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Energy Company Identifies Up to $40M in Savings in IBM Benchmark Assessment


A $28B energy company had a long-standing relationship with IBM with a current annual spend of $39M for Application Development and Management (ADM) Services. The client had not benchmarked its relationship with IBM in some time and wanted to leverage a benchmark assessment to determine if they should stay with IBM or go to market for these services.

The client engaged UpperEdge to do a benchmark assessment of its existing relationship with IBM to market to help the client achieve that goal.


UpperEdge secured copies of all in-scope services contracts, schedules, change orders and current Master Services Agreement (including all amendments) between the client and IMB to begin a comprehensive 5-part assessment process as noted below:

  • Relationship Assessment: Detailed inventory of scope, spend, and delivery metrics to baseline assess current ADM service scope
  • Contracts Assessment: Complete tear down and market comparison of expected, industry best practices terms vs. the contracted terms established at the Master and SOW levels of IBM’s services
  • Financial Assessment: Mark to Market provider specific benchmarking of rates, resource units, rate locks, COLA caps, volume discounts and productivity
  • Service Delivery Assessment: Provider specific benchmarking of Service Level Frameworks and individual service level terms
  • Opportunity Assessment: Quantification of gaps to market identified in the prior 3 assessments that generate real savings targets along with the identification of negotiation leverage to secure concessions
Negotiated Outcome

Based on an addressable spend profile of $195M over the next 5 years, $23-40M in savings opportunities were identified based on current gaps in pricing to market. The following is a more detailed breakdown of these savings opportunities:

  • Volume Discount Improvements: Incremental Savings of $7.8-13.6M over 5 years based on an average annual spend of $34M
  • Productivity Improvement Commitments: $15.3-$23M in savings over the next 5 years to the client’s Managed Services fixed and variable pricing year-over-year
  • Rates/Resource Unit Savings: ~$190K in savings over the next 5-years if SWL Server Database Support Unit Rates reduced compared to the market.

In addition to identified savings, additional improvements were uncovered that will improve provider accountability, create a more balanced risk sharing profile and limit IBM’s ability to raise change orders.

Improved Change Controls:

  • Errors & Omissions: Prevents change orders due to IBM’s estimating errors
  • Notice & Cure: Requires IBM to notify the client of the client’s missed obligation with time to fix it before raising a change order
  • No Cost Change Orders: IBM will not bill the client for time to investigate a requested change

Service delivery Improvements also identified as noted below:

  • SLA Modifications: Secure improvements to SLAs and commitments to penalties for missed SLAs
  • Agile SLAs: Establish service level commitments to development efforts, including agile focused SLAs for persistent teams

At UpperEdge, we help clients benchmark their current IBM environments to unlock opportunities for cost savings that dramatically lower your overall IT spend. Explore our IT Cost Optimization Advisory Services to see how we can help.