Metrics- IT Benchmarking and Sourcing

Best value and pricing 
Problems arise in outsourcing relationships, evaluation of service levels and pricing. Independent consultants assist in repairing relationships and driving stability.
 
Sourcing Support
Approximately 40% of contracts don’t deliver success due to shortfalls in service performance, and misaligned expectations. 
Sourcing managers must prepare effectively, especially in volatile, complex times. Reducing sourcing risk enables both sides to proceed professionally: take enough time, prepare, have realistic objectives and meaningful goals. Contract lifecycles don’t always run smoothly; a small mistake or misunderstanding can throw you off track. 

Common issues: 
1) Overly ambitious project plans, insufficient due diligence and negotiation lead to punitively priced, poorly scoped services
2) Unrealistic business cases and expectations
3) Poor staffing and funding of retained organisations leads to difficult service relationships. Skills required to manage service providers are different from skills to run a service.  It’s vital to have sufficient people in the right roles with the right skills managing service providers.

Research demonstrates independent sourcing advisors: 
1)     ensure impartiality and objectivity, reducing cognitive negotiation biases
2)     deliver pricing 6-10% better than engagements without external input
3)     drive 10-20% better outcomes when they have a database of deal data
 
Insights
Playbook full of insights you can apply: Click
 
Price benchmarking
Ensuring contracts represent value for money is vital.  Tender processes are an obvious procurement tool, however, testing pricing mid-term frequently yields benefits.

Price benchmarks can impact prices significantly during negotiation, mid-contract and during renewal. The chart shows mid-term price benchmark impacts. Evaluation shows 45% of contracts include a price benchmark in the first twelve months; another 40% in months 13-36. In two-thirds of the benchmarks analysed, prices reduced by 11% on average.
  
Services have differing performance, quality and costs depending on delivery models and suppliers. Performance and quality are measured against contracted SLAs and KPIs, but knowing whether they’re competitive is vital. Pricing which was competitive at contract signature, may no longer be, when services change and markets evolve.
 
Clarity
If pricing compared to peers is not competitive, reductions are required. 
Explaining or justifying external spend is easier with financial transparency, also ensuring an understanding of the impact of volume on spend which, in a world where cloud usage proliferates, drives fundamentally better deal management.
IT is costly; competitive pricing is critical. Many contracts include benchmark clauses to ensure competitive pricing over time. The cost of performing a benchmark is small in relation to possible savings.

To ensure competitive pricing, should you consider benchmarking?