Presentation from AribaLIVE 2011 in Nashville on Rapid and Sustainable Spend Management Success by Michael Knipper, SVP, Enterprise Services, The Hartford Financial Services Group, Inc.

1. Blueprint for Rapid and Sustainable Spend Management Success Michael Knipper Senior Vice President

2. The Hartford 200 year old multi line financial Services company 26,000 employees primarily based domestically $1.4 Billion in sourceable spend and increasing Enterprise services – Real Estate, Procurement/Negotiation, Commodity Management and Operations

3. Overview – Our Journey Vision Selection Implementation ASIA – All Spend in Ariba

4. Vision Procurement will deliver measurable value to the company. Value is defined as: Transparency of all spend paid through Accounts Payable Ensure all spend is approved prior to purchase Ensure all invoices in managed categories are matched to a purchase order or contract Defined sourcing process for all managed categories Consistent categorization of spend Spend reporting that provides data to guide decisions and actions Reduce expense and be able to prove it! Key Enablers Single entry point for all purchases Only one system generates an okay to pay file

6. Employee needs are fulfilled after approval

7. Procurement with legal establishes T’s and C’s

8. Goods & Services received. Invoice reconciled, approved

9. Most cost effective method is used to Pay invoice

10. Monitor compliance to process

12. Volumes

13. Locations and business units

14. Suppliers

15. Pricing

16. Specifications

17. Market analysis

18. Competitive situation

19. Suppliers

20. Market segmentation

21. Internal needs analysis

22. Supplier search

23. RFI/RFP Development and Issuance

24. Reverse Auctions

25. Negotiations

26. Catalogs are established for contracted vendors

27. Release contracts are used where applicable

28. NCPR used where no catalog or contract exists

29. Orders are routed electronically to suppliers after full internal approval

30. All requirements and service levels are included in contract

31. Risk assessment and mitigation

32. Certifications, proof of insurance, information protection

33. Establish pricing terms for contract compliance during invoicing

34. Goods are centrally received or at desktop

35. Supplier submits electronic invoice

36. Requester approves invoice to validate receipt where receiving is not turned on

37. Invoices have to reconcile against approved PO or contract

38. Invoice exceptions created to flag non compliant behavior

39. Fully approved invoices are paid

40. Use ghost cards and P cards where possible

41. Optimize payment terms to get discounts for early payment (Through managing payment terms in contracts and PO’s)

42. Ensure source to pay process is used

43. Identify contracted vs. consumed spend for business units to manage reserves and budgets

44. Monitor exceptions and develop policy and new processes

45. Ensure spend is appropriately classified by commodity category

46. Identify suppliers that require management based on spend and criticality

47. Develop processes and metrics to continuously benchmark supplier performance

48. Develop supplier specific surveys and reporting

50. Contract Authoring and Contract compliance

51. Integrated Procure to pay system

52. Peoplesoft AP

53. P cards

54. Sourcing, Spend Visibility, AHP

55. Spend Visibility

56. Reporting

58. # of suppliers per spend category

59. Sourcing cycle time

60. % non competed sourcing events

61. Savings from sourcing

62. % spend on catalog orders

63. # transactions through catalog orders

64. # of orders manually transmitted

65. PO processing cost per PO

66. Requisition to order cycle time

67. # of contracts negotiated per year per quarter per month

68. # of contracts touching legal

69. Contract negotiations and agreement cycle times

70. # of invoices per year

71. % of paperless invoices

72. % of invoices having exceptions

73. Average cost per invoice

75. # of finance FTE’s in Invoice process

76. % of invoices paid with check or Wire transfer

77. # of invoices paid within 30 days

78. Discounts obtained through early pay

79. Dollars paid through P cards

80. % Compliant spend

81. BU’s with non compliant spend

82. % of spend classified

83. # of suppliers managed through a comprehensive process

84. Supplier performance report card

85. Cost

86. Delivery

87. Service levels

88. Quality

89. ValueKey Metrics

90. Selection

91. Selection Process RFP delivered to six providers Key requirements On demand tool Complete tool set to support Source to Pay Why we implemented a new tool Inconsistent approvals prior to purchase Inconsistent authorization to spend levels Inconsistent and in some cases no existent invoice to purchase order contract matching Antiquated contract repository No sourcing tool Highly customized tool, difficult and expensive to maintain

92. Implementation

93. Implementation Strategic Intent – Implement entire source to pay tool set by May 15th 2011 (six months). Go live success defined as including: All spend commodities All historical contracts loaded All users trained Consistent company wide end to end process Contract signed September 2009 Implementation started mid-November 2009 Live May 10th

95. All invoice payments will be routed through Ariba and paid by approved methodology (PCard, ACH, check). Predetermined exceptions to the use of Ariba will be clearly defined (i.e., Legal fees, agent commissions, claim systems payments).

96. PCards will be used for payment whenever possible to maximize the savings opportunity

97. Ninety percent of all requisitioned items will be available in Ariba catalogues and the catalogue “punch-out model” with HIG controlled pricing being the preferred model

98. Commodity approvers will be defined and required for the following commodities: IT hardware and software, meetings, RE, Marketing Services, print, and others to be clearly defined

99. All procurement contracts will be in Ariba

100. The receiving function in Ariba will not be utilized. Invoices for office supplies will be routed through auto requisition match/ auto pay. All other invoices will be auto requisition or contract matched and routed to the initial requistioner to validate receipt/ acceptance

101. There will be one consistent enterprise wide approval process needed to acquire and pay for goods and services

102. Approvals will be obtained only once -at the requisition or project approval stage- whenever possible

104. Implementation – Change Management Process Turn off the old system Turn on the new system Hope to survive

105. Implementation – What We Learned Vanilla is not a dirty word Other than interfaces, no IT concerns Forces an enterprise view with consistent process Removes temptation to “over customize” We were in worse shape than we thought Contracts vs. Invoices Open purchase orders Billing errors Significant volume of spend no compliant with policy Inconsistent coding

106. Implementation – Current State Averages 4,500 purchase orders per month, 80% of the transactions are through catalogs Post conversion, we are averaging 200 new contracts or amendments per month Average 7,000 monthly invoices, 71% electronic 72.5% of “okay to pay” is from ARIBA 452 suppliers fully enabled User experience far better than expected

107. ASIA – Program Overview Sonny Mehta – 860.547.2037

109. Baseline the S2P cycle through the development and use of metrics

110. Establish, document and implement approved S2P policies + workflows

111. Identify categories of spend to follow appropriate sourcing practices

112. Determine the path forward to process all invoices through Ariba

113. Operate one system to create an “OK to Pay” file that feeds PeopleSoft Accounts Payable

114. By eliminating direct input to PeopleSoft

115. Note: Payments for claims, payroll, agent incentive compensation and trade settlement are out of scope

116. Clarify roles and scope for contracting

117. Optimize use of enabling technologies (operating platforms) across the S2P cycle

119. Spend Category Segmentation

120. Spend Levels

121. Strategic Value

122. Sourceable versus Non-Sourceable

123. Key Commodities

124. Key Associated Suppliers

125. Assess S2P Cycle (across spend categories)

126. Source

127. Contract

128. Requisition + PO

129. Receive/Invoice

130. Pay

131. Report

132. Vendor Management

133. Define Current + Future States

134. Role Clarity

135. Baseline Metrics

136. Evaluate Policies

137. Workflow Analysis

138. Identify Opportunities + Gaps

139. Deliver on Actions

140. Test + Implement Requirements

141. Business Readiness

142. S2P Methods + Processes + Technologies

143. Training

144. Supplier Enablement

145. Operate End-state

146. Business Metrics

147. Effectiveness

148. Efficiency

149. Policy Compliance

150. Continuous Improvement

151. Define Requirements

152. Design End-state Solutions

153. Streamlined

154. Best Practices

155. Maturity Model

156. Identify What Changes

157. Define Actions

158. Sequence

159. Timing

160. Accountable Owners

161. Critical Paths

162. Scope Development

163. Prioritized Targets and workplan for ASIA ProgramProgram Management (Planning, Scope + Risk Mgt, Roles + Responsibilities, Workstreams, Milestones, Deliverables, Communications, Dashboard) Phase 1 = PeopleSoft Input Phase 2 = Direct Payment Systems Phase 3 = S2P Optimization

165. Strategic

166. Leverage

167. Critical

168. Low-Critical

169. Forms the basis of priorities + scope

170. Drives appropriate S2P solution (sizing)Banking Services Data Svc Legal Consulting Strategic Value IT Outsourcing Projects Conf + Mtg’s Board Associations Health Networks Directors Fee Postage Outside Travel Civic Donations Ex-Gratia Field Giving Transportation State Ins Depts Sub- scriptions Printing Gift Matching L Low-Critical Spend Leverage Spend L H Spend

179. Enables assessment of current practices

181. What’s Next.. Improved vendor management process Increase sourcing activities, including auctions Utilize supplier portal for selling our products Solve the “project problem”