Good Morning board members. I am here to brief you on the current Qantas/IBM outsourcing deal. There has been a great deal of advancement in IT infrastructure and services globally. Taking into considerations all the key indicators we have outsourced our IT project delivery functions to IBM.

Today, we will have quick review on the background of Qantas/IBM deal. As we are entering into transitional phase of outsourcing, we will discuss the critical issues in transition, out transition plans and human resource transiting.

After thorough analyses of current industry standards, our IT service needs and budget, we decided to outsource our project delivery functions to IBM for a period of 7 years at a cost of $1.5 billion. This will help us to manage our IT business needs and change processes effectively. We have a current partnership with IBM which includes a 10 year contract to manage our data centre, services helpdesk and various processes. This new partnership will bring IBM’s industry knowledge and project delivery expertise that will help us build our core competencies.

We have now passed the initial stage of awarding the contract and are entering a transitional phase. It is important to monitor and plan the transition phase which will be the building block of success in the entire outsourcing deal. After in-depth negotiations with IBM, we have drafted a transition plan identifying the risk and key issues we need to address during this phase.

Analyzing the critical issues that are common in IT outsourcing, we focus on the following.: a. Standards and integration issues b. Knowledge management c. Communication protocol d. Issue resolution e. Contingency processes f. Proprietary management g. Transition plan

Qantas is a leader in aviation and IBM is a global leader in information technology management. We are integrating two different service leaders to upgrade our IT process which in turn will boost our core business goals. During the contract phase we discussed in detail about various parameters and standards that are expected to meet our business goals. For new issues that may arise during the transition, We reached an agreement with IBM to have the flexibility to redraft the contract to include new clauses if necessary.

As part of the transition, we will be undergoing knowledge management and transfer. We need to find the right balance in the amount of knowledge transfer to IBM. Too little transfer may leave the IBM with incomplete information needed for successful project implementation and too much knowledge transfer is dangerous as it will open up the possibility of knowledge loss in our organization. We will set up a team that consist of subject matter experts to handle the knowledge transfer and training. The knowledge transfer will be done in a informal way for more effective result.

Communication is another critical issues that need to be taken care of. During the negotiation and contract phase, we had agreed on the communication channels and conventions. Use of localized jargon will be avoided. The Default communication channel will be email and response time is agreed on two working days on non critical issues and within the same working day for critical issue. There will be project meeting on a weekly basis with IBM counterparts for close monitoring.

It is during the transition phase the process followed by Qantas and IBM will be made known to each other. There may be some issues that might surface during this stage. If proper communication channels are established and adequate knowledge transfer is provided we will be able to fix these issues in the initial stages. We must keep in mind that any issues left unattended will result in a poor working relationship between the two companies. We will be closely monitoring the transition phase and apply immediate and quick fixes.

As we are outsourcing an existing internal process, during the transition phase we need to cautiously evaluate the contingencies that may arise. We need to have a backup plan to ensure that despite the ongoing transition our core business processes remain unaffected and functional. We have also identified the issues that could arise during the integration of Qantas and IBM systems.

During the transition phase, we will need to open up our organization especially during the knowledge transfer. Risk here is that, we may lose valuable intellectual property and other assets. To minimize risk, we will take prudent steps to address the security concerns. As it is not necessary to share all the company information with IBM, it shall be done in need to know basis for critical assets and knowledge. The vendor will be watched for data protection. All the assets will be tagged and segregated to reduce the negative impact. Responsible and authorized personnel will be placed from Qantas to manage those assets.

The critical issues that are discussed will be included in the transition plan. The Transition plan objective is to ensure transfer of services to IBM is transparent to the Qantas. Current on going projects during transition will be identified with the responsibility clearly defined and signed off. We need to manage the impact on the employees. Employees that are affected will be proposed an transfer package that is agreed between IBM and us. For employee who is not taking up IBM’s offer, we will offer a redundancy package. Key staff will be put in place to build and implement processes and procedures that enable effective interface and control at all levels. We will be using a measurable matrix to evaluate the service level of IBM.

As part of outsourcing deal, selective employees from Qantas will be absorbed by IBM which is critical for continuous business operation. We have worked out a redundancy package for employees opting out. As part of our learning experience from previous outsourcing deals, it is necessary to address staff concerns relating to their job security, change in working conditions and environment. It is critical to note that the current staff mindset is unhappy on the entire outsourcing process. Adequate steps must be take to reinstate the trust in employees for a efficient knowledge transfer and successful transitioning.

Today we have gone through the entire benefits of the contract with IBM and we expect this will help Qantas reduce the IT budget. The current outsourcing deal adds continued focus to lead and innovate in our core business. We have discussed in detail the transitional action plan and issues we need to address.

We thank your patience in going through this transition briefing and we seek your guidance and suggestions.

Qantas/IBM Transitional Phase of Outsourcing Amaravathisamy Arthi G1101891B Feng SongTao G1001231F Po Po Naing G1001254D Saw Thwe Aye G0802483C Tan Wee Meng G1101930H

Agenda Background Current Outsourcing phase Critical issues in Transition Transition Plan Human Resource transiting Highlights

Background Seven year IT management outsourcing contract to IBM. To provide timely and cost effective delivery of IT business and change processes. Current partnership with IBM includes, a 10 year contract to manage data centre, service help desk, security and change management.

Outsourcing Phases

Critical Issues in Transition Project transition The Outsourcing Handbook – How to implement a successful outsourcing process by Mark J Power, Kevin C D'Souza, Carlo Bonifazi

Two different kinds of organizations are to be integrated in this phase Standards and parameters of integration are negotiated in contract phase Employ open discussion style with vendor and stakeholders to resolve the issues that arise in integration and redraft the contract to include the new clause.

Right balance on the amount of knowledge transfer to the vendor Create a expert team from both the organizations who will look after training and knowledge transfer and help in building business relationships. Maintain open communication with employees opting redundancy

Selecting suitable communication mechanisms based on cross cultures and time zones Communication channel and convention agreed during negotiation and contract Weekly meeting and email response time

Look for error prevention methods rather than solutions. Success in identifying problem will depend on different communication channel and knowledge sharing. Issues and problems are easy and economical to be fixed in the initial stages.

Proper backup plans and redundancy are in place to face uncertainties. Well thought plan need to be created to minimize the risk. Periodical review and assessment of the process followed and the task completed.

Minimize possibilities in losing clients intellectual property and other assets by using firewalls, VPN, encryption Required and relevant materials alone should be given access to vendor. Physical and Legal protection of assets should be imposed with authorized personnel access and legal contracts.

Addressing the critical issues that are discussed. No disruption for the end users Managing impact on staff and current projects Establish working practices and procedures Verify on agreed service levels

Human Resource transitioning Job security Change in working conditions Change in employment terms

Highlights Benefits for Qantas Priority for core business development Cutting edge tools for effective IT growth and customer experience Transition action plan

Q & A session