NRA MIS Study Group Outsourcing Finance and Accounting, and IT Services

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NRA MIS Study GroupOutsourcing Finance and
Accounting, and IT Services

• Teri Robinson, CIO and BPO Relationship Executive
• Metromedia Restaurant Group
• Fall 2002 Meeting

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Overview

• Who is Metromedia Restaurant Group (MRG)
• How we reached an outsourcing decision
• What is included in our agreement
• Keys to successful outsourcing
• What lessons we learned

3
MRG Overview

• 900 restaurants in the US and 12 countries
• 1.3 billion in system-wide sales
• Bennigans
• Steak Ale
• Ponderosa and Bonanza

Eat Here!
Based in Dallas, part of Metromedia Company
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The Promise of Outsourcing

• All problems will be solved
• New projects will be completed on time and on
  budget
• There will be infinite resources
• Best practices will be imbedded in the business

• Experts will take over
• New ideas and improvements will be abundant
• Costs will be reduced significantly
• Outsourcing runs itself

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Outsourcing Decision

• Developed a strategic plan focusing on our core
  competencies in April 2001
• Knew we needed to get smaller to get larger
• Decided to evaluate outsourcing functions
  important to the business, but not core to
  running restaurants in June 2001
• Assessed all processes in HR, Finance and
  Accounting (FA) and IT

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Outsourcing Decision

• With the help of Technology Partners Inc. (TPI)
  created an RFP
• Invited bids from
• Accenture
• Affiliated Computer Services (ACS)
• EDS
• Deloitte and Touche
• IBM
• Perot Systems
• PriceWaterhouseCoopers

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Outsourcing Decision

• Decided to handle HR through reorganization
• Important to find ONE provider to supply all
  processes for FA and IT
• Selected ACS in November 2001 and began contract
  negotiations, using Jones Day and TPI
• Transitioned to ACS services in January 2002 for
  a 64 month contract

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In-Scope Services Finance and Accounting

• Accounts Payable
• Accounts Receivable
• Bank Reconciliation and Cash Equivalent
  Fulfillment
• Collections
• Credit Card Management

• Financial Accounting and Reporting
• Internal Audit Support
• Lease Administration and Accounting
• Payroll
• Property Accounting
• Sales Audit
• Tax

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Retained Functions Finance and Accounting

• Fiduciary Responsibility
• Ownership of Financial Statements
• GAAP Interpretation
• Policy Definition
• Financial Planning and Analysis
• Income Tax
• Internal Audit Oversight
• Risk Management
• Treasury

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In-Scope Services Information Technology

• Applications maintenance and enhancement
• Asset management
• Data center
• Data and voice network
• Desktop/mobile computing
• Financial planning/tracking
• Help desk
• Procurement

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Retained Functions Information Technology

• Strategy
• Application Development
• Architecture Oversight

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Key Aspects of MRG Agreement

• Service level agreements
• Contractual costs
• Value adds
• Governance

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Service Level Agreements

• Outlined key service levels expected as part of
  the RFP
• Includes performance credits, chronic failures
  and critical failures
• We have two types Category A and Category B
• Category A - First poll success
• Category B - Resolve automated banking
  discrepancies at least weekly
• Category A has penalties for non-performance, and
  Category B does not

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FA Category A SLAsSample

• On time payroll
• Debt payments and reports on time
• Error-free, on time financial statements
• Avoidance of fines or penalties
• Timely critical vendor payments
• No utility disconnects

• No material payment errors
• Reconciled credit card transmission files
• UFOC filings ready and on time
• Timely reconciliation of balance sheet GL
  accounts

22 Total SLAs
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IT Category A SLAsSample

• Same day resolution for store issues
• First poll success
• Help Desk average answer speed
• New store opening install satisfaction
• AS/400 up-time

• Up-time for polling, EM, e-mail and data
  warehouse servers
• EM update timeliness and accuracy
• RSC and Data Warehouse application up-time
• Overall data network up-time

18 Total SLAs
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FA Category B SLAsSample

• Payroll
• Telephone support on business days
• First call resolution
• Timely delivery of manual checks
• Accounts Payable
• Timely delivery of immediate pays
• Availability of source documents and timely
  archiving

• Property Accounting
• Timely capital project close
• Timely retirement postings
• Timely update of lease changes
• Timely resolution of sales data exceptions

25 Total SLAs
17
IT Category B SLAsSample

• On time, on budget, high quality delivery of
  minor enhancements
• Voice mail up-time

• Restaurant Help Desk call abandon rate
• Timely restaurant hardware delivery

9 Total SLAs
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Critical Services

• Services MRG defined as highly important to the
  operation
• Failure to perform critical services at the
  contracted levels could result in cancellation of
  part or all of the agreement

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FA Critical Services

• Missing a payroll run once and delaying payment
  to team members for more than 2 days
• Missing a payroll run twice in 12 months
• Debt mispayment resulting in lender termination
  or acceleration of debt obligation

• Causing MRG to miss a UFOC filing deadline
• Late consolidated financial statement or material
  errors
• Critical vendor payment defaults resulting in
  termination or withholding of goods/services

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IT Critical Services

• No polling for consecutive days
• Significant number of stores down for more than 2
  consecutive days

• Data network down for several consecutive days
• AS/400 down for several consecutive days

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Predictable Costs

• Charged monthly based on the number of
  restaurants and brands open
• Pricing based on franchised versus company
  restaurants, and IT supported versus not
  supported
• Known for contract life

Turned fixed into variable costs
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Predictable Costs

• Upgrade services included
• Development rates established, and can be
  competitively bid
• Pricing for additional services known
• Retained costs are ones which are highly
  controllable by MRG

Created cost transparency
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Value Adds

• Access to buying volume
• Telecomm rate card
• Additional Help Desk experts, and hours of
  operations
• Access to deeper technology and FA talent
• Access to technologies without capital investment
• AP Imaging
• Full scale web hosting

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Value Adds

• Development services to gain processing
  efficiencies
• Fully developed DRP
• Regular customer satisfaction survey
• Benchmarking services

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Governance is Critical

• Different jobs than traditional FA and IT jobs,
  and require specialized skills
• Shift focus from how to what
• Different does not mean wrong
• Outsourcing does not run itself well

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Governance is Critical

• Ensure the organization understands the
  outsourcing arrangement
• Set expectations on delivery
• Provide ongoing feedback on status
• Analyze costs/benefits on an ongoing basis and
  provide updates
• Obtaining the value is up to you

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Lessons Learned

• Outsourcing can be very effective if done
  properly
• Like all major initiatives, having expert advice
  and using a structured process is critical
• The contract is your friend
• How the partnership is managed determines the day
  to day success
• The accountability always remains with you

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MRG Strategic Objective

• Create a business that was more nimble
• Provide alignment around core competencies
• Provide focus on strategic planning

Win for MRG and a Win for ACS
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Happy Birthday Larry
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NRA MIS Study GroupOutsourcing Finance and
Accounting, and IT Services at Metromedia
Restaurant Group

• Teri Robinson, CIO
• Fall 2002 Meeting