Portfolio AnalysisSizing Up the Outsourcing Opportunity

Michael Zeigler – IT Director, Micron Technology, Inc

Michael Serghiou – Sr. Director, neoIT

Agenda

• About neoIT• About Micron Technology, Inc• Process Overview – Portfolio Analysis• The Micron Experience• Lessons Learned, Wrap-Up• Q&A

Micron World-WideTo be the most innovative and lowest-cost

provider of memory-based solutions

Micron is one of the world's leading providers of advanced semiconductor solutions.Micron’s DRAM and Flash components are used in today’s most advanced computing, networking,

and communications products, including computers, workstations, servers, cell phones, wireless devices, digital cameras, and gaming systems. Micron also provides CMOS image sensor solutions to the handset

camera, digital still camera, and PC video camera markets.

Oregon

California

Idaho

UtahTexas

MinnesotaIllinois New Hampshire

New YorkVirginia

North Carolina

Puerto Rico

FinlandScotlandIreland

EnglandFrance

GermanyAustria

Italy

Singapore

India

ChinaTaiwan

S. KoreaJapan

Norway

Sweden

Process OverviewMichael Serghiou – Sr. Director, neoIT

Service Globalization Life-Cycle

35

6 7

89

2 4

10

1

Globalization Life Cycle

Valu

e R

ealiz

atio

n

AssessmentArchitecture

Sourcing

Transition

Management

IT Portfolio Assessment

Sourcing (Captive / 3rd

Party)

Negotiations and

Contracts

Migration to Global Team

Location Assessment

Business Driver Awareness

Globalization Strategy

Knowledge Transfer

Steady State

Steady State Governance

Current Scope

Assessment and Architecture (IS)

Cross linkages among applications, services, roles & employees

Location Assessment

Readiness Insights

Total IS Portfolio –

Applications &

Infrastructure

Operating Model

Migration Roadmap

Business Case

Globalization Scope(Applications, Infrastructure, Services, Roles & Employees)

App

licat

ions

Serv

ices

Rol

es

Empl

oyee

s

AS

RE

AssessmentArchitecture

Risk Flags

IS Portfolio Analysis Framework

Ease of Globalization (EoG)

Risk Flags

Distributed EnvironmentDistributed

EnvironmentSkills

AvailabilitySkills

Availability

Transition Readiness

Operational Ease

Remote Operability

Business Impact

Technology Skills

Formal Training

Non Technology Skills

Financial Benefits

Financial Benefits

Micron’s Priorities

Globalization Assessment

Multi-Dimensional Analysis

Transition ReadinessTransition Readiness

Operational EaseOperational Ease

Remote OperabilityRemote Operability

Business ImpactBusiness Impact

Distributed Environment

Skills Availability

Ease of Globalization Globalization Score

Applications, Services, Roles, Employees

Cluster Analysis

Wave Strategy

Benefits

The Micron ExperienceMichael Zeigler – IT Director, Micron

Technology, Inc

Agenda

• Background on Micron IS• Objectives of Outsourcing Micron IS

– Understand what you want from outsourcing– Establish your ground rules

• General Approach• Lessons Learned

And for those who still don’t believe…

Be Careful…

“10 Steps to

Successful Outsourcing”

“9 Tips for

Outsource-Proofing

Your IT Organization”

“Ten Steps to

Master Outsourcing”

“Challenges to Articulating

a Holistic Sourcing Strategy”

“Best Practice Process

for Creating an IT

Services Sourcing Strategy”

Background – Micron IS

• Approximately 1,100 team members• Primary global locations

– US (Boise, Texas, California, Utah, and Virginia)– Italy– Singapore– Japan

• IT spend is approximately ~3.5% of revenue• Less than 1% outsourcing• Micron’s SG&A cost structure was not

competitive

IT is Still Important!

Information Technology may not be a core competency in a manufacturing company like Micron –

but is there anyone at Micron who doesn’t understand that IT is at the core of every competency?

- Ed Mahoney, VP of IS, Micron Technology, Inc

Why?We need to do our part to make Micron competitive.

“Business as usual” is not an option, and our new service model must be:

• Agile. We must develop a service model that allows IS service levels to be easily dialed up or down to support Micron's strategy, business plan, and fluctuating revenue.

• Cost-Effective. We need to make aggressive changes to our cost structure in order to meet or exceed what our competition has attained. We need to work to make Micron the benchmark.

• Enduring. We need to make changes that are sustainable over time. Even after the new service model is in place, we must continually seek opportunities for improvement.

Dedicated Team

– Met daily• Outline work• Review action items• Discuss communication

– Met weekly with steering team

– Involved about 40-60 people for data collection• Subject matter experts• Managers/leads

Program/ProjectManager

Program/ProjectManager

CommunicationCommunication

Data AnalystData Analyst

Data AnalystData Analyst

Data AnalystData Analyst

The Approach

– Investigated outsourcing before (2003)– Extensively benchmark cost, performance, and technology.– Wanted some outside help (objective opinion and experience)– We had a very aggressive timeline

• Risk of driving incorrect assumptions/decisions• Needed to leverage a disciplined decision-making process (Kempner-

Tregoe)

Triangulation became our strategy!Triangulation became our strategy!

Triangulation Approach

KT Analysis

Data and

Experience

GlobalizationConsultants

(neoIT)

SourcingPlan

Financial Targets

Guiding Principles

– Retain elements of IT that enable competitive advantages for Micron• Differentiating applications• High-customer interaction roles• High-level domain knowledge• Service provider relationship management

– Outsource elements of IT that can be performed well by a serviceprovider• Non-differentiating applications• Industry-standard applications• Industry-standard development and support

KT Decision Analysis

neoIT

– Objectivity!– Extensive experience of processes and industry– VERY detailed templates to facilitate necessary data

collection• Team member skills and experience• Multi-dimensional assessment

– Transition Readiness– Remote Operability– Business Impact– Activities

Data Collection (example)

Micron Priorities

PARAMETERS Speed Flexible Capacity Cost Savings Weightage

Speed Equal Low Low 0.26

Flexible Capacity High Equal High 0.41

Cost Savings High Low Equal 0.33

Micron Priorities

PARAMETERS Speed Flexible Capacity Cost Savings Weightage

Speed Equal Low Low 0.26

Flexible Capacity High Equal High 0.41

Cost Savings High Low Equal 0.33

IS Portfolio Assessment

$$$$ Labor Cost1,357 Applications

346 Services64 Roles

1,121 Employees

$$$$ Labor Cost1,357 Applications

346 Services64 Roles

1,121 Employees

153 Application Buckets40 Services Buckets

153 Application Buckets40 Services Buckets

43 Application Clusters12 Services Clusters

43 Application Clusters12 Services Clusters

ApplicationsServices

RolesEmployees

ApplicationsServices

RolesEmployees

Multi Dimensional AnalysisMulti Dimensional Analysis

Total Portfolio

OutsourceablePortfolio

RecommendationsMichael Zeigler – IT Director, Micron

Technology, Inc

Recommendations

Portfolio Assessment in 6 to 8 weeks?

Viewer Warning!!!Don’t try this at home…

Recommendations

– To make it happen, you need:• Dedicated (full-time) team members• Disciplined project management• Clear expectations of the effort• Document/data control

Recommendations

–Communication role is very critical• Develop a communication strategy

– Timely but accurate

– Substantive but flexible

– Sensitive

• Be up-front with everyone about what you are doing

• Stay honest with your team

• Communicate to the business!

Recommendations

– Communication role is very critical• Techniques used:

– Weekly email updates– Monthly newsletters– ALL supervisor/manager meetings– Sharepoint sites (project sites, IS News)– FAQ’s– Presentations for VP and Directors to share (face-to-face) with

customer teams

Use consistent messages and themes throughoutUse consistent messages and themes throughout

Recommendations

– Don’t under-estimate the time commitment• This is a full-time job• You still have a business to run!

– Start early on key items• Impact to team members and how to communicate to them• Design, approval, and implementation of retention programs,

severance packages, WARN notice

– Treat your team members with respect and dignity• This is difficult for everyone

Recommendations

– Standardize on the process and data collection templates• Dates, Steps, Roles

• Field lock-down where possible

• Standard definitions

• Revision control

Recommendations

– ITIL adoption can help significantly• CMDB• Service Catalog• Well-defined processes like incident, change, and

problem management

– IT strategy must be more than just outsourcing• Service management• Demand management• Enterprise Architecture

Outsourcing Alone is Not Enough!

Business Processes/Application Portfolio Assessment

Sourcing (Captive / 3rd

Party)

Negotiations and Contracts

Migration to Global Team

Location Assessment

Business Driver Awareness

35

6 7

89

2 4

Globalization Strategy

Knowledge Transfer

Steady State

Steady State Governance10

1

AssessmentArchitecture

Sourcing

Transition

Management

• Cost Reduction

• Globalized Services and Sourcing

• Consolidated Technologies & Apps

• Demand and Portfolio Management

• Operational Excellence

Program TimelineJuly ‘07 through January ‘08January ‘08 through August ‘08

Future

Questions & Answers

Contact Information

Mike Zeigler Michael Serghioumichael@neoIT.com

About neoIT

Since 1999, pioneers in advising F1000 clients on leveraging global talent to achieve business objectives

Address business issues, not just sourcing issues

Blend strategy with practical execution

Deep expertise across geographies, ITO, BPO & KPO

Provide objective expertise and advice across the globalization lifecycle

Strategy DevelopmentCapability Sourcing & Transition ManagementGovernance & Globalization Model Optimization

Black Book of Outsourcing 2007 - ‘Top Corporate Globalization Advisor’Si

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