Offshoring
IT Contractor Consolidation and Outsourcing
Transitioned group-wide IT contracting services to optimized managed service models, reducing cost, suppliers and improving scalability.
Industry
Financial Services
Direct/Indirect
Indirect
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Sourcing Context & Procurement Challenge
The company operated with a legacy IT outsourcing model, reliant on multiple on-premise contracts and inconsistent pricing models. Escalating costs, rigid service structures, and poor scalability hindered digital transformation initiatives. The procurement challenge was to transition to a modern service landscape with strategic vendor partnerships – without disrupting business continuity.
Procurement Objectives & Strategic Levers
The initiative aimed at >15% cost reduction while improving agility, scalability, and transparency. Key levers included transparency through benchmarking, vendor consolidation, renegotiation of existing SLAs, and outcome-based pricing. Procurement’s role was not limited to cost: it was instrumental in creating a vendor ecosystem that could support future innovation and digital readiness. Very close collaboaration with all stakeholders (IT and Business) was absolute key in this initative.
Sourcing Strategy & Execution Approach
Procurement led a two-phase strategy: (1) benchmarking all IT spend and contract structures, and (2) launching structured negotiations with incumbent and new service providers. We embedded flexibility and scalability into contract terms (e.g., modular services, consumption-based pricing, moving off-shore resources on-shore). Governance was established through regular joint steering committees and performance dashboards aligned to business KPIs.
Results & Values Delivered
The transformation delivered a 17% overall cost reduction while increasing service responsiveness and uptime. Vendor count dropped by 40%, and the new approach enabled faster deployment of applications across functions. Internal satisfaction with IT support improved significantly (after very strong reluctancy in the beginning), and procurement's early involvement was credited with preventing contractual lock-ins and hidden technical debt.
Role & Contribution
Procurement sponsored the entire vendor transformation roadmap and worked closely with the CIO and her team to align sourcing strategy with architectural goals. Very detailed internal and external benchmarks were conducted and negotiations with Tier 1 and niche providers were conducted, structured exit management from legacy contracts, and designed incentive models tied to innovation KPIs. At the same time, risk-mitigation (alternative solutions ready for worse case) was a central point of focus during all negotiations.
Conclusion & Reflections
This project underscored the strategic role procurement must play in digital transformations. IT contractor sourcing is not a “tech-only” initiative – it's an organizational redesign challenge. Success required not just commercial acumen but also a deep understanding of IT architecture and change management. The most important takeaway: procurement must enable innovation, not just reduce spend. The board’s buy-in was a game-changer for the initiative.