BearingPoint IT Operating Costs Analysis Five Year Period 2001-2006

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BearingPoint IT Operating Costs AnalysisFive
Year Period 2001-2006

• Author Chas M. White, MS
• EVP Corporate CTO
• Date 25 January 2006

Business and Systems Aligned. Business
Empowered.TM
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BearingPoint Timeline Impacts
Year 1 aggregated budget based upon various LLP
TSA allocations planning decision made to take
no IT systems or staff from LLPs LLP model was
a loose federation of national practices
therefore systems
Year 2 separations and TSA terminations in
ASPAC LA creation of BENet MPLS WAN global
messaging for network consolidations based upon
centrist, corporate model
158M
146M
Year 3 termination of Andersen practice TSAs
and integration of OneTeam HR system across all
entities adoption of middleware for data
brokerage
IT Annual Operating Costs
138M
Year 4 termination of KCA TSAs and integration
of OneView CRM system across all entities VoIP
begins
128M
Year 5 final TSA terminated in US VoIP
completes in US OneGlobe replaces PEAT
107M
Year 6 IT steady state includes OG support
costs in IT for first time
95M
2001
2003
2005
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Distribution of IT Spend 2006 - 2007

• Amortization Depreciation
• Office migration hardware
• Software
• Systems hardware
• Organic Labor
• 115 Employees globally
• Service Delivery Managers
• Moving support functions for OneGlobe (MSO), SAP
  and iDEV off-shore
• Outsourced Contracts
• Variable cost consumption based (WAN, Apps
  hosting, deskside support, etc.)
• There is no BE data center

• Global IT Costs
• (Headcount SLAs essentially flat)

Amortization Depreciation
Organic Labor
(34)
(15)
Outsourced Services Contracts
(51)

• 63 of labor driven costs are provided outside
  North America

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Services Contracts Benchmarking

• 2001 Jim Pitchell, KPMG World Class IT,
  performed study of nature and quality of IT
  services in provided by LLP firm preparation for
  formation of KCI entity
• Reported that services were above average as
  specified in SLAs and service definitions
• Verified the services catalog was appropriate for
  a professional services firm
• SLAs have remained the same or improved through
  2006
• 2002 Gartner Study in cooperation with KPMG
  Intl to set best practice costs for professional
  services organization
• Comprehensive study involving multinational firms
  (approx cost was 250k)
• Study determined 2001 pricing was essentially at
  industry standards
• Adopted as standard for BE IT cost targeting with
  goal of 25 reductions
• 2003 Engaged HedgeHog to manage a reverse,
  blind auction for laptops and desktops
• 2004 pricing was 10 lower year over year
  despite loss of LLP procurement volumes
• 2005 pricing was again 10 lower year over year
• Average laptop cost reduced to 1000/unit

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Services Contracts Benchmarking

• 2004 Contracted with RiverMine to benchmark
  telecom services
• Targeted US telecom services to benchmark pricing
  (WAN, dialtone, conference calling, remote access
  and toll)
• Lowered MPLS WAN pricing through renegotiation
  4M/yr
• Negotiated other telecom contracts to 3 below
  benchmark data
• 2005 2006 BE Analyst Relations IT
  Benchmarking exercise (Tom Wilde)
• Internal group captured Gartner, Forrester,
  InformationWeek and other market analyst data
• Interviews were conducted with Gartner and
  Forrester
• Benchmarked against professional services firms
  in general
• Benchmarked against Accenture and McKenzie in
  particular

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Benchmarking Results Summary

• Study Industry BE Actual
• 2002 Gartner Study (250k) 3.9 GR 3.9 GR
• 2005 Gartner/Forrester 4-6GR 3.1 GR
• 2006 Gartner/Forrester/Information Week
• Industry 4-6 GR
• Accenture 6-7 GR
• McKenzie 4-5 GR
• Analyst target for BE 6 GR
• BE 2006 Budget 2.6 GR
• Notes
• Costs are reported as published IT budget as a
  percentage of stated Gross Revenues (GR)
• Most competitors are a generation behind in
  technology deployment (e.g. MPLS, VoIP, etc)
• BE will continue to harvest savings from
  technology deployments through FY07 and beyond

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Technological State of BearingPoint IT a case
of harvested savings not deferred cost

• Fully deployed, single vendor, global, managed
  IP/VPN MPLS WAN (Equant)
• 14,000 seats of Active Directory enabled VoIP
  across all regions with significant applications
  integration and global Cross-Cluster Extension
  Mobility (Cisco)
• All major backoffice systems are lt 3yrs old and
  web enabled
• Single global CRM system (Siebel)
• Single global HR/RMIS system (PeopleSoft)
• Single performance evaluation/rewards system with
  integrated business metrics
• Regional Finance systems (NA, EMEA LA-ASPAC)
• Enterprise Integration Broker allows single
  authoritative source for all discreet data
  elements across applications via publish and
  subscribe technology (WebMethods)
• Single PC platform and standard desktop image
  worldwide supporting 8 languages via Microsoft
  MUI for OS and Office along with backoffice
  application language support
• Standard global SOW and SLAs for desktop
  support, office server support and IPT IMAC and a
  single service provider (Siemens SBS)
• Good process and SOP documentation
• Established IT Portfolio Management process
• Nearly all services contracts are 2nd generation
  with established SOWs SLAs
• Architecture and solutions are scalable to
  support 40,000 users within technology and
  economic parameters (growth costs would be
  essentially linear)

The journey from a loose federation to a
corporate enterprise!
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