Optimisation of a contract–portfolio
6. October 2017
Companies often employ their IT service providers for years. Invoicing according to time & material is quite common – but not always economically sensible. It can be worthwhile to regularly review services, contracts and conditions.
An energy supplier with several international affiliates had to spend large sums year in, year out, for the operation of its IT system. Despite this, the budget was often exceeded while the agreed service levels were not always fulfilled. This needed to be changed.
The situation in individual national subsidiaries was very different with regard to the number of IT service providers, performance, terms and type of cooperation. In the beginning, the willingness to cooperate was rather limited. This changed quickly when the amount of potential savings became clear.
Our contract comprised two stages and concerned subsidiaries in several European countries. We started by analysing the existing situation and had interviews with those responsible in IT and operating departments. The service-portfolio was checked, and the actual performance was compared to the agreed service level and expenditure. There were many discrepancies. The second stage was to jointly define a performance-portfolio which was put to tender.
The new service provider contracts are now consistently kept on a SLA basis. In addition to these favourable conditions for our client, we coupled the SLAs with a bonus-malus system in order to make sure that the defined performance was delivered complete and on schedule. In the first year, already nearly 50% of expenditure (around 2 million euros) could be saved. Moreover, the service providers also profit from the new agreements as they now have a very stable planning horizon. Furthermore, with the reduced number of service providers, the organisational procedures have become easier and more efficient for our clients.