Overview
A global airline company had a healthy relationship with their incumbent I&O Services provider (TCS) when their support term was up for renewal. However, the client had not benchmarked support for its services for several years and sought third-party support to benchmark its existing agreement in advance of initiating renewal discussions and downstream negotiations. The value of the executed agreements totaled $30M annually.
Towers of I&O support included the following services:
- Compute
- Network
- Database / Storage
- End User
- Help Desk
- Security
Approach
UpperEdge conducted a comprehensive review of the existing TCS relationship and contract framework and conducted a holistic market assessment of 6+ towers of service to identify strengths and areas of improvement.
Leveraging UpperEdge’s deep TCS market knowledge and a proven agreement assessment approach, UpperEdge enabled the client to analyze the financial, commercial and operational aspects of the Client’s existing relationship to recommend areas of improvement.
The Client leveraged UpperEdge’s I&O market intelligence consisting of commercial terms, pricing metrics for Rates, Resource Units, Volume Discounts structures, productivity improvement commitments and SLAs, operational flexibility and commitments to productivity improvement over time.
UpperEdge facilitated discussions with tower leads to drive improved metrics, pricing models and cost improvements which were validated against UpperEdge benchmarks.
Negotiated Outcome
As a result of UpperEdge’s Negotiation Strategy, the client was able to achieve Highly Competitive terms for its renewal of services for the next 7 years.
Overall Deal Highlights:
- Achieved $3.6M in Resource Unit (RU) rate reductions across 7-year term. Reductions were based on benchmarked rates.
- Achieved $20M in savings from productivity improvements across 7-year term.
- Secured the following productivity Improvements structure:
- Year 2 – 5%
- Year 3 – 4%
- Year 4 – 3%
- Year 5 – 2%
- Year 6 – 1%
- Year 7 – 1%
- Secured additional $15M in savings across 7-year term via TCS’s commitment to apply existing Volume Discounts to all spend, which was previously excluded from the deal.
SOW Consolidation:
- TCS provided a holistic SOW combining all services (IMS, Monitoring, Tools Support & IIS Support) under a single SOW rather than separate.
Total Cost Savings:
- Achieved $39M in rate reductions across 7-year term ($5.6M Annual Savings), a 19% reduction in costs.
- Savings achieved through cost reductions to:
- (1) Base Resource Unit Rates
- (2) Productivity Improvements
- (3) Volume Discount Agreement
UpperEdge helps companies form strategic relationships with their IT Services partners and achieve best-in-class deals. Explore our IT Services advisory services to see how we can help you maximize the value of your key IT agreements.
