OneFinance Outsourcing the

Finance Function Henric Häggquist

Senior Director, Global BPO Management Finance Operations

Looking Beyond SLAs: Value

Creation Through

Outsourcing

Agenda

Our Case for Change

BPO Footprint Process Summary

Support Model

Governance Model

About Microsoft Operate in 108 countries Revenue – US$69.9 billion Net Income – US$23.150 billion ( June 30th 2011)

Total employees of 90.8k worldwide, 54k (US based) 36K (International)

Finance structured between Corporate, Business Division, and Subsidiary

Single instance of SAP Commissionaire sales structure Operation Centers Dublin – Licensing, Operations and Logistics Puerto Rico – Manufacturing Reno – Licensing and Operations Singapore – Operations and Logistics

Our Case for Change Improving the way we operate in the 3 key

areas: Accounts Payable Procurement (Buy Center) Record (Accounting Transactions)

Key Objectives Drive process standardization Reduced complexity, outsourcing of non-strategic

activities Efficient compliance processes that improve control

environment Powerful business insight & performance management

OneFinance BPO Headcount (FY10 Benchmarking)

* Numbers from 2010 Benchmark

Process Fargo BA EOC Warsaw Chennai APOC Dalian Total

Record - 34 15 52 42 7 19 169 Payables 6 21 - 41 97 - 43 208 Buy Centre 6 31 - 16 - - 45 98

Total 12 86 15 109 139 7 107 475

Delivery Location : Dalian China Loc Ref: 38.8853708, 121.5385938 Delivery Lead: Flora Zhang Processes : Record, AP, Buy Centre

Delivery Location : Singapore ROC Loc Ref: 01.16.671, 103.48008 Delivery Lead: TBD Processes : Record

Delivery Location : Chennai India Loc Ref: 12.54351, 080.13626 Delivery Lead: Sudha Subramanian Processes : Record, AP, VPA

Delivery Location : Buenos Aires, Loc Ref: -34.36.032, -58.23819 Delivery Lead: Anabel Leis Prieto Processes : Record, AP, Buy Centre

Delivery Location : Fargo, ND, US Loc Ref: 46.812094,-96.843304 Delivery Lead: Jennifer Krag Processes : Accounts Payable

Delivery Location : Warsaw Poland Loc Ref: 52.20997 , 21.02567 Delivery Lead: Piotr Tarkiewicz Processes : Record, AP, BC C&C

Delivery Location : Dublin EOC, Loc Ref: 53.16627, -006.12469 Delivery Lead: Andrew Rodgers Processes : Record, Channel Acc.tng

Accenture GDN

Accenture GDN

Accenture GDN

Accenture GDN

Microsoft Facility

93 Record countries 94 AP countries 64 BC Countries

Microsoft Facility

Microsoft Facility

OneFinance evolution

Drive value in commercial arrangement

• Managed Service • Committed cost profile • Productivity, volume absorption

commitments • Mitigate risk on FX/COLA

Transition and Operate

• Focus on service stabilization • Deliver to original

business case • Manage to contract SLAs • Drive process

standardization • Start continuous

improvement

Transformation

• Benchmark operations • Develop

transformation agenda – work smarter • Drive for savings and

outcomes beyond original business case • Develop Centres of

Excellence

Focus on Vision

• Focus on End to End Metrics • Focus on End

Customer Satisfaction • Leverage insights to

create opportunities • Focus on

measureable client business outcomes • Outcomes based

arrangements

2007

2008

2009

2010

2011

Buy Center Operation Functions Sourcing

Strategic Category

Mgt

Contract Execution

Microsoft Procurement

Buy Centre

Expense report processing

Expense report audit Tools:

MS Expense DMS

MS Auditor

Vendor invoice processing MS Market MS Inquire MS Invoice

DMS

• T&E reimbursement

• Vendor invoice payment

• Tools: • Citidirect • SAP

• Employee T&E reimbursement account set up

• Vendor account set up

• Tools: • Global VMF

tool • SAP Vendor

Master File VMF T&E

Invoices Disbursements

Payables Operational Scope

Treasury • Cash Forecasting

• Opex Cash flow Mgt • Bank Administration

Intercompany • I/C reconciliation • I/C commission • I/C cross charge

• Acquisition • Transfer • Disposal

• Depreciation • Physical Audit Recon

• Outsourced to Accenture and E&Y

• Supporting E&Y & Statutory Controllers

• Audit Support • Tax Filing • Supporting Statistical

preparation & reporting

• Payroll Accounting • Local Billing ( limited) • Close Accounting • Journal Entries • Accruals /Prepayment • BS/PL reviews • Account Reconciliation • Business Rule Violation (BRV) • Allocated Cost pool

Record Operational Scope

General Accounting

Treasury & Intercompany

Accounting

Fixed Assets

Statutory & Tax

Preparation Support

Overall Customer Support Approach Principles • AFC as single point of

contact for each subsidiary for all Buy Center, AP and Record related inquiries

• Country specific toll free phone line

• Phone support available during subsidiary working hours

• Email support for all countries (Buy Desk, AP and Record)

Front Office Queries can be phone calls or emails to team mailbox

Assistant Controller

Help Desk

Back Office

Statutory

Reconciliations

Month End

Payables

T&E

General Ledger

Buy Centre

Payables, T&E, Buy Centre Queries

Financial Controller

Employees

Vendors

BPO

Record – Role of Assistance Financial Controllers (AFC)

11

Financial

Controllers

AFC

Fixed Asset

Payroll Accounting

Reconcil- iations

Support Teams

Std Journal Entries

Leveraged Finance Support Teams

• Team leads & team size provide: • Segregation of duties • Controls • Backup support • Capacity to shift work as needed

• Deep functional & SAP knowledge

• Fixed asset process, systems and regulations

• Payroll processes, systems, interfaces, relationships

• Intercompany transactions

Controller Workspace

Governance Workspace

• Close Management

• Non Standard Journal Entries

• P&L and Balance sheet Reviews & Analyses

• Close & JE checklist Sign-offs

• Communications

• Close Accountability

• Reviews

• Close

• Escalations

• Approvals & Sign-offs

Inter- company

Outsourcing Governance Operating Model

12

OneFinance

Manage Relationship

Process Governance

Commercial Support

Service Delivery

Administer the Contract Change Order & Commercials Benchmarking Annual Surveys

Manage for Today Service Delivery Governance Operational Resources Process metrics target Continuous improvement execution

Executive Direction Strategy & Vision Escalation Point

Plan & Execute for Tomorrow

Global Process Owners Global Process Definitions Continuous improvement definition Target setting

Governance Organization (April 2011) Management Lead

Service Delivery

Transformation & Process Governance

Other: Contract & Commercials Project Execution Service Management & Reporting

Henric Häggquist (Overall Management)

Alan Byrne (Americas / Europe)

Mei Feng (APAC/ Middle East)

Piotr Tarkiewicz (Warsaw DC)

Anable Lis Prieto (Buenos Aires DC)

Sudha Subramanian (Chennai DC)

Flora Zhang (Dalian DC)

James Barnes Warsaw Wladyslaw Kleniewski

(Record)

Joanna Kersley (Accounts Payable)

Stacy Conkle (Buy Centre)

Paul Weldon (Record)

Jodi Ford (Accounts Payable)

Wee Ling Yong (Buy Centre)

Fred Soulier Commercials

Caroline Cherry PMO / Projects

Jane Fitzhenry Service Mgt.

Andrew Cheung (OADM)

Srini Krishna Commercial Dir

Jacob Petersen CFM

Andrew Rodgers (Dublin)

Jen Krag (Fargo)

… (Singapore)

SD: Governance Calls AFC as Call Leader and FinOps as Facilitator

1. Pre-Call Preparation

2. Call Focus 3. Post Call Follow-up

4. Escalation to RPO/ Asia SD Gp Mgr if

required

• FinOps S+ FC and requested sub attendees, AFC, SD Mgr and cc DC Process Leads

• Obtain updates from action owners to minutes for previous call and FinOps Updates to circulate

• GW “page” saved as backup in case GW down during call time

• AFC drives the calls for all process topics • DC Process Leads attends if complex

issues • Use of GW on Live Meeting • AP Op Metrics shared as part of call • SD Manager to share Monthly FinOps

updates/ reminders • SD Manager to address governance

questions or manage escalations/queries to other RPOs

• FinOps executives email the minutes and follow up actions and owners by next working day

• Manager/ FinOps executives

• forward issues to RPOs for their follow up

• FinOps executives are also assigned by process (AP and Record) and will assist RPOs in more tactical issues

Performance Summary

SLA Performance (% of Misses)

International Payment within Terms (PWT) RM04

85%

78% 76%

83% 83% 85%

83% 80%

86% 86% 84%

88% 87% 87% 84%

86% 87% 89%

86% 85%

65%

70%

75%

80%

85%

90%

95%

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

RM04 FY09

RM04 FY10

RM04 FY11

RM04 FY12

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12

Benchmarking Transaction Costs (Invoice Processing)

Microsoft Confidential

16

1st Quartile 2nd Quartile 3rd Quartile 4th Quartile

$3.00 $5.00 $9.00

Global -5%

Intl -4%

Warsaw -13%

Dalian +2%

BA +2%

Chennai +3%

COE +4%

US -16%

$19.04 $18.26

FY10

$35.31

FY10

$14.24

FY10

$21.00

$17.99

$8.16

$1.54

$14.66

FY10

FY10

$7.79

$30.67

$20.54

$1.29

FY10

$9.35

FY10

$9.70

$17.59

FY10

Using Benchmarking to drive transformation

Fiscal year*

Cost

per

invo

ice

$9

$5

$3

Q4

Q3

Q2

Q1

FY10 FY11 FY12 FY13 FY14

$8.16 $7.30

$5.81

$5.00 $3.96

E-invoice implementation for original list of countries (17)

OCR for invoices (10) Contractual reduction FY12 (9) Contractual reduction FY13 (8)

E-invoice extension (4) Joined P2P (6) Contractual reduction (5)

FY12 BPO Annual Satisfaction Survey

18

Gain-Share Model – Funding Transformation “Vested Outsourcing” • Fair return to both sides

• Provide adequate financial incentive to both sides to drive transformation • Repeatable across different types of projects and across multiple years • Simple to administer and manage

• The benefits are shared between the two sides so as to give Accenture: • Cost of implementing the project (all projects are designed in a manner

where Accenture bears all implementation costs) – (A) • Compensation of revenue lost due to reduced charges resulting from the

transformation project (Calculate as a % of total benefits) – (B) • Transformation incentive – Calculated as a % of [(A) + (B)] • As the benefits are spread over the life of the contract, Microsoft’s share of

benefits from each project for each year is credited at the start of each fiscal year

FY13 Vision Creation of a joint 3 year vision for OneFinance, focusing on 5 key themes

Excellence in Finance Operations All approved exceptions are statutory driven All SLAs and E2E metrics Green at country level OneFinance internal Green on relationship survey by Process/DC Attrition and tenure : Overall 20% annual increase in tenure YOY with a target of 36 month

Excellence in

Finance Operations

Very Satisfied Customers

Increasing and standardising OneFinance

footprint

World Class Teaming

Excellence in Controls and Compliance

Environment

World Class Teaming Win a third Industry recognition award

CFO Award in Microsoft and BPO/CEO Accenture for best outsourcing deal.

Excellence in Controls and Compliance Environment

IA to use CA programme to measure Control environment Consistent CA report pass in monthly controls testing IA Industry award awarded to One Finance on Controls & Compliance

Very Satisfied Customers OneFinance – Customer/FC Survey GREEN (above 4.25) by Process /DC FC to spend less than 10% of time supporting One Finance Increasing and standardising OneFinance footprint

Increase the Subsidiaries serviced by OneFinance Cover all SUBs WW where legal and has the tools platform Increase service offerings around the 3 streams

Expand scope of services to include 2 new services on top of BC, AP and Record

AP BC Record

No DMS/CRM ticket older than 11 days PWT Target for 95% of transactions Target for 95% of available discounts

No CRM ticket older than 11 days & 50% reduction global PO/CRM ticket ratio Effective Category Card Review of 100% of GPGs Category Cards Global ATF POs target <1% of transactions eSign deployed to 80% of supporting countries

No Red items on Controller Workspace No aged reconciling items on the Balance sheet AFCs with target tenure of 3 years in Record , with a minimum of 2.5 years in the AFC role.

Excellence in Finance Operations

OneFinance – A Real Winner FY08: Everest Outsourcing Center

• Most Strategic Outsourcing Contract

FY09: Shared Services Outsource Network

• Best Mature Outsourced Service Delivery Award

FY11: International Association of Outsourcing

Professionals

• Global Excellence in Outsourcing for Innovation Award

FY12: Shared Services Outsource Network (APAC)

• Excellence in Customer Services

FY12: Shared Services Outsource Network (India)

• Excellence in Thought Leadership [Srini Krishna]

Text from mail from Henric after award nr 3

So why do we get these awards??

I say it is because of TOGETHER. We face all things TOGETHER.

We win TOGETHER. We face difficulties TOGETHER. We never go YOU against US.

We have all seen what that lead to……

I couldn’t be more proud than I am right now. Proud TOGETHER with all of

you!!!

Thanks for the hard work you all do!!!!!”

MS DYNAMICS IW/SQL/SYSTEM CENTER

XBOX WINDOWS PHONE

BING OFFICE

WINDOWS SKYPE

Tool: Controllers Workspace Monitoring Accenture Record Performance

• Enables the Accenture Assistant Financial Controllers (AFC) to efficiently oversee and manage the day-to-day close process while providing Financial Controller (FC) oversight.

• Brings together accountability & responsibility in an intuitive & rational way that helps the FC ensure a successful close in partnership w/ the AFC.

• Extends the existing Finweb platform as a one-stop-shop for Controllers bringing together relevant tools aggregated into one central location.

Key Users: • Accenture Assistant Financial Controllers (AFC) • Microsoft Subsidiary Financial Controllers

Reinforces the relationship that OneFinance is driving : Enabling Microsoft Financial Controllers to focus on strategic issues while delegating day-to-day tactical activities to the Accenture Assistant Financial Controllers.

LINK: Video available . Contact FinOps

Tools for Governance Reviewing Accenture Performance

• Review the SLA & E2E performance for a particular contract as well as trending and other comparative data.

• Prepare for contract performance meetings with a complete contract view on a single page

• Centralized reporting framework to capture all issue lists with a common page and drill to source systems as needed.

• Filter based on role and country to view country-specific SLA performance or all-up regional or global performance.

Key Users: • Microsoft Finance Operations Team • Accenture Governance Team Secondary Users: • Accenture Assistant Financial Controllers (AFC) • Microsoft Subsidiary Financial Controllers

LINK: Video available . Contact FinOps