the supplier-
buyer relationship and service requirements
SOW #1
Service Description
Pricing
& Service Levels
The Service Description &
Service Levels is one part
of the SOW
Exhibit #1 (for SOW #1) Each Service Description
may refer to supporting
exhibits
Exhibit #2 (for SOW #1) Exhibits within a SOW are
not referenced by any
Exhibit #3 (for SOW #1) other SOW
Example exhibits
Transition plan
Exhibit #4 (for SOW #1) Governance structure
Privacy policies
Exhibit #5 (for SOW #1)
Exhibit #6 (for SOW #1)
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Proprietary & Confidential. © 2010 Everest Global, Inc.

12. Table of Contents
Overview of the components of an outsourcing contract
Elements of a Statement of Work
Detailed discussion of Service Descriptions
12
Proprietary & Confidential. © 2010 Everest Global, Inc.

13. The most important part of a Statement of Work is the
Service Description
Description
Term Term of master relationship between parties
Termination Total and partial termination options and flexibility
Performance standards
P f t d d Guiding i i l for ll
G idi principles f all procured services
d i
Business Personnel Guiding principals for transfer of personnel
rules (MSA) Details the confidentiality requirements of shared
Confidentiality
information
Account management/change control
g g Management p
g principles/hierarchy for account
p y
governance
Risk (limitations/liability, indemnification) Details boundaries of financial risk
Charges/invoicing & payment Process, timing, and structure for payments
Services Principles of services, service levels, and exclusivity of
services
Service Description Description of services to be provided
& Service Levels Performance requirements and penalties
Statement of
Work Pricing
g Pricing for services
g
Termination options Termination for convenience/cause
13
Proprietary & Confidential. © 2010 Everest Global, Inc.

14. A Service Description is comprised of 7 sub-components
for each type of service
Service Descriptions
and Service Levels
6. Governance
5. Applications 1. Data center
4.
4 Helpdesk
3. Desktop 1.1 Overview
2. Network ~150 word overview defining the 1.2 Mainframe (details)
1. Data center
high-level scope and relation to
other activities 1.2.1 Description
~150 word description describing the
1.2 Mainframe service
1.3
13 Mid-range
Mid
1.4 Production servers 1.2.2 Major Functions
1.5 Etc. Function #1
Function #2
Function #3
Function #4
1.3
1 3 Mid-range (details)
1.3.1 Description 1.2.3 Desired Results
1.3.2 Major Functions 1.2.4 Process Constraints
1.3.3 Desired Results
1.2.5 Responsibility Matrix
1.3.4 Process Constraints
1.3.5 Responsibility Matrix Task Supplier Buyer
1. X
Task Supplier Buyer 2. X
1. 3. X
2. Etc.
Etc.
1.2.6 Service Level Specifications
1.3.6 Service Level Specifications 1.2.7 Key Performance Indicators
1.3.7 Key Performance Indicators
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Proprietary & Confidential. © 2010 Everest Global, Inc.

15. In review, an outsourcing contract is structured as a
MSA with subordinated Statements of Work that
contain Service Descriptions and Service Levels
Overall
Master Service Agreement Service
exhibit #1
LService
Levels
l
Levels
SOW #1 SOW #2 Additional SOWs
Service Description Service Description
Pricing Pricing
& Service Levels & Service Levels
Service #1
Service #1 Service #1
Service #1
Service #1
Service #1 Service #1
Service #1
15
Proprietary & Confidential. © 2010 Everest Global, Inc.

16. Outsourcing Support Services span the entire
outsourcing process and can be purchased to match
your timing and decision-making process
decision making
Analyst Access (per call/subscription based)
Strategy & planning Design Implementation and On-going
Process Sourcing Project planning
management methodology workshop
Market practices Data collection Pricing model
Proposal review Due diligence toolkit
workshop toolkit analysis
Solution design & Competitive & Pricing model
Risk analysis toolkit
pricing Market Intelligence workshop
Offshore leverage
Location analysis Price benchmarking
diagnostic
Stakeholder &
Stakeholder Change Transition
change
interview toolkit management toolkit management toolkit
management
Supplier selection
Supplier selection Supplier profiles Supplier short-listing Supplier workshops
workshop
Negotiation toolkit
Contracting
SOW and Service Contract Terms and Negotiation planning
RFP Toolkit Contract review
Level templates Conditions workshop
Governance Governance
Governance toolkit
workshop
p
Legend Tools Decision Support Workshops
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Proprietary & Confidential. © 2010
Everest Global, Inc.

17. Q&A
Attendees will receive an email with a link to download today’s webinar presentation. To access a
recorded audio version of this webinar, please contact Ben Kuhn (bkuhn@everestgrp.com)
For background information on Everest, please visit:
www.everestresearchinstitute.com
www.everestgrp.com
Thank you for attending today
To k
T ask a question d i th Q&A session
ti during the i
Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your
screen. This will open the Q&A Panel
Be sure to keep the default set to “send to a Panelist”
Then, type your question in the rectangular field at the bottom of the Q&A box and click the send
button to submit
17