Our client, a luxury goods conglomerate, set out ambitious cost reduction targets of 15% across their technology category. Historically, commercial efforts had been focused on Tier 1 technology vendors, which implied there was a commercial opportunity to be realized by deploying a team that could take a broader view of the supplier base. Proxima was engaged by the CIO to conduct a targeted cost-reduction program.
Challenge
Technology Professional Services accounted for the largest single pocket of spend, with hundreds of millions spent across hundreds of vendors. This significant disaggregation of spend, coupled with the material value at stake, led to this area becoming the program’s initial focus. There was a parallel strategic initiative to develop a captive near-shore technology resource hub to bring back in-house a number of roles that previously sat with external vendors within that spend profile.
Our Approach
On reviewing the Technology Professional Services spend, our team developed a commercial strategy, starting with a supplier questionnaire to understand usage in detail. We gathered shoring, rates, and role title information from the vendors, helping us to refine the baseline held by our client. Proxima reviewed roles in use across all vendors and normalized resource profiles and experience levels, alongside developing some alternative shoring mix opportunities.
Based on our knowledge of the markets in question and data gathered from suppliers and from the business, we identified strategic vendors to be part of a fuller market test. We chose to run two processes in parallel – one for global needs (Tier 1) across all client ‘maisons’, and the other for Maison-specific requirements (Tier 2) with a view that 80% of the spend would be picked up by Tier 1 suppliers and ~15% to be picked up by Tier 2. We developed documentation alongside client stakeholders, including a rate card, technical requirements, example case study scenarios, and a template MSA for vendors to sign to.
We developed scoring methodologies, ran evaluation workshops with stakeholders, worked through moderation of scoring, chaired supplier presentations, and drove the selection process on behalf of the client, arming them with the right information at the right time. The team drove material deal improvements through targeted multi-phase negotiations before workloads transitioned to the new vendor landscape.
Results
The team saved >25% on a like-for-like basis, with incremental value derived in addition to altering the shoring mix and proportion of work shaped into managed service agreements over time. Vendor numbers were forecast to reduce by >90% in the post-transition landscape, allowing for more strategic relationships to develop with fewer vendors. In addition, the team developed an improved approach to the management of vendors, ensuring ongoing competition ‘in contract’ across preferred suppliers. Beyond this outstanding success, parallel teams also delivered material benefits across the global networks deal and embedding AI into the IT Service Desk contract.
