Site Contribution and Value Analysis

August 2016

1

2

Maturity

assessment and

gap analysis

Value metrics

definition

Value contribution

assessment

Strategic

analysis and

outcomes

Data collection

process

Strategic

objectives

Current state analysis and

future state identification

• As – Is understanding of current

maturity and definition of future

state for each BU

• Identification of gaps and future

state including high level

initiatives

Stakeholders’ interviews, primary research

Survey based data collection from Stakeholders

Metric identification and

dashboard

• Identify metrics for share holder

value creation for each

BU/support function

• Define and develop dashboard

for all BUs, support functions

and overall

Identification of value

contribution

• Estimate overall enterprise value

for each centre

• Calculate Unit value contribution

for each BU/support function and

overall for each centre to the

parent

1 2 3

How we assess the value contribution of a Global In-house Center site to the Global Parent

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Maturity Assessment

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Maturity Assessment Model

A structured approach and proprietary maturity models are used to determine maturity of each

function / BU at a center

Methodology and

outcomes

Data collection

process Stakeholders’ interviews / Primary research / Data collection from India teams

Maturity Analysis

Strategic

objectives

• Maturity analysis for each BU /

support function using Zinnov’s

proprietary Maturity Framework

Current State Maturity

Analysis

• Desired future state articulation of

each BU / support function

Future State Identification

• Gap identification – areas of

focus and improvement

Gap Analysis

Maturity assessment

and gap analysis

1

Key parameters for maturity assessment of product development team (Example)

Business Talent Organization Process

• Product budget

• Role in product

management

• P&L

accountability

• Roles

• Scrum type

• Team size

• Activities

• Ability of team

to work

independently

• Organization

activities

• Management

• Process

activities

• Job design

• Measurement

• Technology

Organize

Activities

Maturity assessment

4321 5

Organization

Talent

Organize activities

Process

Business

Current maturity level Desired maturity level within 2-3 years Current state same as desired state

Desired StateCurrent state

• Assists in creating product roadmap

BUSINESS

TALENT

• Significantly influence the product road map, strategy, budget

ORGANIZE ACTIVITIES

ORGANIZATION

• Development, QA, release managers, product managers • Executive leadership from India

• Activities include conceptualization, design, development, testing

and release.

• User experience for the product.

• Activities include conceptualization, design, development, testing

and release.

• User experience for the product

• Structure for assessing ideas

• Product managers defined

• Common portal for submitting of ideas. Unbiased evaluation by

top management

• Project managers responsible for P&L

• Resource allocation is coordinated

• Some repetitive tasks have been automated

• Prioritized resource allocation

• All repetitive tasks automated

PROCESS

5

Maturity assessment

and gap analysis

1

Maturity Assessment

6

Value Metric Definition

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Value Metrics

definition

2

Revenue Opportunity indicates how well

a team is able to identify and fill a need

within a chosen market.

Operating Efficiency reflects how well the

team is able to turn demand for its products

and services into profits and value

Risk Control and Expectation

Management helps define stakeholder

confidence in team’s ability to own and

deliver on higher responsibility

Shareholder

Value

Revenue

Opportunity

Operating

Efficiency

Asset Productivity

Risk Control and

Expectations

Management

• Anything that grows ‘Top

Line’

• Anything that grows the

‘Bottom Line’

• All cost categories

• Anything that reduces the

amount of money tied up in

the assets needed to run the

business, or allows those

assets to be better utilized

• Anything that enhances the

team’s ability to lead, plan,

manage, execute its stated

strategies

• Anything that demonstrates

the team’s ability to control

risk

Asset Productivity reflects how well a

team is able to turn invested resources

(talent, real estate, cash, etc..) into

profits and value.

Current

performance

Expectations for

future

performance

Shareholder Value Contribution

The following levers will form the basis to identify the key metrics for measuring value contribution of the

BU/team

Product Development Team Dashboard

35% 20% 25%

Target achieved

Target achieved Target achieved Target achieved Target achieved

30% 20% 30% 10%

30% 30% 30% 20%

60% 60% 60% 60%

40% 50% 30%

70% 30%

Mean time to resolve

Overall cost

Average ramp up time for

a new hireAttrition

Avg. hiring time

Asset productivity

No. of learning hours per

FTE

Average utilization

Cost/ FTE

Risk control and expection

management

Design approval in first

pass

No. of POC generated

No. of customer found

defect

Lever

Revenue opportunity

No. of products launched

No. of ideas submitted

No. of external interaction

Operating efficiency

No. of reusable

components

Average time to resolve

critical

Man-hour invested in re-

work

Revenue opportunity Operating efficiency Asset productivity Risk control and

expection management20%

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Value Metrics

definition

2

Shareholder Value Contribution

In a similar way, dashboards will also be defined and developed for each Business unit and support

function

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Shareholder Value Creation - Metrics

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Individual Centre’s Value Contribution Analysis

The articulation of value contribution can showcase the value each centre generates

Value Contribution

Assessment

3

How do we

calculate it?

Revenue Opportunity

Operating Efficiency

Asset Productivity

Risk Control and

Expectations Management

Shareholder Value Stack

Actual Value

ContributionThe actual value contribution of a center to the parent will be arrived at by adding together the contributions from

individual BUs / Support functions.=

Actual Value Contribution

Value contribution is a function of each business unit’s maturity and the target they

achieve on the identified metrics

BU Unit Value

Contribution =BU Unit value contribution will be calculated separately for each BU and support function. It takes into account

the enterprise values of all levers, avg. salary proportion, targets achieved, maturity score.

Value contribution

Value contribution of a center to the global parent quantitatively articulates the value

generated by a center and contributed to the parent, thus, helps in driving strategic

investments for that center

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Terminologies used for value assessment

Value Contribution

Assessment

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# Terminology Meaning/ Full form

1 h Head count ratio

2 Shareholder valueFunction of Revenue, Operating efficiency, Asset productivity, Risk control and

expectation management

3 EV Enterprise value (TTM EV)

4 EV’ Enterprise value prime ( EV * h)

5 Vx ,Department Value contribution of a department within a specified centre

6 m Maturity score of the department

7 R’, O’, A’, E’ EV’ broken down by levers of Shareholder Value

8 r, o, a, e Percentage Targets achieved on each lever of Shareholder Value metrics

9 Vai Value contribution of the entire centre

10 Pdk Proportion of average salary cost of a kth department/function

11 Dk kth department

12 Tdk Generic variable to call out targets achieved by kth department

13 Mdk Normalized maturity score of the kth department

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Key Facts• The Shareholder Value = f(Revenue, Operating Efficiency, Asset Productivity, Risk

Control and Expectation Management)

Key ratios• Headcount ratio (h) = Total number of people in centre ‘X’ / Total number of

employees

Centre ‘X’ Potential Value Contribution

*Note: Potential contribution on each of the lever is arrived at by distributing equally the remainder of potential enterprise value less potential revenue contribution across Operating

Efficiency, Asset Efficiency, Expectations

Centre ‘X’ Value

Contribution

(Vx)

Sum of value contribution of all Centre ‘X’

departments

(∑ Vx,Department)

=

Centre ‘X’ - Potential Enterprise Value

broken by levers of Shareholder Value

(EV’)

Global Average TTM

Enterprise Value (EV)= Headcount Ratio (h)x

Centre ‘X’ Actual Value Contribution

*

• Centre ‘X’ Value Contributions = f(average TTM enterprise value, headcount ratio,

proportion of avg. salary cost, maturity level, and target achieved on metrics)

Centre ‘X’ Dept. Value

Contribution

(Vx,Department)=

Value Analysis

The value that a centre contributes is a function of average TTM enterprise value, headcount ratio,

maturity level, and the target achieved on metrics

Revenue Opportunity

Operating Efficiency

Asset Productivity

Risk Control and

Expectations Management

Shareholder Value Stack

Value Contribution

Assessment

3

f (EV’, Pdk , Td

k, Mdk )

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Change in Maturity(m) gives more value

• The Value Curve equation: Vx = (Rx, metrics contribution + Ox, metrics contribution + Ax, metrics contribution + Ex, metrics contribution ) * m2

OR

• Vx = a * m2 (Keeping the targets achieved on the metrics constant)

• Instantaneous rate of change of Vx is 2*a*m

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Actu

al V

alu

e c

on

trib

utio

n (

Vx)

Normalized Maturity(m)

A

B

*

*

The Value Curve

Hence at point ‘A’ the instantaneous rate of change of Vx is lesser than the instantaneous rate of change of Vx at ‘B’

1X of Cost

arbitrage

1X to 2X

2X to 4X

6X to 7X

7X to 8X

• Value contribution curve is not linear

and rises rapidly with changes in

maturity levels

• Incremental changes in maturity at

higher levels of maturity gives higher

incremental gains in value

• Hence the value curve is a parabola

Value Curve

The value contribution increases rapidly at higher levels of maturity

Value Contribution

Assessment

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Case Study

Value Analysis– Maturity Assessment, Value Metrics Identification, and

Value Contribution

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Project Summary

In order to further leverage its India R&D centre

investment the client, who is a leading CDN service

provided undertook a review of their India center

operations and governance. The scope of the

project included analyzing the current and future

desired maturity state, value metrics and next steps

– for each function and also assessing the value

contribution of the India centre

Business Issues

The client initiated the project in order to respond to a number of business issues, including:

Increasing the value contribution of

the India centre to the Global

organization

A strategy to leverage the existing investments

in India R&D center and increase investments

in India

The current competitive market environment

which requires a more differentiated talent

strategy

Objectives

Project Objectives and Scope

• Analysis of the current and the future

desired state of various functions

• Value metrics for each function in order to

clearly demonstrate the value that the India

center generates

• Dollar contribution of India center to the global parent

Scope

• Organization diagnostic (current and

future state)

• Strategic bold plays and

recommendations

• Value metrics and dashboard

• Valuation analysis to derive dollar

contribution

Functions in scope: Global Shared Services,

Marketing, Finance, Product Development,

Platforms (SOC/NOC), CIO/IT, HR, Customer

Care, L&D, and Emerging Customers Group

(ECG) in India Center.

Value Delivered / Estimated Benefits

1Definition of a redefined target state for each function and a well-formulated

growth strategy

2Improvement opportunities has been identified, prioritized with a high-level cost-

benefit analysis

3Articulation of the impact of client India centre on and the dollar value

contribution to the global parent

4Set of strategic bold plays have been identified and detailed out ― to be

executed in next three years and has been received well by the global

stakeholders

5Acceleration of five bold plays ― development of expertise in product

development for IoT, consolidation of L&D org, defining organization

level agreements (OLAs), improvements in employee performance

management, and better engagement with Alumni.

Bangalore

69 "Prathiba Complex",

4th 'A' Cross,

Koramangala 5th Block,

Bangalore-560 095.

Phone: +91-80-41127925/6

Singapore

Level 42, Suntec Tower Three

8 Temasek Boulevard

Singapore 038988

Phone:+65 6829 2123

Texas

21, Waterway Ave

Suite 300

The Woodlands

TX-77380 USA

Phone:+1-281-362-2773

Beijing

Meilifang Tower 4, Entrance 4, 10/F #1003,

11 Beiyuan Shuangying Road,

Chaoyang District, Beijing

China 100012

Thank You

Gurgaon Office:

First Floor,

Plot no. 131, Sector 44,

Gurgaon-122002,

Phone: +91 124 4420100

California Office

3080 Olcott Street

Suite A125,

Santa Clara, CA 95054

Phone: +408-716-8432