Outsourcing Enabled Transformation
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NewPage Corporation, a leading producer of coated paper in North America, outlined its IT outsourcing strategy post-divestiture from MeadWestvaco. The sourcing process involved a detailed planning and evaluation phase to align IT objectives with business needs, ultimately resulting in a successful transition completed on schedule and budget. Key learnings emphasized the importance of early planning, team integration, and strong governance practices for achieving low-cost production and high customer service.
Outsourcing Enabled Transformation
- 1. Sourcing 2006 Outsourcing Enabled Transformation Dan Clark – NewPage Corporation May 4, 2006 Huntington Beach, California 1
- 2. Agenda • NewPage Overview • A bit of history • Our objectives • Our approach and process • What did we learn? • So, is it working? • Questions 2
- 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: [email protected] 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 3
- 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 4
- 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 5
- 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 6
- 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 7
- 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 8
- 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 9
- 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 10
- 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 11
- 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 12
- 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 13
- 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 14
- 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 15
- 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 16
- 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 17
- 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 18
- 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 19
- 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 20
- 21. Sourcing 2006 Questions? 21