A technology company that had experienced massive revenue and share loss in the previous 3 years sought P&C’s help implementing a transformation program with a stringent sourcing strategy. P&C evaluated outsourcing options for business processes and IT and made recommendations that achieved $85 million in annual cost savings for the company.
At A Glance
Annual Cost Savings
IT Outsourcing
Months Project Duration
Annual Cost Savings
Business Process Outsourcing
Return on P&C’s Fees
P&C Helps This Client Focus on Core Competencies & Determine Outsourcing Opportunities
Our Tech Company client had experienced massive revenue and share loss during the previous three years, though the company had conserved cash through significant cost reductions. Management developed an ambitious strategy to transform the company by refocusing the organization on core competencies.
The P&C team provided solutions to the following questions:
- What should be considered for outsourcing?
- What’s the best end-game option (best-in-breed vs. one-stop)?
- How do we rush through Request-for-Proposal (RFP) and negotiations without leaving money on the table?
The sense of urgency was high because our client needed to sign a contract in less than 9 months; however, there were a number of complications:
- The company was completely vertically integrated for core products
- An “I don’t trust foreigners” mentality prevailed
- 75% of the executive team were new to the job
- Many in the company were skeptical of outsourcing due to past failures
- The client was in the midst of a transformation of its business model
P&C Considered the Outsourcing Potential Along Its Client’s Value Chain & Used a Systematic Approach to Evaluate the Sourcing Potential for Each Division
- Operations (engineering, procurement, manufacturing)
- Customer service and support (CS&S)
- Warranty and repair
- Support functions such as Finance and Accounting (F&A), HR and IT
- Understand client strategy and resulting market positioning
- Determine factors key to successfully implementing strategy
- Understand management’s goals on the company’s future
- Create detailed process maps of activities under consideration
- Proceed along the company’s value chain, division by division
- Evaluate each activity against industry benchmarks
- Evaluate importance of achieving key success factors
- Map against performance against industry competitors
- Determine if external market exists
- Define set of potential sourcing partners
- Assess risk of utilizing external market
- Evaluate in-house solution, based on management-initiated turnaround strategy
- Develop action plan by and across activities
- Assess high level organization impact
- Objectively compare in-house vs. outsourced solutions with respect to risk/reward
Our Recommendations
- Launch request for information (RFI) and thorough RFP process
- Select potential suppliers based on agreed-to criteria developed with the client’s key stakeholders
- Execute thorough due diligence
- Build base case model, normalize bids, and ensure price flexibility
- Develop and negotiate service level objectives and service level commitments
- Start deal promptly to stay within requested nine-month timeframe
- Maintain focus on day-to-day responsibilities
- Align organization with outsourcing effort
- Ground sourcing in company strategy
- Determining relative performance
- Assessing external market opportunities
- Investing in a robust, multi-sourced RFP process
- Addressing implementation issues early
Within 9-Months, P&C Created Significant Value For Its Tech Client, Totaling ↑75X P&C’s Fees
- $8M in cost savings from IT outsourcing (ITO)
- $25M in a one-time asset impairment write-off
- $23M in cost savings from Business Process Outsourcing (BPO), including outsourcing 50% of Finance operations and 85% of Human Resources operations
- Service levels at or better than current levels, including continuous improvement efforts
