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Global Investment Bank Outsourcing Renegotiation
Background
The investment bank’s outsourcing agreement for certain IT infrastructure services was not providing the desired economies of scale as the firm’s requirements grew rapidly. There were few complaints with the quality of service, but the annual fees were escalating at an alarming rate. Both IT and finance management agreed it was time to consider renegotiating and possibly terminating. It was unclear how the provider would react to renegotiation, as many years remained under the agreement. The W Group was engaged to validate the opportunity to renegotiate pricing and to assess the practicality of termination.
Approach
The W Group led the client team through a rigorous process to analyze the existing agreement, service requirements, and pricing structure in order to develop strategic options for the firm.
Service pricing was compared with recent market deals, which confirmed the pricing was not keeping pace with the market and was penalizing the firm for unexpected growth.
The agreement was reviewed to establish all the implications both of renegotiation and termination. In reviewing options, risks, and likely outcomes with the client team, an approach combining renegotiation with the incumbent provider and discussions with a prospective provider was selected.
The W Group led the team through a 90-day process of working separately with the two providers to secure new solutions and pricing arrangements. The approach was iterative and collaborative to ensure the solutions were complete and to give the client a chance to assess the providers.
The W Group worked with the firm’s legal team to create a new and more flexible agreement that
would provide the firm with immediate benefits and more options to respond to changes in the future.
Results
The firm terminated the existing agreement and transitioned services to a new provider in record time, with no service interruptions.
The services, which included all mission-critical applications, were transitioned to the new provider in less than five months. A thorough migration plan for data centers, equipment, applications, and data resulted in an on-schedule cutover and was essentially transparent to the firm.
The new agreement is yielding savings of over 35%, including the costs of transition. In addition, the firm gained a more robust technical solution and a more flexible contract that can accommodate either the growth or decline of requirements.
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