Strategic Vendor Negotiation for Cost Reduction PPT

This PPT slide, part of the 15-slide Oil and Gas - Technology Procurement Transformation PowerPoint presentation, outlines a case study where a Value Solutions Provider (VSP) successfully negotiated a contract with a security vendor, achieving significant cost savings of approximately $4 million, which equates to a 20% reduction. The project context highlights the evaluation of 5 IT vendors by Downstream LCG to manage support for over 125 custom applications. Initially, the service model was based on staff augmentation, with a clear goal to transition to managed services. The management's primary focus was on reducing total costs while maintaining service quality, especially for systems that directly impact revenue.

In the negotiations strategy section, the VSP's approach is detailed through 7 key levers. These included reducing rates based on industry benchmarks, securing multi-year discounts, and lowering transition costs. The strategy also emphasized the importance of providing efficiency gains over time, optimizing Project Management Office (PMO) costs, deferring Cost of Living Adjustments (COLA), and securing additional investments. The prioritization of rate reductions and other investments during negotiations with Tech Provider B is particularly noteworthy.

The results section quantifies the outcomes of these negotiations. It reports a reduction in application development rates for near-shore resources in Mexico by 7-9% and for off-shore resources in India by 10-20%. Additionally, prior transition costs and investments negotiated by the business unit, valued at $1.7 million, were preserved. This case study serves as a compelling example of effective vendor negotiations that can lead to substantial cost savings while ensuring quality service delivery.

EXPLORE MORE SLIDES FROM THIS PRESENTATION

EXPLORE MORE PRESENTATIONS ON

Oil & Gas Project Management PMO