Overview
A $3B manufacturing company conducted a benchmark assessment of its Infrastructure and Applications environment. This assessment identified that the client’s IT spend was materially higher than its peers. Following the assessment, the client received recommendations via an internal initiative that targeted $6M in cost reductions.
The client assembled a cross functional team responsible for evaluating and executing on the targeted cost reductions and operational improvement opportunities. Based on the preliminary discovery and planning conducted by the client and UpperEdge, the client defined the objectives, organizational structure, financials and vendor data necessary to accelerate an engagement with UpperEdge.
Approach
UpperEdge secured copies of all the in-scope providers Master Services Agreements, sample active SOWs and financial views of IT Services spend per vendor by line(s) of service. This information allowed us to conduct an in-depth analysis of vendor utilization, vendor efficiency, vendor fit, vendor fees compared to the market, and identification of vendor consolidation opportunities. UpperEdge also conducted an assessment of the client’s labor portfolio.
As a result, UpperEdge’s analysis and market supported benchmarks empowered the client to
- Rationalize suppliers (Top Tier, Niche, and Contingent Labor) via consolidation and a competitive evaluation process
- Deliver targeted, fact-based checkpoints for improvement for top two providers
- Ensured the client remained on track to achieve cost reduction targets
Negotiated Outcome
Based on an addressable spend profile of $54M in annual IT Services spend across all providers, UpperEdge identified savings opportunities between $5M-$7M (8-12%) in cost reduction opportunities.
As a result, UpperEdge’s analysis and market supported benchmarks empowered the client to
- Rationalize suppliers (Top Tier, Niche, and Contingent Labor) via consolidation and a competitive evaluation process
- Deliver targeted, fact-based checkpoints for improvement for top two providers
- Ensured the client remained on track to achieve cost reduction targets
The assessment findings and recommendations ensured the client would remain on track to achieve cost reduction targets and improved contract structure with their primary vendors. 80% of IT labor spend was centered on two primary IT providers with opportunities to reduce vendor base costs and consolidate spend.
Provider Specific Opportunities Identified:
TCS
- Savings of $2.5-$3M related to reducing rates, increasing commitment to productivity improvements, and removing excess capacity (“bloat”) in application support staffing based on ticket volume
- Levers Identified: Expiring agreement and a willingness to entertain proposals to renew their services term early
Capegemini
- Savings of $750k-$2.5M tied to rate reductions, improved volume discounts, market rate adjustments and resource optimization
- Levers Identified: Expiring agreement, competitiveness to peers, and incentives to gain market share from CGI and/or IBM
