Shared Service Model

8/3/2019 Shared Service Model

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ESS Face to Face

February 28th, 2005


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Agenda

> Introduction

ESS Organization Update

IT Strategy Communication

> IT Shared Services - Hugh Sheridan

> Offshoring, Project SDI - Frank Vastano

> 2005 Objectives and Themes

> Merck News


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ESS Shared Service Model

February 27th 2005


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2005 Objectives

> Shared Services IT:

Complete the implementation of the IT shared services operating model includingorganizational design, service levels, operating procedures and funding model(4Q).

Realize approximately $750k in operating expense savings through applicationco-location and the elimination of redundant activities (4Q). (Scope: Finance/HRTrans Systems, Owner/Plan: Sheridan, Establish Engineering/Ops capability:

Piscitello, Id/Effect Opportunities: Lotier/Blair) (stratmap intersection:OPEX/Internal Process)


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Value Proposition

Economies of scale through common demandand leveraged knowledge expertise

ValueProposition


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If we succeed, how will we look to the corporation as a whole?(How will Merck assess our contribution to its success?)

Drive EfficienciesManage InvestmentStrategic IT

FocusedUse of Assets

OptimizedCost Structure

Optimized

High Value/HighReturn Initiatives

Focused

IT Strategy Map Strategic End State

FinancialPerspective

InternalProcess

Perspective

CustomerPerspective

OrganizationalCapabilitiesPerspective

DriveInnovation

Deliver BusinessValue

Operate withExcellence

ManageRisk

To satisfy our customers and the corporation as a whole,at which processes must we excel?

To achieve our vision, how must we look to our customers?(How will our customers understand our contribution?)

To achieve our vision, what capabilities must we put in place?

IntegralPartner

Business-

Driven

TrustedValue-Driven& Innovative

Worldwide Service Attributes

Cost-Effective

Quality

Focused

Predictable,Reliable &

Responsive

Relationship Image

Continuous Improvement

BreakthroughOpportunities

Regulatory &Compliance

End-to-End

ServiceDelivery

Portfolio &Governance

Architecture &

InformationManagement

Adaptability and Diversity

LeadershipEngineering &

Operational DisciplineBusiness &

Technical AcumenInnovative Thinking

Strategy


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Shared Services Benefits

Benefits Business Clients ESS

Budget Financial Savings Cost Efficiencies

Quality of service High Service Quality Reuse and Integration

Delivery time-to-market Time savings Time Efficiencies

Benefits


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Benefits Realization

Financial Savings and cost efficiencies

Benefits

Year Activity Savings Status

2005 HRIS Integration 600K Completed

2005 Finance SLAs and SOPs 550K In Progress

2005 PeopleSoft Payroll Puerto Rico 100K In Progress

2005 JDE North America consolidation 300K In Progress

2005 Global JDE Licensing Optimization 200-400K In Progress

2005 Document Management SharedServices

300K Planned

2006 PeopleSoft Payroll US 500K Planned

2006 PeopleSoft Banyu integration 100K Planned


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Organization Models (Industry Trends)

Basic Model Marketplace Model Advanced Market

Place Model

Independent

Business Model

* Consolidation oftransactional andadministrative work

* Includes professionaland advisoryservices

* Client choice ofsupplier

* Separate businessentity

* Focus on economiesof scale

* Separatesgovernance and

service functions

* Market based pricing * Profit is retained

* Services charged outto recover fullyloaded costs

* Services charged torecover fullyloaded costs

* Possible externalsales if surpluscapacity

* Multipleorganizations ascustomers

* Objective is to reduce

costs andstandardizeprocesses

* Objective is to reduce

costs and improveservice quality

* Objective to provide

clients choice ofmost cost effectivesupplier

* Objective is to

generate revenueand profits forservice company

Hybrid Approach

OrganizationModel

2007


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ESS Professional Services Operating Model

ClientsESS

SharedServicesAccount

ManagementProgram

Management

Integration ManagementOffice

GIShared

Services

IT Shared Services


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E

nterpriseArchitecture

IT Process Management

Global InfrastructureESS

Business

Corporate Functions

Legal/PA ProcurementFinance HR

Business Divisions

MRL MMD HH

Operating Model

Define&R

efine

Services

Build

Services

Division IT

HHRIS A&IT

Architecture Services

Corporate

Run

Services

Manage GI Strategy

Su

pport

Relationship

Management

Prog.

Mgmt.,

Engineering&

ImplementationClient Services

Application Services

(Development & Maintenance)

OrganizationModel


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ESS Organization Structure

InformationManagement

Services

ApplicationServices

ArchitectureServices

Client Services

HR

Client Services

Finance, Global

Procurement, Legal,IS & Public Affairs

ESS

Services

BusinessRelationships Account /

DemandManagement PortfolioManagement Businessanalyst

BusinessRelationships Account /

DemandManagement PortfolioManagement Businessanalyst

Application andInformationArchitecture

Architecturalstrategy andplan

ProjectManagement

ApplicationEngineering(inc webapplication & IMdevelopment)

ApplicationSupport

ServiceManagement

Policies &Procedures Standards

development Usageguidelines Training &Education Enterprise IMrequirements IM Strategyand planning

Enterprisereferenceconsultation IM InnovationConsultation

Financialmanagement Comm.

HumanResourcesAdministrationprocesses Measurementand Reporting

OrganizationModel


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Shared Service Model Services

Enterprise Information Management Services

Enterprise Client Services

ESS Architecture Services

Enterprise Application Services (Engineering and Support)

ESS Project Services

ESS Integration Services

External Shared Services

ESS Internal Shared Services

Enterprise Decision Support Services

Services

3Q05

In Progress


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External Shared Service Definition

> Responsible for partnering with therelevant clients. This includedparticipating in Strategic Planningprocess and aligning IT and clientstrategies, as well as supporting

Portfolio management processes

> Responsible for development androllout of informationmanagement strategies forCorporate and Business Divisionsclients. This includes

development of an informationmanagement culture, enabled by

deployment of commonstandards, policies andprocedures, usage guidelines,training and education

Services

Client Services Information Management Services


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External Shared Service Definition

> Responsible for management,development and support of allnew applications / enhancements.Applications include enterpriseand corporate application, webbased applications and

information managementproducts. Project Managers willbe deployed to define, manageand deliver projects. ServiceManagers will provide specificproduct / service expertise and beresponsible for delivery of service

as defined in Service LevelAgreements

> Responsible for providingconsistent and reliable decisionsupport reporting services toensure the integrity, operabilityand availability of Mercks

information asset.> Responsible for supporting the

design and development of datawarehouses and the necessarysupporting data marts.

> Responsible for supporting the

integration of Mercks informationacross these data marts into thereporting solutions

Services

Application Services Decision Support Services


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Internal Shared Service Definition

> Responsible for managementof Application and InformationArchitecture. This will includedeveloping a architecturalstrategy and plan in response

to changes in business orfunctional strategies.

Responsible for providing policies,procedures, reusable assets andspecific solutions in support ofMercks enterprise integrationneeds.

Services

Architecture Services Integration Services


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Internal Shared Service Definition

> Responsible for managing and deploying shared compliance, system testing,release management and resourcing (staffing) services to ESS Projects.Compliance will be monitored according to both regulatory and internal Merckrequirements. Release Management is the coordination of the overall releaseof new technologies / functionalities. Resource Managers will

administratively manage and deploy resources from a single resource pool.Deployment will be based on matching resource competency with clientdemand. Resource managers will not be responsible for formal staff(performance / development) management functions

Services

Project Services


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Shared Services Next Steps

> Professional Services Phase Two

> Enhanced Service Definitions

> Global Infrastructure Integration

> Detailed Consolidation Plans


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Professional Services Implementation Team Members

> Bisschops, Marcel;

> Callahan, Brian T;> D'Angelo, Dawn M.;

> Griggs, Ken;

> Hsi, Amy;

> Hsiou, Yu;

> Kamel, Sherif;

> Mure, Michael;

> Sa, Vilma;

> Schwab, Rosanne C

> Semanchik, Scott M.;> Sheridan, Hugh

> Vastano, Frank L.;

Assess

Recommend

Enhance


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PSM Implementation Team Meeting Outcome

> Assess education/skill relevant to role

> Invest in team building

> Capture lessons learned and develop action plans (continuous process

improvement)

> Define workflows by projects in relation to project size and roles

> Work with Global Infrastructure to strengthen integration points

> Build and leverage shared service capabilities (testing, PMO,)


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Proposed Development Team Structure

ESSClient

AM/PM

PM/Dev

ESSClient

AM/PM

PM

Architect

DevTeam

ESSClient

AM/PM

PM

Architect

DevTeam

TL

BA

X-Small Small Medium

GI GI GI

BA

DevTeam

TL


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Proposed Development Team Structure

ESS

Client

AM

PrgM Architect

DevTeam

TL

BA

Large Program

PMPMPM

DevTeam

TL

DevTeam

TL

GI


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Proposed Operations Team Structure

ESSClient

PrM

OpsTeam

ArchitectGI


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If You Have Questions About PSM

Talk to any

of the PSM Reps


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Enterprise Systems & Services (ESS)

IT Off-Shoring & Project SDI

How Does It Impact ESS?

February 28, 2005


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Off-Shoring Project SDI

What Is Project SDI?1

2

How Does SDI Support Career Development In ESS?

4 Project SDINext Steps

How Does SDI Support The ESS PSM?

3


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Mercks Goals For Off-Shoring


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Pharma Industry Is Getting Aggressive About Offshoring

Source: McKinsey research; expert interviews

Activities

Applications for mainframe,AS/400, Lotus Notes, Domino,

SAP

Data management for clinicaltrials

IT systems management

Location

India

India

Vendor

Tata ConsultancyServices (TCS)

Satyam

Comments

400-700 FTEs in IT worldwideby beginning 2006

Dedicated offshoredevelopment center

Applications maintenance anddevelopment for selectapplications

India mPhasis

Application managementservices

India Infosys

mPhasis

Dedicated offshoredevelopment center forapplication management

Systems development,maintenance and support

Montevideo(Uruguay)

Tata ConsultancyServices (TCS)

Data management for clinical

trials

India Accenture

Application development and

maintenance

TBD TBD

20 million of IT services TBD TBD

Top 10Pharma - 1

Top 10

Pharma - 7

Top 10Pharma - 5

Top 10Pharma - 4

Top 10

Pharma - 2

Top 10Pharma - 3

Top 10Pharma - 6


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Pharma Industry Leveraging IT Offshoring

Activities Offshored Location Operating Model

Source: Press research, expert interviews

Application management India mPhasiS

Dedicated offshoredevelopment center forApplication managementservices

Application

India Infosys

Dedicated offshoredevelopment center

Applications for mainframe,AS/400, Lotus Notes,

Domino, SAP

Data management forclinical trials

India TCS

Systems development,maintenance andoutsourcing

Montevideo

(Uruguay)

TCS

IT systems management India Satyam

Vendor

Outsourced

Outsourced

OutsourcedIndia mPhasiS

Outsourced

Outsourced

Outsourced
http://www.jnj.com/index.jsp;jsessionid=PCNYPVRVYMDZ2CQPCCGSZOYKB2IIQNSChttp://www.pfizer.com/main.html


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Project SDI (Systems Development India)

A project team was appointed (Terry Jacklin, Fred Puelle, Nick Riccio, and Frank Vastano)by the ISLT in November, 2004 to review work completed earlier in the year that identifiedopportunities to shift Merck IT spend to more strategic initiatives

An approach was designed, with the help of McKinsey consultants, to focus on commodityactivities that are being performed by contractors and project-based vendors

An implementation plan was developed that properly balances savings realization and

risks by setting forth an aggressive vendor selection timeline, but allowing sufficient time forknowledge transfer and dual operations

Target spend was identified in ESS, USHH, MMD, and Infrastructure (DBAs) that could beoffshored to realize $2.8 to 5.1 million of expense savings in 2005

Nine vendors were engaged to bid on an RFP that was issued on January 10, 2005, whichused a modular structure to enable the selection of 2-3 vendors for the initiative

Vendor selection is targeted for March 7, 2005


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Focus Of Current Effort

Identified 2.8-5.1 incontractor expense savings

Need to identify additionalopportunities in thiscategory

Later we would look toexpand into capital work

Capital Expense

Contractor

Employee

~100

Labor spend, $ Millions

~50

Focus to date

~90

~275

Additional opportunity to

investigate


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RFP Module Definition

>Module >ESS >USHH >MMD-A&IT>InfrastructureDBA >Total

FTEs

Web Support: 4.5

Web Dev: 16

20.5>Web Dev/

Support

Project Charlotte:20

Sales PortfolioTesting: 30

50

>Testing

CIM: 6 EZ-Buy: 4 Finance: 3.2

HR: 16

29.2

>ESS

Helpdesk: 34 34>USHHHelpdesk

PortfolioApplicationsSupport: 60*

60*>USHHSupport

MMS Impact: 3

QRIS LIMS: 4

DBA: 7 14>MMD/Infrastructure

69.7 124 7 7 207.7Total


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What Is Project SDI?1

2



How Does SDI Support The ESS PSM?

3


Th ESS P f i l S i M d l


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The ESS Professional ServicesModel

ESS Professional Services Roles: Account Managers Program Managers

Resource Managers

Account

Man

ager

ESS CentersOf Excellence

Technology

Contractors

Other MerckCenters OfExcellence

PackageVendors

OffshoreVendors

ProgramManager #1

ProgramManager #2

Budget Planning

Day-To-DayActivities

OrganizationalSupport

Large CapitalProjects

Small Projects(Capital OrExpense)

CLIENT

Concept Requirements Design Construction Installation Operation Retirement

Project SDI

Candidate


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Recent Activities1

2



Current Vendor Ranking

3


C Pl f O i i l T i i (Ph I)


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Common Platform Organizational Transition (Phase I)Professional Services Model

(PSM)

Portfolio Management Model(PMM)

Operational Support Common Platform Development

Grade 4

Grade 5

Grade 6

Grades 7-9

Grade 4

Grade 5

Grade 6

Grades 7-9

50%

30%

Concept & Requirements

Promotions

Contractors

Project SDI

Candidate

C Pl f O i i l T i i (Ph II)


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Common Platform Organizational Transition (Phase II)Professional Services Model

(PSM)

Portfolio Management Model(PMM)

Operational Support Common Platform Development

Grade 4

Grade 5

Grade 6

Grades 7-9

Grade 4

Grade 5

Grade 6

Grades 7-9

StrategicOutsourcing

Design & Development

Project SDI

Candidate

Off Sh i P j t SDI


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Recent Activities1

2

Preliminary Financial Analysis


Current Vendor Ranking

3


Project SDI Next Steps


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Project SDI Next Steps

> March 2, 2005 Team Decision Meeting &

Reference Calls

> March 3, 2005 Recommendation Memo To

Sponsors

> March 7, 2005 Decision From Sponsors

> March 8, 2005 Thru March 9, 2005 Prepare Vendor

Communication

> March 10, 2005 Thru March 11, 2005 Announce

Decision To Vendors> March 12, 2005 Knowledge Transfer Phase Begins


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2005 ESS Objectives & Themes

ESS 2005 Objectives and Themes


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ESS 2005 Objectives and Themes

Deliver Business Value through IT Enabled Solutions

Finance Transformation

Merck Production System Common Platform

Integrated Talent Management and Global Compensation

MRL CLPA

Build and Create the ESS Global Shared Services Model

Enterprise Document Management

Strategic Sourcing, Project SDI

ESS and GI Integrated Shared Services Model

Quality Assurance, Program Management, Metrics, Communication, Change Mgmt

Simplify and Standardize the Global IT Environment PeopleSoft Banyu Integration, U.S. Payroll and Time/Labor

EZExpense Upgrade

Charlotte Technology Center

Six Sigma Production Environment

Shared Service Model

Documents