Sourcing Complex Services

1
Sourcing Complex Services
An Implementation Case Study
Susan Wagner, Director of Americas Facilities
and Services, Microsoft, Inc. Michele Flynn,
Expense Management Solutions, Inc.
2
The Profile

• Microsoft is rapidly expanding both locally and
  globally with several million square feet added
  or contemplated.
• People are Microsofts greatest asset and service
  delivery reflects this. Programs include personal
  shipping, on-campus dry cleaning, lunch
  deliveries, and most recently, a pilot program of
  free commuter buses with electric hookups
  and wifi connectivity.  
• The addressable portfolio
• Major Corporate Campus
• 4 regional locations
• 12 Million in annual costs
• 102 Buildings
• 107 Mail Rooms
• 6.5 Million mail pieces/year
• 91 mail employees
• 115 receptionists

3
The Sourcing Objectives

• Benchmark services against the industry in terms
  of workflows, contracts, staffing levels and cost
  
• Second generation sourcing contract for combined
  services with service levels, key performance
  indicators, fees at risk and cost reduction
  directives
• Place accountability for performance with the
  vendor
• Consolidate the number of vendors on-site,
  reducing the time and cost of vendor management
• Leverage field campus service providers on-site
  management to enable a headcount reduction in
  supervisory staffing
• Reduce cost

4
The Challenge

• Deliver cost savings and efficiency increases in
  five key employee services areas

• Mail Operations
• Shipping and Receiving
• Reception
• Switchboard
• PC Recycling

5
Strategy
6
Detailed Service Level Agreements (SLAs)
The SLA puzzle is assembled from the following

• Clear scope of work
• Detailed service descriptions
• Clearly articulated goals inunderstandable terms
• Incorporate service expectationsinto the
  contract via Key Performance Indicators (KPIs)

7
Service Level Agreements
Bidders asked to provide services for multiple
functions

• Receptionist Services
• Mail distribution services
• Parcel delivery services
• Shipping and receiving services
• Switchboard Services

8
Structured Pricing Model
Bidders asked to provide services under
two-tiered pricing structure

• All management, technology, reporting, profit and
  overhead should be provided for a flat monthly
  fee
• Compensation placed at risk, based on the bidders
  ability to meet the levels defined within the
  Service Level Agreement documents
• Bidders required to meet minimal standards of
  performance as a prerequisite to awarding any
  at-risk compensation

9
Base Fee At Risk

• Performance assessment based on SLAs and KPIs
• At-risk base fee portion and assessment scorecard
  determined during contract negotiation
• At-risk portion held back pending periodic
  performance assessment
• Release of at-risk fee clearly tied to
  performance assessment and meeting expectations
• If performance assessment exceeds expectations,
  only100 of at-risk fee is awarded

Award of at-risk base fee
90 released
100 released
100 released
120
90
100
Performance Level
10
Sample Service Expectations
11
Savings Achieved per Year
Total Bid Comparison
13
Reception Cost per Hour per Desk
Switchboard Cost per Call
11
20
35
33
12
Non Financial Results

• Consolidate direct vendor relationships to one
• Realignment of responsibilities to enhanced
  vendor performance and efficiency
• Higher service levels
• Linked compensation directly to results
• Clients satisfied with service

13
Lessons Learned

• Success requires upfront investment to build
  detailed baselines and volumes
• Scope should be clearly defined with measurable
  expectations
• Need a provider who can deliver the services, and
  can also manage continual change
• Operations expertise alone is not enough. A
  service provider needs to work with other
  suppliers at different locations to ensure a
  consistent process and procedure
• Technology implementation and the corresponding
  business process changes required are critical to
  success Provider must dedicate appropriate
  transition resources

14
Questions?
Susan Wagner susanwag_at_microsoft.com Michele
Flynn flynn_at_expensemanagement.com