Case Studies - Outsourcing
Business Challenge
A sixteen billion dollar communications company focused on internet services had built a hosting and managed services business where profitability, consistency of services and customer satisfaction were far short of the desired state. Growth had taken place organically, via acquisition and through partnerships which resulted in major segments of the business operating differently.
The challenge was to design, develop and implement a set of processes, procedures and system enhancements to optimize the business without impacting desired growth.
Our Solution
The Nathanson team designed a solution that kept the highest value added centralized services in house and outsourced the rest to partners who could provide guaranteed streams of revenue. We then developed the processes, procedures and system enhancements required to optimize and maintain the business and negotiated all relevant outsourcing and sales agreements.
Results Achieved
The result was over $5 billion dollars in sales, a complete set of optimized, end to end processes and savings in excess of 20% of expense.
Business Challenge
A twenty-seven billion dollar telecommunications company found itself with the highest cost per subscriber and lowest customer satisfaction in the industry. To address these issues, the client decided to outsource significant portions of their customer service operations and rethink major operating processes and supporting systems. A rapid RFP process was run between the two competitors that had the capability to perform the desired services and a finalist was selected.
The key challenge was to create, negotiate and implement a contract with the selected provider that would guarantee cost savings, provide significant performance enhancements and increase customer satisfaction on a very tight time frame.
Our Solution
Nathanson led a team of forty client resources in the necessary due diligence effort, developed statements of work with the selected outsourcing partner and created plans for the overall transformation of the business.
Using our proven methodologies, we put in place the processes for measuring and managing performance improvements and instituted an incentive/penalty based system for service levels.
Results Achieved
The result was a contract that guaranteed over a billion dollars of savings with guaranteed improvements in productivity, performance and customer satisfaction.
Business Challenge
A sixty-six billion dollar international conglomerate was purchasing a three billion technology business and needed to outsource existing IT services from the seller. The business being purchased was losing over one billion dollars a year and was going to be merged into the clients existing technology business. Cost cutting was the order of the day.
The seller was providing the IT services at cost to its own division. Since both parties were going to be selling goods and services to each other in the future, the agreement was to sell at fair market price. The seller normally achieves a gross margin of 25% with their commercial clients and therefore the buyer was told to expect to pay 33% more than the sellers “internal cost”.
In order to hit the profit goals of the combined company, the cost of outsourced IT services needed to be reduced by 35%, not increased by 33%. The final price being offered was more than two times what the buyer could afford in one year.
Our Solution
The Nathanson team designed an outsourcing contract with the seller for IT services that allowed for enough flexibility to reduce the price over the term to the desired level.
Nathanson and Company was able to accomplish this and take it one step further. Using our fact based negotiation techniques, we reverse engineered the solution, tightened up the scope of work to meet the clients existing requirements and added market competitive service levels. Building from the bottom up with the outsourcer, we were able to obtain the services for 22% less than the client had been paying at “internal cost”.
Our team managed the implementation of the outsourcing contract including training key personnel how to successfully manage the outsourcing partner, optimize operations, retire aging systems and end projects with an unfavorable return on investment.
Results Achieved
As a result of our efforts, commercial grade service levels were achieved at less than half the price the client expected to pay with the flexibility to retire systems, applications and unnecessary services at no penalty. This resulted in driving operational cost down more than 45% within a year of the acquisition.
Business Challenge
A fifteen billion dollar global manufacturing firm was 2 years into a 5 year, comprehensive multi-tower outsourcing agreement that originated as part of an acquisition.
The outsourcing costs were very high due to systems that were built to support a more complex enterprise than the business unit that was acquired and carved out of its parent and there was no flexibility to reduce it. The client had a limited budget to migrate off the systems.
Our Solution
Nathanson and Company entered into negotiations with the outsourcing vendor to find a path to lower the cost of the existing contract and provide for a transition to a new infrastructure that would allow the client to more easily absorb the acquired business into its current business infrastructure.
Results Achieved
Within 100 days, Nathanson and Company reached an agreement with the supplier to reduce the price of the existing services by 30.8% while retaining the same scope and SLA’s in return for a commitment to spend the funds on building out a new infrastructure, transitioning to it and signing a contract to support the new infrastructure. This saved the client $88,000,000.
Business Challenge
An eleven billion dollar global technology and services company had just undergone a transition in Senior IT management. A new CIO was hired and was concerned that the company’s long term contract for application support was no longer market competitive.
Our Solution
Using our proven methodology, Nathanson and Company performed a rapid assessment and determined that the client was paying an overall premium of 30-50% for the services. Using the data we collected during the rapid assessment, we entered into negotiations with the outsourcing vendor and negotiated an immediate rate decrease in combination with a service improvement plan. Eventually the agreement was completely renegotiated.
Results Achieved
Within 90 days, Nathanson and Company was able to negotiate a retroactive rate decrease and ultimately a replacement of services. The new contract provided for services under superior terms and SLA’s at a savings of 42%.