A major North American Travel and Transportation company was approaching the expiration of contracts covering IT services outsourced to a Tier 1 Service Provider with which it had maintained a long-term contractual relationship over a period of 10+ years. The scope encompassed roughly all areas of infrastructure (i.e. mainframe, help desk, distributed systems etc.). The contract was due to expire in a year and a half and the client wanted to ensure that they had sufficient time to conduct a thorough analysis of their IT environment.
As part of the analysis, they wanted to complete an in-depth assessment of the contractual relationship, and ensure they had sufficient time (if necessary) to develop new contract(s) with a best-fit service provider(s) to support the company’s business and IT strategy in a changing economic, regulatory, and technology environment while lowering costs, improving service delivery, and avoiding early termination liabilities.
WGroup collaboratively developed a best-fit sourcing strategy that aligned the client’s sourcing activities toward key business outcomes, with an emphasis on cost improvement, best practices, technology optimization and transformation. The client wanted to extend its relationship with the Service Provider as it would lower the risk and costs associated with any transition, but only if the Service Provider would transform the IT environment and put in place a robust IT Service Management (ITSM) foundation, at a market-competitive price. The initial revised bids from the Service Provider did not meet this criteria. WGroup presented a detailed critique of the bids with clear direction on how they needed to be improved.
In parallel, WGroup began the work to competitively bid the services to other vendors by analyzing sourcing alternatives for the client with corresponding discussion of the pros and cons for each option. Additionally, WGroup created a client specific financial case based on market driven service costs that would be used to determine the true savings of any submitted bids. As part of this analysis, WGroup also looked at some of the balance of trade fundamentals that were inherent in the relationship to create a true picture of the spend and services between the client and the Service Provider.
The combined impact of these analyses changed the negotiation dynamics and information asymmetry from being, as is typical, more favorable to the sole-sourced Service Provider to being more favorable to the client. This realization by the Service Provider resulted in the presentation of a solution that was both transformative in nature, while substantially reducing client costs and incorporating ITSM best practices.
WGroup then negotiated a revised contractual arrangement with new Service Levels that provided greater insight into service delivery and improved controls and flexibility to meet changing business needs. Furthermore, WGroup’s work with the client indicated that the client lacked the necessary capabilities to manage the Service Provider and contract on an on-going basis to ensure that the contractual commitments would be met. WGroup crafted a Vendor Management Framework and processes for managing the Service Provider and laid out a plan to expand the VMO capability to include other Tier1 IT Service Providers.
Clients who have had a long-term relationship with a particular Service Provider are reluctant to change, while at the same time they may lack knowledge of how the market and industry has evolved with respect to services, pricing, best practices, etc. It is critical for them to understand this evolution before entering into a new contract or renewing an existing contract.
The sourcing space is changing rapidly and there are Service Providers with new approaches to sourcing, transition, service delivery, service level management, etc. Any contractual relationship that was issued more than 3 years ago should be reviewed for value and cost to the client.
Over the course of the previous contract, the relationship between the Service Provider and client had deteriorated. With the help of WGroup, the client did not have to change providers and both parties enjoyed a renewed relationship in which the provider was viewed as a valuable addition to the client’s team. The client was delighted with their outcome and found great value in WGroups evaluation, they enjoyed many improvements including;
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