Kaiser's Outsourcing strategy

Date: Thursday, October 24, 2002 1:41 PM

H-1B and JOB DESTRUCTION NEWSLETTER

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This internal company memo is from Kaiser management. Here are some choice
quotes:

"We intend to use offshore resources primarily to displace expensive U.S.
contractors."

"we have been engaged in knowledge transfer with seven HCL resources from
India"

10/17/02

One clear advantage of using Covansys for legacy support is that we were
able to move 94 ASM employees to development projects, where they replaced
expensive U.S. contractors. As a result, the cost per development hour in
ASM has dropped from $81 in 2001 to $75 an hour in 2002. This was also
partly a result of converting high-priced contractors to KP-IT employees at
the end of 2001 and in early 2002. We fully expect the use of offshore
resources to reduce our core costs for legacy system support as well.

HCL Technologies: HCL Technologies has 29 offices in the U.S., Europe,
Japan, India, and the Asia Pacific, with nearly 6,000 employees. Since
August, we have been engaged in knowledge transfer with seven HCL resources
from India so that they can take over the maintenance of three application
systems in Care Delivery: AMCARE - a care/case management application;
LURS - Laboratory Utilization System and Reporting; and PLL - Patient
Laboratory Letters. Affected KP-IT employees will be assigned to investment
projects once the knowledge transfer is complete. In addition, since July we
have been using three more HCL resources on two investment projects for the
Common Provider Master, which should be complete by the end of this year. We
have a signed contract with HCL Technologies, which is renewable every 12
months.

Tata Consultancy Services (TCS): Tata Consultancy Services is a subsidiary
of Tata Enterprises, India's largest industrial conglomerate, with more than
80 subsidiaries and affiliates. TCS has more than 21,000 employees in 125
offices across 24 countries, including 14 centers in India. In September, we
started the knowledge transfer with two TCS resources, with
another five to be added as needed. These resources will support one legacy
system in Health Plan Operations, QCare, and will be managed by the Lake
Oswego, Oregon, ASM group. The QCare system provides claims processing in
Colorado and Ohio. In addition, we are using three resources to help with
one investment project on the Common Membership System, the CSP language
conversion capital investment project, which is scheduled to complete in
January 2003. We are close to finalizing a 12-month contract with TCS.

Infosys: Infosys is a leading IT consulting and systems integration company
based in Bangalor, India, with 11,000 employees in 16 offices worldwide. In
August, we engaged between 10 and 15 Infosys resources from India and the
U.S. to develop the user interface for the Panel Transfer and Notification
Tool (PTNT), a Northern California Care Delivery system that allows the
transfer of members from one health care provider to another. This project
will continue through November. A second phase of PTNT development to
support letter generation will start in October and continue through
February 2003. We are close to finalizing a contract with Infosys.

I will keep you posted as developments with offshore occur. In the meantime,
if you have any questions or concerns, please contact Molly Porter from
KP-IT Communications and Organizational Change.

Sincerely,

Garry Hurlbut
Vice President
Application Systems Management
Kaiser Permanente Information Technology

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