AMS Contract Price & Service Review
for a global manufacturer
Our client had a long term Global Application Management Services contract with its main outsource provider. Service had always been good, but the client was concerned that the deal was now too expensive when compared to other more recent contracts in the market. Peru made a commitment to help.
Using our knowledge of similar contracts, Peru carried out the following:
- Analysis of current service descriptions and performance measures to achieve a full understanding of the services being provided.
- Review of the available commercial opportunities to optimise performance of the SAP maintenance contract.
- Use the above to create a “bottom-up” price comparison of the incumbent's likely commercial model and obtain comparative costs from other vendors in the market.
- Conduct an independent price comparison for a similar basket of SAP maintenance services, using Peru's own, independent comparator database.
As a result of this work, Peru determined there was a significant gap in the price offered by the incumbent supplier compared to other vendors and industry average costs. This meant:
- Drafting an initial Request For Proposal (RFP) for a re-tender of the services.
- Bringing the incumbent supplier to the table with a new offer.
- Advising the client through successful re-negotiations of a supply deal.
- Re-writing updated service descriptions which were incorporated into the revised contract and operations manual.
The whole process led to a new three-year deal with the client's existing supplier at a 20% discount to the original price on a like-for-like basis with a clearly written contract that reflected the cost savings. As well as optimising the organisation's total cost of IT ownership, it also strengthened its relationship with the supplier, while removing the transition risks of having to move to another provider.