Sourcing and IT executives in Australia and New Zealand tend to be a bit jaded when it comes to benchmarks. Many clients I’ve spoken to have grown weary of promises of big savings that never seem to materialize. What they’ve experienced instead is a long and painful process of data collection and analysis, followed by a long and contentious negotiation process that often leaves service provider relationships severely bruised if not irreparably damaged.
It needn’t be that way.
For one thing, benchmarking capabilities have evolved dramatically. Thanks to automated data collection and analysis capabilities, as well as heuristic models to enable scenario modelling, benchmarks are increasingly agile, cost-effective and adept at assessing multiple alternative options over time. This means a benchmark analysis can be conducted in a matter of weeks rather than months, and at significantly less cost. Moreover, by moving beyond historical point-in-time assessments of discrete service towers, benchmarks can now gauge the impact of new technologies such as cloud and Robotic Process Automation (RPA). For example, while a traditional benchmark would assess the pricing of a data storage contract against market standards for similar data storage contracts, today’s tools enable clients to consider the potential risks and benefits of moving data storage to a cloud platform. In other words, rather than comparing the apples of six months ago to the apples of today, new capabilities allow you to normalize and compare the apples of existing technology against the oranges of moving to a new technology.
Equally important, the ability to collect more accurate and granular data creates transparency into pricing that has the potential to fundamentally change the conversation. A typical benchmarking negotiation often devolves into bickering over accuracy of data and validity of comparators. However, if both parties know precisely what the competitive market rate for a given service is, they don’t have to waste time and energy haggling, but can move on to discuss how to structure an agreement that benefits both parties.
A final consideration is the role of the client organization itself in a benchmarking initiative, specifically in terms of oversight and management of driving cost savings and minimizing value leakage. As operational strategies mature, enterprises are recognizing that recommendations for cost savings and performance improvements aren’t magically implemented but require engagement from the client side.
The fact remains that today’s outsourcing market is characterized by an unprecedented level of competition and innovation that is exerting steady downward pressure on pricing for IT and network services and creating new service delivery options. This means that a contract signed six months ago may already be out of line with competitive market rates as well as a step behind the latest technology.
However unsatisfactory their past experiences may have been, executives in Australia/New Zealand shouldn’t ignore the potential role of benchmarks to identify opportunities to improve pricing and service quality.
About the author
Dave is an advisory services veteran in the New Zealand and Australia markets, specializing in benchmarking, vendor management and robotic process automation.
