Value Creation Diagnostic

Identified $16M of savings opportunities for a financial services organisation

Challenge

Our client, an Australian financial services company with 1 million members and $150 billion in funds under administration, had an annual supplier spend of approx. $350 million across 400 suppliers needed to identify value creation opportunities for the up-coming financial year to fund new and strategic priority investments. A new procurement leadership had recently been established and the company was mid-way through a company divesture and executing an enterprise-wide digital platform transformation. With low data and analytics maturity, spend and contract visibility were limited. The client’s Finance and Procurement team had limited experience with value creation diagnostics and used Technology Connect to guide them through this critical activity.

Approach

By collecting spend data and contracts the client was able to form initial hypotheses of cost reduction and avoidance value opportunities. Used deep procurement experience to form a “Day One Answer” to the problem, i.e. “the size of the prize”, and construct an initial perspective of our confidence and ease of implementation in value hypotheses. This approach enabled the client to prioritise the opportunities with the highest impact and shortest time to value. The priority opportunities were subsequently socialised and validated through workshops and interviews with key subject matter expert client stakeholders. Our focus centered on incremental value opportunities, i.e. savings opportunities incremental to what our client’s procurement team had already identified, sized and validated.

Result

Our client identified $16M new annual cost reduction opportunities. Most of the savings opportunities were IT related, with other large savings opportunities in management of its contingent workforce, consultants and marketing spend. Technology Connect was subsequently engaged to assist the client realise the savings opportunities whilst simultaneously helping our client build its internal capacity and capability to sustainably identify and “bank” new value opportunities.

Tom Dissing is the founder and Managing Director of Technology Connect. He has deep expertise in helping companies digitally transform and scale their businesses through better, faster and smarter use of emerging technology and optimising value from ecosystems. Tom is a trusted advisor to business and technology executives and senior management teams. He has advised senior executives in Financial Services (Banking, Insurance, Wealth and Superannuation), Media & Entertainment, Construction & Engineering, Technology Services and Government (Federal and State) in Australia, New Zealand, Asia and Europe.

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Application Service Provider Strategy

Driving Agility, Performance and Risk Reduction

Challenge

Our client, a large Australian financial services company, with 300+ application service providers (ASPs) and an annual ASP spend of $500M+, had entered into long-term contracts primarily based on a short-term and transactional offshore labour arbitrage strategy (Australia vs India time & material rates) to reduce costs across application development and maintenance. However, business divisions were under pressure to accelerate the release of new digital products and services to customers and therefore wanted ASPs to help them increase agility and performance within a long-term and transformational relationship. Furthermore, the client was embarking on an enterprise-wide application modernisation program across 3,000 applications, in which the ASPs had the potential to play a major value-adding role. The team at Technology Connect was engaged by the Chief Procurement Officer to develop a new ASP strategy.

Approach

We applied our strategy framework and methodology to develop the ASP strategy. Initially, we established a baseline of current ASPs, spend, application portfolios, support resources, delivery locations and type of contracts across both the “Run” and “Change” environments. We applied our market and technology experience and insights, complemented with recent external research, to consider technology trends and emerging practices. Through extensive stakeholder consultation, we constructed 6 focusing questions to guide the strategy:

Do we have the right ASPs?

Do we have the right ASP concentration?

Do we have the right support model?

Do we have alignment with strategic programs?

Do we have the right on/offshore ration?

Do we have the right commercial and fee models?

Using our Transformation Hub methodology, we collaborated with key stakeholders to co-design the ASP strategy using design thinking and agile principles.

Result

Our client received an ASP strategy aligned to strategic priorities and stakeholder expectations. Furthermore, the ASP strategy identified significant cost savings opportunities by improving supplier segmentation and “tail spend” management. The ASP strategy reduced our client’s operational and financial risks by moving to outcome-based contracts aligned to agile software development practices with ASPs aligned to business units.