Corralling Vendor Chaos for Cost Savings and Control
How K&B Global saved a global automaker $50 million annually over five years.
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The Challenge: Vendor Sprawl and Unfavorable SLAs
A worldwide auto manufacturer recognized that its sprawling roster of IT vendors was underperforming and overcharging. It needed a new sourcing strategy to corral and restructure dozens of vendors and nearly 2,000 vendor resources across multiple service towers, including application development and support, service desk and deskside support, core infrastructure, and service management.
The IT org suffered from a lack of organizational tracking, benchmarking, and analysis of how this impacted total ROI. Many vendors individually supplied little to the overall operation, yet collectively amounted to a large total spend.
Additionally, some vendors' contracted rates and SLAs were unfavorable toward the automaker, and in many cases, internal stakeholders weren’t impressed with service quality.
The Solution: Strategic Sourcing and Service Delivery Management
Appreciating that cost savings could not come at the cost of delivery quality, K&B jumped right in with a VMO assessment to understand the current state of the client’s systems before creating a holistic strategy and sourcing model that improved vendor management capabilities through processes, standards, templates, and coaching. The SDM approach included:
- Building RFPs to consolidate into a select few primary vendors and specialized suppliers
- Leading efforts to renegotiate terms with existing vendors
- Securing credits from existing vendors
- Negotiating new Master Services Agreements and Statements of Work to fully document the new terms and conditions, scope, and performance requirements
- Managing deployment of the new vendors and revised services across the multiple towers
Ultimately, K&B transitioned the automaker from a primarily staff augmentation model, where the managers were managing the individual contractors at their offices, to a globally managed services model consolidated into three key vendors in which the managers, supported by the VMO, were responsible for tracking results.
The Outcome: Improved Performance and $250 Million Saved
By transforming from an L2/L3 model in AMS/ADS to a squad model, the manufacturer consolidated its resources and adopted an agile framework that:
- Saved ~$50M/year over five years for $250M in total savings
- Reduced rates by more than 30%
- Reduced vendor resources by 10%
- Improved overall service levels and governance
- Improved the quality of deliverables and performance metrics
“K&B did a fantastic job of understanding our challenges and quickly generating significant, measurable results that directly contributed to the bottom line.”
