CDRU’s Cost Reduction Journey
The Background
CDRU were initially engaged to undertake a short, sharp review to provide insights in opportunities where IT cost optimisation could be made to improve both short term (in FY) and long-term IT run cost.
This initial review led to a multi-year engagement with CDRU managing and delivering cost optimisation initiatives across all elements of IT, Corporate back office, Sales, Marketing, Operations and Engineering divisions.
The Challenge
Like its competitors our client experienced increasing market and operating cost pressures in a highly competitive industry, highlighting the need for operating cost reduction and profit margin increase.
Group IT had a number of challenges to address including:
- Proliferation of IT suppliers
- Non effective IT operating models
- Low levels of architectural, operational and project delivery maturity
- Reduced budget over future years to deliver same level of services.
The Solution
Starting in IT, CDRU was solely selected to complete E2E Sourcing Strategy, Execution, Transition and ongoing supplier management across all IT Services & applications, networks and enabling Infrastructure, into a new IT transformed future state while ensuring IT was a driver of significant corporate value to the organisation.
Following a successful multi-year engagement within IT, the client engaged CDRU to drive a group wide cost optimisation program across all non-Customer facing functions while at the same time ensuring service continuity and improved quality to internal and external stakeholders.
Using CDRU’s ‘USP’ sourcing-transformational process, multiple strategic service providers were sourced across Applications, Infrastructure, Telecommunications and Back Office Functions, using a blended onshore/offshore service delivery.
Activities – IT
CDRU commenced in IT by mapping our client’s existing state, supplier base costs and formalised a total cost baseline position for all IT spend including shadow IT. Using our market knowledge, CDRU developed a series of immediate and medium-term recommendations to achieve sustainable cost reductions including:
- Implement an IT governance model
- Improve the maturity, scalability, and agility of IT in a cost effective jointly resourced strategic program
- Build an Enterprise IT operating model & PMO, by establishing robust IT governance
- Establish Vendor Management and Sourcing Model
- Align and elevate the capability of the architecture team
Following these recommendations CDRU managed and delivered a multi stream program of work using our in-housed developed ‘USP’ sourcing-transformational process to source and transition in multiple strategic service providers across Applications, Infrastructure, Telecommunications using a blended onshore/offshore service delivery.
Activities – Back Office functions
Successfully completing a multi-year cost optimisation program across IT, CDRU deployed its ‘USP’ across back-office functions with the initial focus in Finance. CDRU clearly mapped out in practical steps what had to be done from the initial market briefing through to full transition of the in-scope functions to the new managed services partner to achieve the cost optimisation outcomes for our client.
CDRU provided a team of expert programme and project management resources, complemented by Business Analysts, Organsitional Change Management (OCM) specialists and Finance Subject Matter Expert (SME) consultants. Working with the client Project Director, CDRU managed the sourcing and transition delivery over a 9 month accelerated programme, including multiple technology enhancements and tool deliveries from both internal IT and the Service Provider.
The Benefits
CDRU’s primary objective generated short and medium-term cost reduction including:
| Managed Infrastructure and End User Services: | 19% over 5 years |
|---|---|
| Managed Print Services: | 38% over 5 years |
| Telco carriage services: | 16% over 5 years |
| Application Support Maintenance Services: | 20% over 5 years |
| Corporate Back-office services: | Phase 1: 42% over 5 years Phase 2: 48% over 5 years |
In addition CDRU achieved the following:
- Successfully transitioned the management and delivery of the in-scope services to the contracted MSP, within the contracted transition timeframe and budget, and in accordance with the approved business case
- Ensured the current business operation, service levels and functionality to the business throughout the transition phase/s were maintained
- Renegotiated and consolidated supplier contracts
- Optimised IT Infrastructure and Operations
- Optimised IT Project Portfolio
- Developing a simplified IT Architecture
The Results
CDRU partnered with our client through a transparent business model transformation based on vendor independence and risk-sharing through outcome-oriented fee structures.
The cornerstone of CDRU’s proven methodology is that our client’s cost reduction initiatives required the interlinking between IT strategy development aligned with their business needs and IT Procurement, with strong category experience and operational implementation experience to realise cost reduction.
From benchmarking to strategic sourcing, cost optimisation to transition planning, we saved our client between $30M – $50M over the five year period of engagement across IT and BPO, achieving targeted cost reduction and significant yield improvement as well as the following results:
- Prioritised a single integrated sourcing program across all Enterprise Applications, Infrastructure, Networks and managed Print towners.
- Improved IT effectiveness resulted in lower Opex generated, with a more sustainable foundation existing with greater value and better returns from IT investment
Using the CDRU ‘outcome’ business model from the outset, sourcing & transition risks were known and mitigated, timeframes were compressed and early benefit realisation was achieved. The benefits of working with CDRU can be summarised below:
- Partnered with an expert ‘can do’ partner that drove the strategy, process scoping, sourcing, and supplier transition to low the overall program risk.
- Delivery of a high-profile business program that worked very well with a mix of client and multiple third parties resource, within very tight timeframes to meet cost reduction goals.