Outsourcing Enabled Transformation This session will discuss the IT sourcing process used to separate a division (formerly MeadWestvaco Papers Group) to a stand alone company. The steps of understanding the business objectives that drive the IT strategy and execution will be outlined along with the do\'s and don\'t(s) of making a very complex transition process work with minimal customer impactThis presentation will also address the idea of using business oriented service level metrics to

1. Sourcing 2006
Outsourcing Enabled
Transformation
Dan Clark – NewPage Corporation
May 4, 2006
Huntington Beach, California
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2. Agenda
• NewPage Overview
• A bit of history
• Our objectives
• Our approach and process
• What did we learn?
• So, is it working?
• Questions
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3. NewPage Corporation Overview
Description of Business: Key Stats
The leading producer of coated - Revenues $M's 1,862
paper in North America. Four fully
- Employees 4,300
integrated pulp and paper mills
made nearly 2.2 million tons of
coated paper in 2005.
Key Contact
Headquarters: Dayton, Ohio CIO Dan Clark
- Tel: (937) 242-9051
Interesting Fact About The - E-mail: dac1@newpagecorp.com
Company:
Whether it’s the label on a product
in your home or the pages in a
leading magazine or catalog you
read, you probably touch NewPage-
produced paper every day.
Web Site www.newpagecorp.com
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4. NewPage – A Bit of History
Background on NewPage Prior to ITO Effort
• Prior to divestiture (5/2005), the majority of IT services were provided by
the MeadWestvaco (MWV) centralized IT organization
• Application environment primarily comprised of:
• SAP plus bolt-ons for the majority of business functions
• OptiVision and other 3rd party packages for manufacturing support
processes
• PeopleSoft for HR and Payroll functions
• Variety of other homegrown and package software
• At close, NewPage signed a 12-month TSA with MWV:
• Support Day 0 – Day 30
• Establish a separate physical instance of core SAP plus bolt-ons
• Provide current services through ITO cutover
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5. NewPage – IT Sourcing Objectives
Understand the Business Objectives
• Market focus for new paper company
• Market discipline priorities
• High customer service / customer intimacy
• Low-cost production
• Plans for scalability
• Bottom Line: IT value drivers are aligned with business
objectives and executed through the sourcing strategy
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6. NewPage – IT Sourcing Objectives
Create the Context for Detailed Planning
• 0-30-60-90 Day planning underway
• IT Sourcing Planning (integrated directly with
corporate business planning)
• Physical separation of IT systems
• Sense of Urgency: Timing of NewPage transaction
• Develop schedule for supplier evaluation and selection
• Developed within the context of business strategy
• Reduce ambiguity regarding IT costs: short- and
long-term
• Minimize operational risk during IT transition
• Develop & implement organizational design
• Maximize value from outside advisors
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7. NewPage Process to Sourcing IT
Phase 1: Planning Phase 2: Initiation Phase 3: Realization
Establish the
Team Understand
Existing
Technical
Create the Environment
Context for Develop Supplier Perform Due Complete
Detailed Sourcing Evaluation and Diligence Contract
Planning Strategy Selection Activities Negotiation
Writing the
Understand RFP
the Business
Objectives
FEB MAR MAR APR MAY JUNE JULY JULY AUG SEP
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8. NewPage – IT Sourcing Process
Establish the Team
• CIO creates cross-functional Team
• Cerberus Operations IT resource
• NewPage Mill based resources
• NewPage Business Analysts
• NewPage Project Management
• Sourcing Consultants – ex. Alsbridge
• Included broad, experienced IT leadership
accountable for the outcome
• Leveraged industry expertise
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9. NewPage – IT Sourcing Process
Develop Sourcing Strategy
• Goal: Stay aligned with business objectives
• Identify internal strengths that support business objectives
• Result: Defined Retained Authorities (e.g. strategy, PMO, business
analysis, etc.)
• Result: Leveraged existing IT expertise critical to core manufacturing
operations at Mills
• Identify external market strengths
• Result: Defined Scope of Outsourcing
• Document Guiding Principles: Basis for making decisions
• Result: Criteria for TCO, continuous improvement, innovation, service
levels
• Internal Management Assessment: Can we manage the complexity of
relationships in a multi-sourced environment?
• Result: Governance Requirements
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10. NewPage – IT Sourcing Process
Writing the RFP
• Need: Create detailed record of NewPage expectations
• Executive meetings conducted early
• Discover chemistry, cultural fit
• Assure a ‘level playing field’ and clear ‘line of sight’ to decision-
makers
• Maximize supplier creativity and flexibility
• Details dealt with the ‘What’ not the ‘How’
• Specific instructions open the door to discussing alternative ideas
• Structure the relationship for ‘best practices’ with suppliers
• Mutual governance model
• Clear statements of scope
• Business alignment through service level agreements
• Up-front discussion of expectations: Price, Terms, Conditions
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11. NewPage – IT Sourcing Process
Formal Supplier Evaluation and Selection
• Market scan resulted in four best-qualified potential providers
• Careful selection of participants / evaluators
• Must be knowledgeable, credible and respected
• Orientation to process for creating ‘consensus’ among technical
teams
• Scoring and tabulating across seven towers
• “Actually read all the responses”
• Tangible and Intangible criteria
• NewPage management makes all decisions
• Technical team consensus is input to decision
• Down-select is based on NewPage management team consensus
• Alsbridge facilitated rapid consensus
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12. NewPage – IT Sourcing Process
Informal Supplier Evaluation & Selection: ’Rest of the Story’
• Not a slave to the process -- Flexibility is the key
• Remain open to making “mid-course corrections” to be
successful
• ‘Reading between the lines’ kept Accenture in the game
• Pre-downselect meetings to validate assumptions with
two suppliers
• Direct feedback to suppliers prior to and during due
diligence
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13. NewPage – IT Sourcing Process
Perform Due Diligence Activities: Manage the Chaos
• Project plan approach
• Requires significant planning and scheduling
• Plans and Results documented by Tower
• Resource baseline created
• Concurrent DD activities with two suppliers
• “Keep the competition alive”
• RFP detail fostered “apples to apples” comparison with
differentiators surfacing
• Multi-site visits, including overseas locations
• Contract reviews started: Business interest discussion
• No attorneys present at this time
• No ‘negotiations’ – rather, explanation of business interests
• Formal, team-based conclusion: Acceptance of results and risk
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14. NewPage – IT Sourcing Process
Understand the Technical Environment:
• New team lacked insight into breadth and depth of MWV
Services
• Response: Conduct in-depth interviews across MWV
technical towers
• What work was getting done at each organizational
level?
• Response: Gain a process perspective (ITIL-based)
on organizational activities
• What were the costs and cost drivers?
• Response: Complete a cost analysis by tower using
best available data
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15. NewPage – IT Sourcing Process
Complete Contract Negotiation
• Team was NewPage / Cerberus
• CIO consulted prior to each step
• NewPage contract manager fully engaged
• Alsbridge consultant on team
• Leveraged discussions from due diligence
• Business interests and risks already were identified
• Relationships had been established
• Attorneys focused on specific legal issues
• Final contract signed in three weeks start-to-finish
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16. Outsourcing Work Stream™
Phase I Phase II Phase III
SERVICE TRANSFER
BUS. BUS. CHANGE
RFI CASE 2
LOI
CASE 1 REQ.s
Site
Visits
SERVICE
RFP Outputs
SPEC.
MANAGE
STRATEGY / JUSTIFICATION / SELECTION / FINAL NEGOTIATIONS TRANSITION
Client COMPARISON ACCEPTANCE & DUE DILIGENCE MANAGE CONTRACT/
FEASIBILITY RELATIONSHIP
SAS SAS SAS SAS
SERVICE SCOPING / COSTING OLA
SLA
UNION / STAFF CONSULTATION / COMMUNICATION /CHANGE MGMNT SLA
CONTRACTS
CONTRACT
REVIEWS TERMINATION/
RENEWAL
FINANCING / TAX
Term
Sheet
UNION / STAFF COMMUNICATION & COUNSELING
SOLUTION SCOPING AND DESIGN IMPLEMENTATION ONGOING DELIVER/
OUTLINE DETAILED
PLANNING & ROLL-OUT ACCOUNT MGMNT.
Supplier ASSESS SELL THE TRANSITION &
Activities OPPOR-
TUNITY
ARRANGEMENT
NEGOTIATE & CONCLUDE
THE ARRANGEMENT
STAFF TRANSFER
OPERATIONS
QUAL. DOC PROPOSAL NEGOTIATION COST FINAL COST
PARAMETERS BASE- BASE-LINE
LINE
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17. NewPage – What did we learn?
Summary: Key Points
• Strong Foundation: Set the stage early and build discipline
• Build Right Team / Integrate Planning Efforts / Specify Timing / Create
Urgency
• Business Alignment: Sourcing strategy supports business objectives
• Low Cost / Responsive to Changing Business Conditions
• No Surprises: Conduct early knowledge transfer from parent company IT
• Establish a credible cost baseline and detailed scope of services/SOW
• Preview of Coming Attractions: Explore expectations in the business
relationship
• Contract and pricing
• Service levels
• Governance practices and cultural fit
• Do It Right The First Time: Insist on best practices in pricing, governance, etc.
• Saves time in the long-run
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18. NewPage – So, is it working?
What was converted or transitioned:
• Mainframe to Unix re-platforming
• SAP R/3, Bolt-ons, Middleware, 70+ other apps
• 902 Lotus Notes databases
• Approx. 475 servers
• Help Desk supporting over 4000 users
• Email conversion for over 4000 users in 3 weeks
• Created 450 recorded knowledge transfer
sessions – for use on and offshore
• Built Corporate IT organization
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19. NewPage – So, is it working?
• Completed in 5 months – on schedule, on budget
• Stabilized within 3 weeks; minimal customer
disruption
• Reduced ‘local mode’ recovery time by 50%
• Improved email performance
• All organizations integrated well at start
SO FAR, SO GOOD; MORE TO COME
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20. NewPage – So, is it working?
Metrics
• SLA consisting of typical SLA metrics
• SLA also has end to end business process metrics
• Take an order
• Wrap a roll
• Ship the product
• Help Desk end-user satisfaction metrics
• Accenture’s formal client executive satisfaction
metrics
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21. Sourcing 2006
Questions?
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