A strong governance structure delivers cost savings and retains value for a utilities client.
Opportunity
Our gas and energy client was a first-time outsourcer looking for innovative, best-in-class applications development and maintenance, contact center and cloud services. Many of their 1,200+ legacy contracts contained no service-level agreements, weak discounts and termination clauses. Without a framework to assess contract effectiveness and value leakage, business losses were a constant problem.
Imagining IT Differently
ISG designed a governance solution with tier stratification, point-to-point and contract databases to manage the sourcing-to-pay lifecycle. The solution established strong scorecards for real-time spending visibility, proactive monitoring of contract renewals, renegotiation support post assessment and strong renewals.
Future Made Possible
- Cost avoidance of US $150,000 during contract review
- Avoided leakage of $100,000 by capping time and labor expenses at 15 percent of contract/statement of work value
- Annual contract price increase capped at three percent
- Service-level agreements designed to penalize supplier for any breach
- Operating expenses reduced by adding an early payment discount, and capping support fee and late fee
- New framework created for change requests, multi-source agreements and all fixed prices to ensure consistency in data reporting
- Termination clauses changed to convenience client rather than suppliers
