Tag Archives: Benchmarking

Contract Renegotiation: Are you Missing Something?

man wearing a suit sitting in a table showing a contract and whe

Lores Schwind, Director ·

For a client organization, the end of an outsourcing contract term always brings with it the renew/renegotiate/repatriate quandary and its myriad options and considerations. Are we getting a good deal? Can we do better? If we can do better, is it worth the disruption of finding and bringing in a new provider?

In today’s rapidly changing marketplace, the choices are more complex than ever – and the stakes are higher than ever if you make the wrong decision.

For one thing, ongoing technology innovation and stiff competition are exerting steady downward pressure on IT services. This means that a deal that was competitive as little as six months ago may now be significantly out of sync with the market. Moreover, in addition to evaluating how much, say, storage costs have dipped since your last contract, you now have to consider the potential risks and benefits of moving your storage to a cloud platform, versus staying with existing technology. In other words, it’s no longer enough to compare the apples of six months ago to the apples of today; now it’s about normalizing and comparing the apples of existing technology against the oranges of moving to a new technology. And, speaking of new technologies, the game-changing specter of Robotic Process Automation is on the horizon and is already having an impact on the pricing of outsourcing contracts.

In this environment, benchmarking existing operations against market standards is more important than ever to an end-of-contract strategy. The good news is that the growing automation of data collection and analysis tools, as well as heuristic models that enable projections of future scenarios, have greatly enhanced benchmarking capabilities. As a result, today’s benchmarks are increasingly agile, cost-effective and adept at rapidly assessing multiple alternative options over time.

But end-of-contract considerations today go far beyond issues of pricing and technology platforms. Industry-specific expertise is becoming increasingly important to client organizations in all sectors. Consider banking, where regulatory compliance and supplier oversight across the entire service delivery chain has become a critical priority. Here, the end of a contract term offers an opportunity to assess the provider landscape – have new players emerged who have the requisite expertise and can demonstrate success at navigating the regulatory landscape?

From this perspective, the end of a contract term needn’t be confined to the details of pricing and service delivery, or to an assessment of technology options, but rather can encompass a high-level review of business strategy and operational requirements. Signing on for more of the same and hoping for the best is not an option. The world is changing too rapidly for that.

And All the Deals are Above Average

Pushy salesman with an oversized grin, coming in for a handshake

Dan Bryan, Managing Director

If you put 100 customers of data, network and storage components in a room and asked who among them had an amazing one-of-a-kind deal from their provider, with the lowest rates available to anyone, chances are that many of those customers would raise their hands.

The problem is, of course, that they can’t all be right.

The sales strategy employed by hardware and software vendors comprises two basic pillars. One is to make you the customer feel special, or at least fortunate to be in a position to take advantage of the sales rep’s dire predicament: Either it’s the end of the quarter, the end of the year, or there’s a bonus threshold within spitting distance. Regardless of the specific target, there’s a number that has to be met and the account manager is being squeezed to make a deal happen, and you are going to reap the benefit.

The second pillar is to make sure that you have no way of determining whether the deal you’re getting is truly as spectacular as your account manager says it is. Vendors are notorious for obfuscating rates, bonuses, discounts and invoices so that your apples don’t compare to the oranges that your peers are getting. The rationale for creating this confusion is that today’s Converged Infrastructure solutions are so complex that each one is unique and therefore doesn’t lend itself to any market-based comparison.

Don’t buy it.

Complexity doesn’t preclude transparency, and you as a customer should insist on the latter. And you can achieve it through a detailed analysis of existing costs, an audit of assets and a benchmark of prices. This assessment can allow you to truly understand the value of your agreement in the context of existing market standards. In other words, you won’t have to take the sales person’s word for it.

Don’t Pay Too Much (or Too Long) for Custom Network Services

By Beth O’Hern

In an ideal world, you as a telecom services buyer negotiate contracts based on existing, validated rates for standard services and well-defined business terms and conditions. This helps ensure relevant comparisons, competitive rates and quality service. In many cases, however, you require specialized, custom services such as private rings and high bandwidth private lines. Pricing for such services is highly dependent on location, routing and availability, and typically requires vendors to invest in special equipment and expertise. These investments are generally passed on to you, the customer. While that’s reasonable, you often continue to pay high rates long after vendors recoup their investment and have significantly lowered their internal monthly costs.

One reason this happens is that specialized services are typically contained within a larger network services agreement and, during renewal, tend to be wrapped into the big-picture discussion rather than separately and directly negotiated. As a result, the high rates get pushed into the next agreement. Moreover, the competitive landscape for custom services is unfamiliar, so finding a market-based comparative precedent for special services presents a challenge.

How can you prevent this long-term overpaying? At a minimum, insist on including custom services in renegotiations as a separate discussion item. While direct, like-for-like market-based pricing comparisons are hard to come by, you can apply rules of thumb regarding margins and payback period for custom access and special builds. Using the contract to show evidence of install dates and details such as ring locations and private route paths, you can make an effective case for lowering monthly rates.

Vendors will typically push back, stating that the complexity surrounding custom services requires special support on an ongoing basis. But don’t be too quick to accept that argument, and don’t hesitate to demonstrate a willingness to put the service out to bid. Keep in mind that custom services generate significant margins for vendors, so even with lower monthly rates your deal will remain a profitable one and your vendor will not want to see you walk.

While the opportunity varies, the size of the prize can be significant for a Fortune 1000 enterprise. I’ve seen instances where a business spends $10 million annually on capital-intensive custom services and could easily lower that spend by 40 to 50 percent.

Bottom line: don’t ignore the potential of this low-hanging fruit.

Reduced Network Costs is only one of the Many Business Benefits of TEM, Says Alsbridge

In the current economy, telephony bills have become an important place to save money, and Telecom Expense Management (TEM) helps enterprises do that together with providing innumerable other benefits. Alsbridge’s latest report A Better Way to Cut Costs with Telecom Expense Management explains how enterprises can tap into big savings through Telecom Expense Management.

Through the analogy of a famous book retailer in America, the report explains how the Alsbridge TEM team helped the book seller run all its telephony bills through the TEM system, realizing innumerable business benefits. According to this third largest book retailer in America, apart from the surprising amount of cost savings the biggest benefit has been the in-depth inventory the Alsbridge TEM team completed. Also, the business intelligence and analytics the TEM system provides.

With the bills today so complex, it is difficult to know if you are paying your telecom provider too much. The difficulty becomes geometrically more challenging for corporations with thousands of phone lines, data lines, switches, cell phones and tablets for which it now must pay. Moreover, few companies have the time, expertise, specialized systems, applications or processes to handle their ever more complicated telephony bills, which have become an important place to save money.

“The current economy is forcing many companies to focus on expense control management on a heightened level,” says Phil Hugus, managing director, Network Services Group at Alsbridge. “In today’s connected world, companies are dialing into Telecom Expense Management (TEM).”

For further details on this case study and to know how your company could also save money by dialing into Telephone Expense Management, download the complete report A Better Way to Cut Costs with Telecom Expense Management.

About Alsbridge Inc.

Alsbridge is a global consulting firm that helps companies transform and optimize the way they purchase, manage and leverage technology and business processes.   We have over 175 team members on 4 continents serving over 200 clients a year including more than 40% of the Fortune 500.  Alsbridge has helped hundreds of companies reduce costs and get more value from their vendors.  Our experienced consultants leverage proprietary tools and information databases to identify and engage the optimal vendors for your situation, negotiate best practice terms at fair market prices, and improve the way you work with your service providers.  Alsbridge clients utilize the most cost effective and value added sources globally for IT infrastructure services, network carrier services, hardware and software, application support and development, business processes and cloud services.

EDITORS/WRITERS: Journalists interested in covering the above topic or interviewing one of our SMEs please contact:

Eric Gilmour
Office: (214) 696-6410

eric.gilmour@alsbridge.com
www.alsbridge.com

BPO Vs ITO: Who Will Be the Outsourcing Heavyweight Champion in 2014? – Alsbridge Shares Insights

The gloves come off when it comes to BPO and ITO impacting the world of outsourcing. Experts from Alsbridge will be delivering an eSeminar –BPO vs. ITO: Who has the Upper Hand in 2014?- on January 16, 2014, 1:00 PM to 2:00 PM ET. This eSeminar will highlight how current trends in both business process and information technology outsourcing are impacting the outsourcing landscape in 2014.

Join Alsbridge for ringside insights from Directors, Dennis Winkler and Pete Roman as they discuss how the outsourcing arena is changing and what you need to understand to better leverage opportunities.

Attendees will learn:

  • ITO and BPO trends: past, present and future
  • Underlying drivers affecting new deals and pricing
  • The Big Data difference in BPO vs. ITO
  • ITO & BPO benchmarking: which is an art and which is a science

Discover what it takes to the outsourcing heavyweight champ and deliver a knock-out in 2014.

To register, visit the eSeminar registration page. Seats are limited and early registration is recommended.

More than Half of the Outsourcing Buyers Miss Out on the Value Generated from Benchmarking Agreements – Alsbridge Report

In response to the ever-changing outsourcing market  prospective and current buyers of outsourcing services are finding benchmarking vital not only to managing pricing, but also to improving their relationships with their providers, identifying best practices, engaging in continuous improvement, and driving innovation.

Alsbridge released a new report- Benchmarking in Outsourcing: Keys to Driving Long-Term Value, which describes how benchmarks go beyond simply uncovering misaligned pricing and services. Benchmarking in outsourcing has evolved from a single-focused pricing comparison into a richer, broader array of tools that is being increasingly used by both buyers and providers to improve the process, the relationship, and ultimately the outcomes.

Although benchmarking is becoming more common and accepted, it’s still far from ubiquitous. In a recent poll, Alsbridge found that nearly a quarter of respondents were not making use of benchmarks at all, and another third were taking advantage of them at comparatively infrequent intervals – every three-plus years. It was also found that more than half of buyers of outsourcing services (and perhaps even providers) are missing out on significant opportunities to gain insight into the key points of contract value.

In the wrong hands, benchmarking can be a difficult process, even if all parties go into it with open eyes and positive expectations. Every benchmarking effort must be carefully considered, well-planned and effectively executed in order to produce a meaningful, actionable outcome. The report discusses in detail the following benchmarking best practices:

  • Context is required
  • Be prepared for the unexpected
  • Carefully consider all inputs
  • Use the right benchmark
  • At the right time
  • Use the benchmark as a relationship builder

Employed carefully and properly, the value generated by actionable benchmarks can drive significant return in performance, cost reduction, innovation, injection of industry best practices and continuous process improvement.

For further details the complete report can be downloaded here.

Alsbridge and P&G to Co-present Their Price Benchmarking Success Story at the SIG 2013 Global Leadership Summit

Alsbridge Inc., a benchmarking, sourcing and transformation advisory firm, today announced it will co-present Current Market Trends in Benchmarking: How P&G Leveraged Benchmarking to Drive Transformation at the SIG Global Leadership Summit at Fort Worth, TX on October 15, 2013.

The session will include insights from Alsbridge and Procter & Gamble on how Alsbridge helped the financial services buyer successfully leverage benchmarking to drive transformation. The case study will include how they effectively organized the project, garnered executive level support, positioned benchmarking within a larger sourcing strategy, negotiated leveraging benchmark data, and delivered actionable results to achieve their objectives.

Benchmarking is the cornerstone for continuous improvement,” says Chip Wagner, CEO, Alsbridge Inc., “Organizations not engaged with benchmarks may find themselves misaligned with cost-effective market performance indicators.”

Join the experts from Alsbridge as they share current benchmarking industry trends including which type of benchmark is most often used; provides the highest ROI; delivers the most on the savings promise; and is of greatest value to the buyer. Attendees of this session will also learn about:

  • Latest Trends In Price Benchmarking
  • Pros And Cons Of Different Types Of Benchmarks
  • Best Practices To Avoid Traditional Benchmarking Pitfalls
  • How To Successfully Execute A Benchmark and Get Results

For further details about the event please visit SIG Global Leadership Summit 2013.

About Alsbridge Inc.

Alsbridge is a global consulting firm that provides data-driven sourcing advisory and benchmarking services for IT, Finance and Sourcing executives.  We’ve helped hundreds of companies reduce costs and get more value from their vendors.  Our experienced consultants leverage proprietary tools and information databases to identify and engage the optimal vendors for your situation, negotiate best practice terms at fair market prices, and improve the way you work with your vendors.  Alsbridge clients utilize the most cost effective and value added sources globally for IT infrastructure services, hardware and maintenance, network services, software and maintenance, application support and development, business processes and cloud services. Alsbridge was ranked the #1 outsourcing advisor in the world by the International Association of Outsourcing Professionals (IAOP) based on the value delivered to clients.  This commitment to delivering value to our clients has made Alsbridge a distinguished member of the 2010 Inc. 500 fastest growing privately held companies in America.

About Sourcing Interests Group (SIG)

Sourcing Interests Group (SIG) is a membership-driven organization comprised of sourcing and outsourcing professionals. Members are focused on improving bottom-line performance, quality and customer service through strategic sourcing/procurement and outsourcing initiatives. SIG is acknowledged by many as a world leader in providing an ongoing forum and services to assist companies in strategy development, the improvement of goods and services sourcing, and the implementation and management of corporate services through outsourcing, offshoring, insourcing and shared services

EDITORS/WRITERS: Journalists interested in covering the above event or interviewing one of our SMEs, please contact:

Scott Tims
Office: 214-378-7970 ext. 278
stims@thepointgroup.com
www.alsbridge.com

Price Drivers, Not Just Price, Are Key to Implementing Price Benchmarking Results, According to Alsbridge

A sourcing benchmark needs to investigate the causes of any price differences to market, rather than just show the price difference itself, according to Alsbridge Inc., a benchmarking, sourcing and transformation advisory firm. Alsbridge today released a report How to Implement the Results of a Benchmark, describing how considering sourcing price drivers is essential for effectively implementing sourcing benchmark results.

According to Chip Wagner, CEO, Alsbridge, “A sourcing benchmark needs to explore not just the price differences to market, but more importantly the causes of these price differences.” He adds, “Without an analysis of causes, it is nearly impossible to make any changes to the price of your services because there could be multiple issues at stake.”

Will the provider agree to the change? What will that change do to the pricing mechanism? How will the price change impact the service? What effects will it have on the client/provider relationship? To be effective in these circumstances, a sourcing benchmark needs to uncover the drivers of any price difference, such as volume changes, asset refresh rates, residual transformation charges, etc. These price drivers will determine the ability of either party to derive price benefits from the agreement.
Another driver of price change is the contract itself.

“The best way to implement sourcing benchmark results is to consider the price drivers not just the price, so all available change levers can be used to arrive at the right market competitive price for the services required” says Wagner.

Thus, the report reiterates that while sourcing benchmark can seem like an easy answer to improving the price performance of your outsourced operations, by simply changing your pricing to reflect the market, it is the price drivers that play the key role in effectively implementing the price benchmarking results.

To know more about effectively implementing the results of a benchmark, access the complete report here.

About Alsbridge Inc.

Alsbridge is a global consulting firm that provides data-driven sourcing advisory and benchmarking services for IT, Finance and Sourcing executives.  We’ve helped hundreds of companies reduce costs and get more value from their vendors.  Our experienced consultants leverage proprietary tools and information databases to identify and engage the optimal vendors for your situation, negotiate best practice terms at fair market prices, and improve the way you work with your vendors.  Alsbridge clients utilize the most cost effective and value added sources globally for IT infrastructure services, hardware and maintenance, network services, software and maintenance, application support and development, business processes and cloud services. Alsbridge was ranked the #1 outsourcing advisor in the world by the International Association of Outsourcing Professionals (IAOP) based on the value delivered to clients.  This commitment to delivering value to our clients has made Alsbridge a distinguished member of the 2010 Inc. 500 fastest growing privately held companies in America.

EDITORS/WRITERS: Journalists interested in covering the above topic or interviewing one of our SMEs, please contact:

Scott Tims
Office: 214-378-7970 ext. 278
stims@thepointgroup.com
www.alsbridge.com

Alsbridge Releases Study on the Current State of Price Benchmarking Based on a Survey of 664 Global Respondents

Price benchmarking of IT and business process services provide several benefits to companies who choose to take more of a “profit center” vs. “cost center” approach, according Alsbridge Inc., a benchmarking, sourcing and transformation advisory firm. Alsbridge today released the results of 2013 price benchmarking survey the firm conducted earlier this year, in its report –2013 State of Price Benchmarking, providing insight into the current state of IT and business process price benchmarking on a global basis.

2013 State of Price Benchmarking, is a result of survey conducted amongst over 664 sourcing buyers, providers, and consultants from global companies. The report reveals an in-depth analysis of:

  • The history of price benchmarking
  • The need for benchmarking
  • Types of benchmarks and best practices
  • Major findings of the study
  • Benchmarking benefits

Over 80% of companies engage in outsourcing to reduce expenses, gain access to variable resources, increase time-to-market and focus on core competencies, says report.

“With the global economic crisis still in recovery, today’s business leaders remain challenged to “do more with less” by seeking ways to streamline operations, cut cost and become more efficient,” explains Alsbridge CEO, Chip Wagner.

Alsbridge’s research reveals that the total 2013 global outsourcing market is nearly $1 Trillion with approximately two-thirds in Information Technology Outsourcing (ITO) and one-third in Business Process Outsourcing (BPO). The percentage of IT services currently provided by third parties, including outsourcers and cloud providers, increased slightly to 25%, up from 23% last year and 22% two years ago.  This figure is expected to climb to 37% within the next 3-5 years

“As the global economic recovery continues, IT and business process budgets continue to grow, but slowly.” Wagner said. “The magnitude of outsourcing spend is enormous and vitally important to companies as part of their overall management strategy,”

Access the complete report 2013 State of Price Benchmarking.

About Alsbridge Inc.

Alsbridge is a global consulting firm that provides data-driven sourcing advisory and benchmarking services for IT, Finance and Sourcing executives.  We’ve helped hundreds of companies reduce costs and get more value from their vendors.  Our experienced consultants leverage proprietary tools and information databases to identify and engage the optimal vendors for your situation, negotiate best practice terms at fair market prices, and improve the way you work with your vendors.  Alsbridge clients utilize the most cost effective and value added sources globally for IT infrastructure services, hardware and maintenance, network services, software and maintenance, application support and development, business processes and cloud services. Alsbridge was ranked the #1 outsourcing advisor in the world by the International Association of Outsourcing Professionals (IAOP) based on the value delivered to clients.  This commitment to delivering value to our clients has made Alsbridge a distinguished member of the 2010 Inc. 500 fastest growing privately held companies in America.

EDITORS/WRITERS: Journalists interested in covering the topic or interviewing one of our SMEs, please contact:

Scott Tims
Office: 214-378-7970 ext. 278
stims@thepointgroup.com
www.alsbridge.com

Alsbridge Names New Leadership Team

Alsbridge announces leadership changes in its CEO, President and CFO positions.  Alsbridge, a global consulting firm that provides Fortune 500 executives with independent advice on enterprise technology and business process transformation, is positioning the new leadership team to drive the firm’s continued growth.

Chip Wagner, who joined Alsbridge in 2008 as Managing Director, will become the Company’s CEO on July 1, 2013.  In his new role, Chip will leverage 30 years of business experience including prior roles as the CEO of Marconi Wireless, President of Adea Solutions, President of Marconi North America, VP of Process Engineering & Business Transformation at USAA, President of Vehicle Industry at EDS and President Manufacturing at EDS Germany GmbH.  Chip is a widely acknowledged expert in the sourcing advisory market having led hundreds of transactions with a combined value of over $15 billion with clients such as Cummins Engine, Detroit Diesel, Harley Davidson, HJ Heinz, Moore Business Forms, Radian Group and Zale Corporation.

“I had worked with Ben Trowbridge at EDS many years ago and in 2006 engaged Alsbridge to perform a sourcing assessment for our contact centers and back office functions during my tenure at USAA.  The team did a fantastic job and two years later I accepted the invitation to join Alsbridge as Managing Director,” says Wagner. Since 2008, Alsbridge completed four acquisitions that combined with organic growth drove the firm’s growth rate to over 48% per year, inclusion in the 2010 Inc. 500 fastest growing privately-held companies in America, and an investment from LLR Partners at the end of 2012.

“One of our key acquisitions was the Thompson Advisory Group (TAG) which we purchased from Alcatel-Lucent in late 2009.  I was introduced to Dieter Thompson, TAG’s founder, through a mutual friend, and we both immediately saw the synergies and growth potential in combining the outsourcing advisory and network consulting firms,” states Wagner.  

Dieter Thompson, who joined Alsbridge in 2009 as part of the TAG acquisition, will become Alsbridge’s President on July 1, 2013.  Dieter’s over 25 years of business experience as founder and CEO of TAG, Business Line President at Alcatel-Lucent, Vice President at ACS and multiple executive positions at AT&T.  Dieter has negotiated over 800 global contracts representing $37 billion in annual revenue with clients such as CITGO, Best Buy, Northern Trust and Toyota.

Alsbridge has also added outsourcing industry veteran, Scott Scaff, as CFO.  Scott’s over 25 years of business experience includes CFO roles at National Bankruptcy Services and Aurum Technology, a carve-out of the Community Banking Services Division from EDS.  Scott brings extensive financial and business experience to rapidly growing companies providing business process outsourcing and technology services.

“It’s a terrific opportunity and honor to assume the CEO role at a firm on the rise.  We have assembled a suite of offerings that are unmatched by our competitors, a team that is unrivalled in its delivery excellence, a very supportive investment partner in LLR, and a tremendous foundation of historical growth including a record year in 2012. Alsbridge’s first quarter revenue growth was over 40% and our prospects for the remainder of the year are strong.” says Wagner.  “Our people are second to none,” adds Thompson.  “And no other firm has our depth of industry data and ability to provide buyers an unbiased viewpoint on the vendor landscape – the value we bring to our clients is significant.”

About Alsbridge Inc.

Alsbridge is a global consulting firm that provides data-driven sourcing advisory and benchmarking services for IT, Finance and Sourcing executives.  We’ve helped hundreds of companies reduce costs and get more value from their vendors.  Our experienced consultants leverage proprietary tools and information databases to identify and engage the optimal vendors for your situation, negotiate best practice terms at fair market prices, and improve the way you work with your service providers.  Alsbridge clients utilize the most cost effective and value added sources globally for IT infrastructure services, network carrier services, hardware and software, application support and development, business processes and cloud services.