post award contract management - sigsig.org/docs2/post_award_contract_management.pdfseller make the...

Post Award Contract Management

Craig Nelson & Bill Huber

© 2014 Alsbridge Proprietary & Confidential

2

2

Post Contract Award; Value Can Be Elusive for Both Parties

Adversarial Negotiations / False Economics / Misalignment Of Expectations /

Poor Relationship Management / Ineffective Change Management

Alignment Of Provider and Client Goals is a Critical First Step to Realizing

Value

Most buyers Underestimate the Necessary Investment in Post-Award Change

Management, and while recognizing the importance of Relationship

Management fail to Commit Necessary Resources and Processes to Getting

Vendor Management Right.Top Outsourcing Challenges

Identified by Providers

Capturing Process Knowledge

Achieving a Balanced Contract

Shortening Transition Time

Shortening Transformation Time

Reducing Implementation Costs

Reducing Transaction Costs

Relationship Management

Retaining Top Talent

Achieving Target Service Levels

Managing Change

0% 10% 20% 30% 40% 50% 60%

Top Outsourcing Challenges

Identified by Clients

Retaining Top Talent

Shortening Transition Time

Shortening Transformation Time

Reducing Implementation Costs

Managing Change

Linking Results to Shareholder Value

Achieving Target Service Levels

Reducing Transaction Costs

Relationship Management

Achieving a Balanced Contract

0% 10% 20% 30% 40% 50% 60%Outsourcing Leadership 2013


3

Research shows sourcing of the cost base has

increased over the last 3 years among top

companies

Your effectiveness in managing your supplier base

has critical implications for business performance

Results from 2,000 corporations shows a 1%

reduction in labor costs produces 0.7%

improvement in EBITDA…

Conversely a 1% reduction in non-labor/supplier

related cost improves EBITDA by 4.1% - SIX TIMES

HIGHER

70% of revenue is spent buying goods and

services from suppliers

Vendors are Key to Operating Performance

69.9%of Revenue on

Non-

Labor/Supplier

Costs

12.5%of Revenue on

Labor Costs

6%

%8

Non-labor costs as a % of revenue have increased…

Labor costs as a % of revenue have decreased…

0.7

%

Reduce labor cost by…

Improves EBITDA by…1%

4.1

%

Reduce non-labor/supplier cost by…

Improves EBITDA by…1%

$

Profitabili

ty

Governanc

eInnovatio

nRisk

Business

Performa

nce

$

$

Vendor management has a SIX TIMES greater impact on EBITDA than focusing solely on labor cost reductions. Hence, vendor management is critical to revenue and underlying profitability.

Proxima 2013


4

How is EBITDA NOT Being Optimized – Value Erosion

2/17/2015 Confidential and

Proprietary

4

ContractualChallenges

7-8%

RelationshipChallenges

2-5%

Invoicing Errors

Unrealized Performance

GainsFailure to Meet

Contractual Obligations

Inability to Track Contractual Obligations

Lack of Operational Alignment

Lack of Common

Processes20% to 30%

value

Erosion

Alsbridge Research 2013

OperationalChallenges

8-12%

Companies on average experience 20% to 30% contract value erosion and spend 4% to 6% on vendor governance activities while focusing 80% of their resources on activities that do not optimize EBITDA

4% to 6%

Gov. Spend

Po

ten

tial

Valu

e t

o b

e

Realized

Net

Valu

e R

ealized

Profitabili

ty

Governanc

eInnovatio

nRisk

Business

Performa

nce

$


5

Transformation Challenges Needed Interventions

Radical move to a new way of

delivering support services

Communicate a decisive

transformation strategy

Shifting work, people and control from

operating units to a provider or new

location, or both

Align organizational talent and skills to

optimize provider effectiveness

Understanding of new operating vision

and roles

Change how employees are evaluated

and rewarded

Treat impacted employees with care

and respect

Skill gaps in new roles

Assess talent and close skill and

competency gaps

Fragmented business processes Document and rationalize processes

Shift to governance and management

activities

Measure progress and establish

milestones for success

Undocumented governance and work

processes

Define and institutionalize new

processes

Hold leaders accountable for

transformation success

Overcoming the Change Challenge


6

Governance

Performance

is Optimized by…

Governance & Business Process

Drives Structure & Execution

Transform to Optimize Post Contract Performance

Manage Change:Clear Skills &

Roles Alignment

Structure

Governance:

Clarity Among

Stakeholders

Managed Change & Structured Governance

= Speed-to-Value

Client & Provider Teams

Structured to Succeed

Managing Change and Establishing Your Governance

Framework Produces Long-Term Performance Leverage


7

Keys to Post Contract Success

Strategy Drives

Structure & Execution

Structure:

Create the

Right Roles

Execution:

Choose the

Right People

Structure + Execution

= Performance

Competent Teams

Structured to Succeed

Stakeholder Alignment and Readiness

Transformation Design

Governance Structure

Retained Org Design

Roles Structure

Validate

and

Refine

Align Processes and Staff Validate

and

Refine

Competent

Teams

Structured to

SucceedAligned Provider and Client

Post Contract Success

Model Business

Processes

Model Roles

and Skills

Set provider and

customer roles and

requirements for

Operating Model

Train Teams and Communicate

Roles, Processes and Governance

Structures


8

Summary: 6 Disciplines for a Successful Journey

Transition

Management• Transition Readiness & Risk

Assessment

• Integrated Transition Plan

(Client / Vendors)

• Transition Program

Management

Communication

Management Change Readiness and

Audience Analysis

Communications

Requirements and Strategy

Communications Delivery

Organization

Design• New Operating Framework

• Organization Redesign

• Competency Management

• Transform Strength to

Talent Employee Selection

VM

Governance

Structure• VM Governance Structure

• VM Process and

Organization Design

• VM Performance

Optimization

• Sourcing Business Case

Value Realization

Operational

Alignment

• OA Touch-Point

Identification and Mapping

• OA Alignment Workshop

• OA Process and Work

Product Adjustments

• Stakeholder Ops Alignment

Service

Management

• SM Process Assessment

• SM Strategy and Planning

• SM Implementation

Governance and Support

• Service catalog development

and benchmarking


9

Transition Management


Proprietary

9

People in the organization do not generally relate to strategy; more often

they relate to the actions they see and the transformation that is reinforced


10

Communications Management


Proprietary

10

In the absence of clear & effective communications, people will fill in the white space with their own take on operational change; leaders must lead by communicating the right messages at the right times


11

Organization Design


Proprietary

11

Incidents Solutions

Vendor Management Apps / Infrastructure

Sourced IT Retained IT

IT Users

Requests Solutions

IT Management

Vendor

Management

Office

Application Architects

System Development System Production Support

CIO,

Sr. Directors

Admin.

Product Management*

Scvs.

Mgmt.*

Prioritization

Enterprise

Strategy,

Architecture

&

PMO

Business Analysts

Application Development

Application Maintenance

L1 Service DeskApplication

Service

Desk

L2/L3 Desktop

Governance

NOTE: * Demand Management part of Enterprise Strategy, Architecture & PMO

IT Compliance & Controls

IT Customers

Infra

Arch

Data Center Operations,

Servers, SAN,

Network/Telecom &

Information Security

8

2

30

2

10

4

3

4

2

8


12

Vendor Management & Governance


Proprietary

12

Process standardizes the relationship, and tools enable people to extract

value from the sourcing relationship; it is about achieving the promised

results


13

Operational Alignment


Proprietary

13

Processes are operationalized by skilled people with the right tools who

understand their operational responsibilities and are aligned to deliver


14

Service Management


Proprietary

14

To improve performance dramatically the client and the provider must

eliminate nonvalue - adding activities that are the source of costs, errors

and delays to the business customer


15

Conclusion

Sophisticated managed services contracts frequently deliver value across

multiple sites, geographies and processes, but because of the degree of

associated change in the new operating model, unless the both buyer and

seller make the necessary commitments to post-award governance,

significant value may be lost, and the initiative may fail

Buyers should plan for and realistically budget for change management and

post award governance as part of the business case for any managed

services initiative, and should ensure that the right resources and expertise

are available to ensure success.


16

Thank You!

Questions?


17

Alsbridge Europe

22-24 Ely Place

London, EC1N 6TE

United Kingdom

Tel: +44 (0)207.242.0666

Fax: +44 (0)207.242.0667

Email: [email protected]

alsbridge.com || The market leader in data-driven benchmarking, sourcing and transformation

services

Bill HuberManaging Director

(704) 806-3910

[email protected]

Contact Information

Alsbridge Americas

3535 Travis St., Suite 105

Dallas, TX 75204

United States of America

Tel: +1 214.696.6410

Fax: +1 214.239.0698


Craig NelsonManaging Director

(214) 476-5206

[email protected]

Americas

Corporate Headquarters

3535 Travis Street

Suite 105

Dallas, TX 75204

USA

Tel: +1 (877) 800-6247


Canada

The Exchange Tower

130 King St. West, Suite 1800

Toronto, ON M5X 1E3

Canada

Tel: +1 (416) 842-9005


EMEA

United Kingdom

3000 Hillswood Drive

Hillswood Business Park

Cherstey

Surrey KT 16 ORS

Tel: +44 (0) 800 61 25727


Germany

Bahnhofsplatz 3

56410 Montabaur

Germany

Tel: +49 (0) 2602 134269 77


Asia-Pacific

Bangalore

Alsbridge Advisory Private Limited

3rd Floor Embassy Classic 11 Vittal

Mallya Road

Bangalore – 560001

India

Tel: +91-80-6670-4500


mailto:[email protected]





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