A European bank did not achieve the cost savings it had hoped for after integrating several companies. Costs and integration expenses were growing, particularly in IT. Under pressure from the regulator, the management formulated a drastic cost savings target for IT totaling 30 percent. These savings were to be achieved within one year. At the same time, it had to be ensured that the high availability of the IT systems was not jeopardized. The interim manager and expert in IT cost reduction was hired to reduce the high external IT costs in particular and to renegotiate the corresponding service contracts.
In many cases, IT contracts no longer met the actual requirements
The interim manager set up a project in which he examined the IT cost items - especially external costs - for short-term cost-saving potential. The focus was, for example, on the entire IT server operation including mainframe, AIX systems and Solaris, as well as Windows and Linux. The service providers concerned were major international providers such as IBM, HP and Accenture. Some of the existing IT contracts had long contractually agreed remaining terms. However, he found that some requirements had changed significantly. In many cases, they no longer corresponded to actual requirements. In some cases, fixed budgets had not been fully utilized, while in others, high flexible additional services had been purchased that had not been adequately negotiated in terms of price.
Building pressure on the existing service providers with realistic market prices
In order to support the renegotiation of the contracts, the interim manager set up a team to create a request for proposal (RfP) and placed it on the market to obtain realistic market prices. He used tried and tested templates for the RfP. This allowed the RfP to be created in just a few weeks and agreed with all those involved in IT and purchasing. Concrete counter-offers were available just 8 weeks after the start of the project. The new competitive situation brought transparency to the achievable prices. Based on these offers, the interim manager was able to negotiate very effectively with the current service providers.
Modernization roadmap developed for the cost-intensive mainframe applications
In parallel, the interim manager worked with the client's IT team to develop a modernization roadmap for the cost-intensive mainframe applications such as the core banking system. For several system components, he designed the switch to standard systems or cloud applications.
In addition, the interim manager optimized the IT delivery model and increasingly considered cloud solutions for new requirements. Internal requests can now be implemented faster and more cost-effectively, for example via a private cloud. A container-based development model that is independent of service providers or specific hardware will be used in development in future.
Demand management improves utilization of service quotas
The interim manager also set up structures to better manage internal demand from IT managers, such as server capacities. As a result, the requested capacities are better coordinated with the contractually agreed quotas and cost-optimized procedures can be implemented in the event of increases. The new processes were also dovetailed well with the existing organization to ensure the transition to permanent regular operations. On the initiative of the interim manager, a planning and prioritization committee was set up, in which the specialist departments also participate.
Short-term savings of more than 20 percent realized
The negotiations resulted in short-term savings of more than 20 percent per year across all external IT services considered. Significant budget-effective savings were already achieved in the year the project was launched. In the medium term, savings of more than 30 percent were achieved.
In order to ensure the success of the project, the interim manager contractually agreed to support the service providers with regard to project implementation. Win-win constellations ensure that the service providers also have an incentive for further cost reductions.
