Free | Contract Health Check Capability and Credentials

Wavestone US Contract Health Check

Overview of Capability and Credentials

Agenda

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Brief Introduction to Wavestone US

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Contract Health Check Approach & Methodology

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Snapshot of Recent Health Check Outcomes

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Introduction to Wavestone US

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About Wavestone US (formerly WGroup)

Management Consulting

People

Services

Value-focused

/ Founded in 2004 by former CIO / Global operations with HQ outside Philadelphia, PA (+NYC)

/ Sr. Partner level only – Sr. Partner “operators” lead ALL engagements / Former CIOs, IT leaders, and business executives / Avg. experience over 25 years / Practical insights, not analyst research or best-practice surveys

/ Strategy and Planning / Cost and Run Optimization / Service Delivery Modernization / Outsourcing Contract Health Check / Benchmarking / Sourcing Lifecyle Support / IT Service Management / Program Management

/ Business outcomes / Alignment to the business / Realization to Business Outcomes – Outcome focused / Revenue improvement / Cost reduction and containment / Risk reduction / Independent and Agnostic to technology and vendor

/ Strategy and execution / Wavestone+WGroup Merger Jul ‘19 / 3,250 Global Consultants / Fortune 5000 Fastest Growing ’17 - ’18

/ Growing 32% CAGR 2013-2018

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Wavestone US Differentiators

Any sourcing initiative is only as successful as the foundational elements that go into it

DATA, ANALYTICS, AND INSIGHT

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PEOPLE

METHODOLOGY

CLIENT OUTCOMES

Seasoned Practitioners

Live-deals Data and Insights

Phased Decision Tollgates

Realistic and Referenceable

/ Community of sourcing industry practitioners – ex-CIOs, CFOs, Consulting Partners, Procurement Specialists, etc. / 20+ years of average experience / No junior inexperienced staffing / Strategy and hands-on execution experience

/ Rich data and cues from only Wavestone-led deals, no survey or secondary research data / Practical know-how on evolving technologies, process automation, and AI solution sets, along with realistic TCO impact / Contemporary costing, delivery, performance, and operational metrics (no older than 24- month rollover data)

/ Step by step approach with concrete outputs, stakeholder weigh-in, and acceptance before proceeding to the next phase / Options with underlying context and pros/cons for actionable decision making as opposed to big-bang recommendations / Surface upfront change management needs

/ Realistic expectations on solution and savings options / Equitable and sustainable contracting / Strategy and business case recommendations backed by skin-in-the-game execution support / Significant referenceable client base and CXO level advocacy

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Enabling Digital Transformation Wavestone US helps organizations cross the digital transformation chasm

Modern Digital Business

/ Technology Drives Business Agility and Competitive Disruption / Omni-Channel and Integrated Customer Experience / Proactive Technology Initiatives that Increase Revenue / Asset-Lite, Cloud-First, Automated, and Optimized Run Environment / Advanced Analytics for Real-Time Business Decision Support / Mobile, Social and Personalized Customer Focus / Frictionless Cybersecurity / Entrepreneurial Tech Staff Investing in Emerging Technologies (Blockchain, IoT, AR/VR, etc.)

Digital Transformation “Chasm”

/ Strategy + Execution / 360 IT Assessment

/ Transformation Roadmap / Architecture Modernization / Service Model Redesign / 50% Budget Reallocation / Cloud Adoption / IT/Bus. Process Outsourcing

Legacy-centric Business

/ Immature IT Processes / High Legacy Tech Debt / On-Premise-Centric / Wrong IT Skills

/ Asset Rationalization / Process Automation / Agile Operating Model / Change Management / Interim Leadership / Talent Transformation

/ Unconsolidated M&A Environment / No Separation of Core v. Context / Vendors Work is Transactional / 80% of Budget and Time on “Run” / IT Costs Out-of-Bounds

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Contract Health Check

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Why Is A Relationship Health Check Important?

Typical factors that can strain an enterprise-provider relationship

Not exhaustive

Buyer wants to optimize, and right-size outsourced spend, whereas provider wants sustained account growth

Service provider begins to lag the market in terms of pricing, commercial model, service levels, and technology leverage

Even well-drafted contracts can come under strain over time as buyer-provider objectives begin to diverge and contracts don’t keep up with the evolving technology and innovation landscape

Buyer sees increasing disconnect between transformation/digital themes being discussed or committed, and the action on the ground

Service provider tries to inject innovation, but with low tangible impact due to an account growth focus instead of value realization

In the pursuit of recovering investments, service provider over-optimizes delivery and marginalizes governance that may impact service quality

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During a contract lifecycle, the gap between Buyer’s value expectations and Provider’s value delivered tends to widen starting with latent suboptimality at the contracting stage and subsequent misalignment in execution and evolution value definitions Buyer-Provider Value Gap

VALUE ARTICULATION

VALUE RECOGNITION

VALUE DIFFERENTIATION

EXECUTION GAP Weak operational governance around pricing, delivery, performance, end-user experience can erode trust & deter account expansion plans CONTRACTUAL GAP Inadequately informed/challenged solution and contracting can set you up for failure EVOLUTION GAP Lack of strategic governance, innovation, account management can limit value extension opportunities

Client Expectation Trajectory

Contract Signing

Provider Trajectory

Contract Mid-term

Contract End / Renewal

TIME

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Given the rapid evolution in the services industry, any strategic Buyer-Provider relationship should stand on an updated contractual bedrock and have advancement opportunities clearly identified Tenets of a Comprehensive Relationship Health Check

Relationship Health Check

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‘Optimize’ Themes

‘Transform’ Themes

Are there areas of overbilling or market-to-market errors in the current versus contracted tenets? / Pricing opportunities (rates, over-skilling, etc.)

Have you identified all transformation opportunities to evolve your contracting model? / Automation / autonomics leverage to accelerate cost take- out and improve delivery efficiency / Maximizing delivery ROI via Cloud, DevOps, Agile, and aaS models. Has provider traversed the planned trajectory? / Pricing and commercial models commensurate to the evolution changes

/ Scope changes (adds / deletions)

/ Suboptimal delivery and/or productivity

/ Shadow costs (contingent labor, redundancies etc.)

/ Inadequate contract terms and conditions (T&Cs)

/ Better adaptability to regulatory change

/ Sub-par Governance model and roles/responsibility definition

/ Business case (investment profile, run-in costs versus proven ROI)

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Enterprise Buyer can choose to take a holistic view of health check services in order to impact an overall TCO and relationship improvement plan OR prioritize specific health check scope elements Health Check Framework

c) Technology Maturity incl. Automation leverage SOLUTION REVIEW: a) Scope Assessment, Potential for Expansion b) Delivery Model, metrics, right-sizing, right-skilling

d) Governance Structure

PERFORMANCE ASSESSMENT: Analyze gaps in provider reported versus user perceived performance, applicability / accuracy of service credits, Service Level coverage & stringency metrics recalibration

PRICE BENCHMARKING: Financial assessment of contracted vs. current spend trajectory, TCO benchmarking (fixed fee, variable P*Q rates & volumes, contingent labor spend etc.), nomenclature standardization, revisit ARC/RRC & pricing modes, corrective actions on continuous improvements

Comprehensive Health Check Services

KEY T&Cs EVALUATION: Review key clauses that impact the business case and/or have proven to be especially cumbersome. E.g., COLA, Forex, Service Credits, dispute charges and resolution, Continuous performance, Indemnities, termination etc..

OVERALL EXPERIENCE AND RELATIONSHIP: Degree of alignment and progress towards goals / vision, governance leadership and communication effectiveness, perceived partnership, cultural fit etc.

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Health Check Methodology

STAKEHOLDER INTERVIEWS

PROPOSED ACTIONS

PROJECT ORGANIZATION

FINDINGS

NEGOTIATION

DATA COLLECTION

EXECUTION ROADMAP

RECOMMENDED STRATEGY

START UP

DISCOVERY

ANALYSIS & ASSESSMENT

ONGOING PROJECT MANAGEMENT, GOVERNANCE & REPORTING

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Wavestone US has successfully supported several mid and end-term health check reviews to support, renegotiate, and expansion mandates Health Check Deliverables

Results Expected

Scope and Solution Revised SOWs addressing changes in scope breadth/depth and contemporary solutions

Revised Pricing Regime Evaluate original contract pricing constructs against current service provisioning models. Provide fair target positions, negotiate target positions and contract the new pricing regime

Operational Enhancements Target operating metrics for recalibrated performance

Contemporary Service Levels Revise and draft updated SLAs per business impacts and address metrics to drive behaviors toward desired outcomes

Retained Organization Construct Provide updated roles, skills, responsibilities and staffing for buyer and provider

Assess Agreement Levers Create and implement strategy to provide equitable incentives for both parties to adjust contract, scope, SLAs and sustain a mutually rewarding relationship

Governance and Cultural Realignment Revised governance interaction models, practices, and outputs, staffing remediation and prescriptive recommendations

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Typical levers and impact based on the recent 20+ Wavestone US Contract Health Checks in from 2017 to date

We deliver a tangible opportunity roadmap for contract improvement that enable transparent and equitable negotiations between the two parties Clear Relationship Improvement Roadmap

Some improvement levers encountered in health checks

Equitable Optimize + Transform opportunities are identified for both parties

15-20%

20-25%

Current enterprise TCV

Continuous improvement charter

Optimized enterprise TCV

Transformed enterprise TCO

Rate and skills recalibration

Delivery mix alignment

Shadow cost elimination

Equitable contract T&Cs

Automation impact

DevOps impact

Self-service impact

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ASSESS OR OPTIMIZE THEMES

ADVANCE OR TRANSFORM THEMES

Most commonly targeted in any benchmarking exercise due to high visibility. Only partial value capture due to limited win-win potential.

These levers may be obscure and yet contribute materially to the optimization potential. If unchecked, they can lead to serious value erosion.

Even a highly optimized outsourcing relationship can be further advanced by leveraging next- generation digital transformation levers.

* REFER SLIDE 18 FOR QUALITATIVE SUMMARY

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Base Case Run Cost (1yr)

Transformed Run Cost (1yr)

Transformation Achieved

/ Large IT footprint and storage reduction / Automation / Redesigned sourcing model to unit-based pricing at market rates

$96 million ( -52%)

$201 million

/ Created shared services across 5 BUs / Increased offshore labor / New tools and automation / Modernized reference architecture / Infrastructure segmented by regulatory requirements / Multi-sourced with new governance

Impact Delivered

$52 million ( -67%)

$159 million

Actual financials of Wavestone-led Run

$31 million ( -46%)

$59 million

Optimization Engagements in the previous 24 months

/ Automation enabled delivery / Greater cloud utilization / Modernized sourcing model

$14 million ( -46%)

$25 million

“ Please pass along our thanks to Bill for the work he did on the financial base case especially his forecast for anticipated savings. Bill projected a first year savings of $80 million and we finished the year at $81M. It was spot on!”

/ Proactive support analytics / Increased automation and self-service / Moved to lower-risk service provider / Modernized and automated EUS delivery / Rebalancing of labor model / Redesigned sourcing model and contracts

$6 million ( -24%)

$8 million

$3.5 million ( -39%)

$6 million

– IT CFO of first company referenced on the right

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Typical transformation inhibitors remediated in recent health check engagements

Financial and Non-Financial

Outcomes of Health Check

Poor Speed And Operational Performance

High Costs

Outdated IT environment – infrastructure, applications, organization, vendors

Outdated operating model

Service delivery model not optimized

Poor service quality

High pricing and low value

Misalignment with business

M&A-driven growth without integration

Focus on transactions vs. outcomes

Limited cloud usage

Wrong skills and organization

No time or budget to transform

Immature IT service management

Technical Debt

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Actual masked output IT Contract Health Check | Leading Healthcare Insurer and Tier 1 Service Provider

We also create a prioritization dashboard for the identified opportunities and balance financial and non-financial benefits realization timelines and delivery/implementation risk considerations Prioritization Roadmap

Prioritization matrix for optimization and transformation

Relative prioritization recommendations

Low-hanging fruit

Wave 1 priorities

/ Low-hanging fruit: 0-6 months. Given current levels of maturity, a CIF framework and performance analytics can be deployed within 6-8 weeks. The benefits include rapid standardization and effort reduction / Wave 1 priorities: 6-12 months. These are bolt- on initiatives driven by automation and integration of patch and release management. Additionally, a command center and low-usage application decommissioning could impact service quality significantly / Wave 2 priorities: 12-24 months. These are contingent on process/delivery streamlining done during Wave 1. They require a bedrock of organizational change which takes 12-18 months. These should be selectively deployed and in stages to avoid major delivery risks.

CIF framework

Performance analytics

Integrated release and

Demand management

L1.5 ticket automation

Application decommissioning

Command center resizing

Wave 2 priorities

KPI alignment analytics

Cloud remediation

DevOps adoption

Low

High

Potential impact

Optimization levers

Transformation levers

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Illustrative Deliverables (PAGE 1 OF 2)

Actual masked output IT Contract HealthCheck | Global Manufacturing Client & Tier 1 Service Provider

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Illustrative Deliverables (PAGE 2 OF 2)

Actual masked output IT Contract Health Check | Global Manufacturing Client and Tier 1 Service Provider

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CASE STUDY

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Representative Health Check Timelines and Staffing

Project Element

Estimated Timeline

Week

W1 W2 W3 W4 W5 W6 W7 W8

From experience, even the best laid contracts can accrue inefficiencies and transformation gaps during run state. Our last 20+ Health Checks yielded an average ~40% TCO reduction via equitable improvements in scope, solution, metrics, and pricing arrangements far greater than the lopsided and blunt rate card negotiation exercises.

Project Kickoff

Discovery

Analysis and Assessment

Recommendations

Socialize and plan negotiation next- steps

Multiple Touchpoints

Typical Staffing

• One (1) Part-Time Managing Principal

• One (1) Full-Time Principal

• One (1) Part-Time Financial Modeling Principal

Note: This is a representative timeline based on past Health Checks. Priority scope carve-outs, instead of comprehensive Health Checks, can take lesser time. Also, elapsed time can vary across engagements, but our fixed fee model does not incur additional billing for reasonable delays.

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Sarthak Brahma VP of Growth, Wavestone US Tel: +1 (917) 715-0239 Email: sarthak.brahma@wavestone.com

150 N. Radnor Chester Road Suite A230, Radnor, PA 19087

+1 (610) 854-2700

www.wavestone.us

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