Cost Reduction Strategies in IT Vendor Negotiations PPT

This PPT slide, part of the 15-slide Technology Sourcing in the Oil and Gas Sector PowerPoint presentation, outlines a case study of a negotiation led by the VSP for a contract with Security vendor X, resulting in approximately $4 million in cost savings. The left side presents the project context, detailing the evaluation of 5 IT vendors by Downstream LCG to support over 125 custom applications. Initially, the service model was based on staff augmentation, with a clear objective to transition to managed services. The management aimed to lower total costs while maintaining service quality, particularly for systems that directly impact revenue.

The slide notes that the project narrowed down proposals from Tech Provider B and Tech Vendor V, with a preference for a mixed staffing solution. The VSP was engaged to negotiate further reductions in Tech Provider B's bid.

On the right side, the negotiation strategy is detailed, highlighting 7 key levers that the VSP focused on during discussions. These included reducing rates based on benchmarks, securing discounts for multi-year commitments, and lowering transition costs. The strategy also aimed to provide efficiency gains over time and optimize PMO costs. Additionally, it included deferring cost of living adjustments and securing other investments.

The results section summarizes the outcomes of these negotiations. It notes a reduction in application development rates for near-shore resources by 7-9% and for off-shore resources by 10-20%. Furthermore, prior costs and investments worth $1.7 million were preserved, showcasing the effectiveness of the negotiation strategy employed by the VSP.

This slide is part of the Technology Sourcing in the Oil and Gas Sector PowerPoint presentation.

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