Last year we were told by a finance director for one of our repeat clients in the Insurance industry that they were in the process of negotiation a multi-million, multi-year IT outsource deal with one of the leading global Systems Integrators in the insurance sector.
There was an overall contract envelope value agreed in principle however, as in any negotiation the actual terms were being drafted and discussed, and these would drive the ultimate value and contract payments.
We proposed to develop a financial model that would emulate the key contract terms, taking into account all the relevant volumetric and parameters, so that the client could
- estimate more accurately what the contract would end up costing them, and also
- ensure complete control of contract payments and avoid over-paying for the services
We began by analysing the contract terms to understand the parameters and mechanisms that would define payment outcomes. We then developed the model over an initial 6-week period and made adjustments as the contract negotiations drew to a close.
We then trained the finance mgmt team responsible for monitoring the contract to use the model.
1 year later, the model is in use by the team. They verify all invoices received from the Systems Integrator against the model results based on the known volumes and parameters, and have identified hundreds of thousands worth of over charging in the first year alone. Our costs to our client to design and build the contract model have already been paid more than 5-fold, in the first year alone. The contract that the model supports will run for 7 years, providing our client with potential to generate savings of many more multiples over the life of the contract.
If you would think you could benefit from this kind of expertise please do not hesitate to get in touch at: email@example.com