JW Marriott Hill CountrySan Antonio, Texas

February 19-22, 2017

Leveraging Outsourcing to Modernize While Maintaining Applications

Anthem’s New AMS Approach Proves You Don’t Need to Pick One or the Other

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Speaker Introduction

Chief Marketing OfficerWGroup

Managing PrincipalWGroup

President and CEOWGroup

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Session Objectives

Learn how a new approach to AMS sourcing can enable the modernization of core IT systems and maintenance of applications in parallel. See Anthem’s playbook and methodology for this innovative sourcing delivery model.

1

Learn how to stratify which suppliers can truly help you transform core systems, and which ones that may only be able to handle tasks. See the evaluation criteria that Anthem leveraged in assessing its suppliers for transformational work.

2

Understand the potential for running modernization and maintenance in an integrated effort, as opposed to separate initiatives. 3

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IT TransformationAdvisory IT Strategy Service Delivery Transformation “Digital” Transformation

Goal(s): Align IT to the business. Shift from run to grow.

Improve service to the business and users and reduce cost. Speed and competitive differentiation.

SpecificService:

Technology Enabled Business Strategy

Mergers, Acquisitions, & Divestitures

Cost Optimization

IT Assessments / Remediating Complex IT Issues

IT Governance & Demand Mgmt.

Interim IT Executive / Interim CIO

Sourcing Advisory Strategy RFP to Contract Renewals Transition Governance

Vendor Management

ITSM / Process Optimization

Organizational Design

Cloud Strategy & Roadmap

Application Portfolio Transformation & Rationalization

Exploratory Investment / Innovation Lab Competency

Automation

Cognitive / Autonomics

Staff Augmentation (via upGrow Service Business) Interim | Contract and Contract to Hire | Permanent Placement

About WGroup

Helping IT and Sourcing Leaders Drive Transformation Since 2004.

© 2017 IAOP. All Rights Reserved.

Do these challenges have a familiar ring?

Business agility, innovation and value creation are key to Anthem’s success, but are hindered by organizational challenges

Rapid growth and acquisitions have resulted in multiple operating models, inefficiencies and higher costs

Level of complexity across the organization makes managing the business of IT difficult and expensive

Opportunities for improving operating effectiveness via standardization, rationalization, modernization, and process improvement

App. Development teams, are overwhelmed with demand for services and forced to operate in a reactive mode

Need to establish sustaining IT capabilities: Business engagement and creation of a strategic IT roadmap & governance model Clearly articulated target application architecture Application portfolio rationalization to simplify the application landscape Demand management and execution must align with target application architecture Continued focus on rapid innovation to exploit technology capabilities and opportunities

Anthem is working to transform health care with trusted and caring solutions. Our health plan companies deliver quality products and services that give their members access to the care they need. With over 73 million people served by its affiliated companies, including nearly 40 million enrolled in its family of health plans, Anthem is one of the nation’s leading health benefits companies. Additional detail http://www.anthem.com

About Anthem, Inc.

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Health plans are continually evolving to find the right mix of capabilities that will help them win and retain customers in aincreasingly competitive marketplace

Change in Market Dynamics

Health plans need to increasingly make compelling features available to consumers, and faster time to market is becoming a critical factor to acquiring and retaining customers.

Changes in Market Dynamics

Faster Time To Market

New entrants such as Oscar are changing the way that technology is viewed by health plans. With the emergence of the $5 PMPM model, larger health plans need to manage costs while delivering cutting edge features to their member base.

Technology Enabled Lower PMPM Alternatives

Simple and Convenient

Customer Loyalty Through Advocacy

The target consumer base places a greater emphasis on usability, convenience and

productivity. Improved consumer experience when leveraged for support staff will enable the

solving of customer problems the “first” time.

To deliver the “retail” mindset, health plans need to adopt a consumer-centric approach

and analytics to enable the right outcomes across the consumer journey.

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Initial State & Implications

Six business units contract for ADM services independently: Commercial, Government, Infrastructure, Information Security, Corporate Applications, and the Office of the CIO

A significant number of applications contracts in the portfolio to expire at the end of 2015: Poor alignment of supplier / contract with Anthem needs Current applications sourcing approach is fragmented and contributes to increased cost and complexity while limiting agility, quality and overall business value: No

application strategy defined with the business leadership

Initial State and Problem:

Overall Strategy Supplier & Contract Strategy Why Now?

Modernize Enterprise Application architecture while absorbing legacy functionality

Optimize support model for effectiveness and efficiency across the ecosystem

Commercial IT systems are highly complex, require strong quality control, significant modernization, and partners with a product mindset

Explore cognitive compute platforms

Modernization approach, experience, capabilities, commitment, costs, etc. – key evaluation parameters

Major consideration by Supplier tier:

Task Takers: How big of a hurdle is it to invest and change their model?

Engineers: Do they have the domain expertize to define, govern and deliver on modernization?

Transformers: Do they have the execution capability to drive operating efficiency?

Restructuring operating model and partnerships today enables future savings

Drive substantial transformation in the next 2-3 years with the right partners (uplift in skills, capabilities, tools, and repeatable processes)

Leverage supplier investments for enterprise services

Accelerate transition to end state architecture; jumpstart application rationalization and significant savings

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As the core of Anthem’s operations, the WGS platform exhibits a number of challenges prevalent in most health plan systems

Why Modernize WGS?

Area Current Challenge(s) Future Opportunity

Data ModelGroup-CentricCore administrative assets are currently focused on employer businesses

Consumer-CentricBuild out new capabilities to address marketplace shifts towards consumerism

UsabilityTransactionalFocused on integrating native datasets to process claims

ExperientialShift to contextual, user-focused transactions for areas such as member self-service

PlatformsLarge Mainframe FootprintRely on mainframes resulting in high fixed infrastructure and talentacquisition/management costs

Hybrid-TechnologiesShift to newer platforms, reducing costs, increasing quality and improving speed-to-market

Release Times

Long Release CyclesCurrent release cycles range between 8 and 20 weeks

Continuous IntegrationEmploy automation and CI/CD capabilities to reduce time-to-market (typically 20%)

DevelopmentPhilosophy

Custom DevelopmentLarge custom-built with opportunistic integrations with packaged software

Cloud/XaaS-FirstConsider Cloud/XaaS before custom build, wherever appropriate

TalentLegacy Talent ModelFocused on issue resolution, production incidents and “lights on” activities

DevOps Talent ModelRetrained to deliver value added services and solutions using cuttingedge technology

CostFocused on “Lights On”Largely driven by capital expenditures such as data center maintenance etc.

Focused on Value DeliveredShift to operating expenditures and focus budget on value added capabilities

Why Modernize?

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Governance & Vendor Management

“The Most Important Part of Value Realization”

New skills, processes, behaviors, and objectives.

Root Cause Analysis Business SLA & OLA mgmt. Change Management

Business Outcomes

What You Want, in Business Terms

Realization of Your Expected Outcomes

Delivery of Business Value

Transformation Program

Business Strategy Alignment Define key Business Metrics and

Translated to IT Outcomes Integrate Infra. and Apps Strategy Cloud Modernization Program ITSM-Enabled Service Delivery

Model Re-Solution Service Delivery

Reference Architecture Embed Automation and

Autonomics Relentless focus on Security

Non-Prescriptive Solutioning

With or without a formal RFP

Flexible for Providers to solution against core competencies.

Iterative Solution Enhancement

Encourage Innovation

Contracting

New Contract Terms

New SLA & OLA Models

Gain Sharing Clauses

Flexibility (limit MRCs)

Modernize while Maintaining

Realization Management

Agile Approach to Sourcing

Win-win, risk-mitigated agreement(s) with the best-fit service provider(s) to meet short and long term business

objectives, at the right price.

Transition Management

Sourcing Toward Outcomes with Speed

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Evaluation CriteriaProcess Overview

1. Rank most important to least important (as a % of total = 100%)

2. Detailed criteria within each category3. Score 0-5

4. Normalize to account for “outliers”

Blank Not Scored0 Unacceptable / does not meet requirements or non-responsive

1 Weak / could meet requirements with major improvement(s)

2 Marginal / could meet requirements with minor improvement(s)

3 Acceptable / meets requirements

4 Very Good / meets / exceeds requirements

5 Excellent / meets / exceeds requirements with significant value

Category DescriptionAbility to Meet Anthem ObjectivesAgreement TermsBusiness Continuity Planning (BCP) Disaster Recovery and AvoidanceClient ReferenceContract FlexibilityCorporate ProfileCultural FitDelivery LocationsFinancialInvestmentsHuman Capital and Staff Development and RetentionManagement CommitmentModernizationOral PresentationRisk Management and GovernanceSecurity and ComplianceService DeliveryTechnical and technology Management CompetenceTechnical Demonstration WorkshopTerminationTransition

Evaluation Categories

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Process & Scope

RFP Towers

Claims EB&C Provider Product TP&E

Incumbent(s) Vendor 1, Vendor 2 Vendor 3, Vendor 4, Vendor 5 Vendor 6, Vendor 7, Vendor 8 Vendor 9, Vendor 10 Vendor 11, Vendor 12

Scope: 149+ SOWs @ $118M+ in Annual Spend

StrategyDevelopment RFP Preparation Supplier Q&A/

Proposal DevDue Diligence /

Hackathons / Best & FinalContract

NegotiationsProposal

Evaluation

August 2015 September November January 2016 February March April / May

Initiated RFP Engaged WGroup

Released RFI to 13 Suppliers

Released RFP Invited 9 Suppliers Proposals Received Down Selected to

Tower Finalists BAFOs Received Award Notice

Process

True partnership between WGroup and Anthem IT, Procurement, and Legal Experienced consultants who each had extensive technology, architecture and sourcing experience Clearly articulated outcome approach, allowing providers to innovate the solution

Keys to Success

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Technology Patterns – e.g., Data Fabric - API Integration - Micro services – Containers – Automation – Machine Learning - AI

Modernization & Strategic Project List

Modernization Patterns – e.g., Re-platform -Remediate -

Replace

Workforce Competencies

Rewards & Recognition

New Business Model & Requirements

Application Development & Maintenance Delivery

Governance and Modernization Council

New Operating Model

Business outcome focus Cohesive & integrated IT capability Modernization integrated with

delivery Continuous feedback

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Key Lessons Learned

Involvement of IT Executives and Application Leaders “Modernization, business as usual” rather than “a Modernization Project” Business Model driven modernization Point-of-View provided as a baseline Evaluation criteria and criteria weights carefully developed to measure capabilities and fit Hackathons – Demonstrating what was being sold Pre-RFP Site visits to narrow supplier list Pre-Final Selection Supplier Site Visits – during Hackathon period Contract Highlights Risk-based pool – to fund modernization based on achievement of business outcomes/ROI Significant Application Development Productivity Improvements Subcontracting incumbent to reduce transition risk for specific applications SLAs supporting outcomes and clearly defined roles, responsibilities and SLA hand-offs

© 2017 IAOP. All Rights Reserved.

Panel Discussion

Chief Marketing OfficerWGroup

Managing PrincipalWGroup

President and CEOWGroup