CaseStudy: 21% savings on IT spend through Spend HyperCube.

3 December 2018

Industry – Financial Services

Public/Private – Public

Annual Revenue –$3B

Problem

  • The CIO was looking to optimize enterprise the organization’s IT spend.

  • IT spend was mis-classified due to lack of uniform taxonomy and a significant amount of spend was found mis-categorized. Therefore, the CIO did not have a 360-degree view of the spend and missed out on savings and compliance opportunities.

  • The general ledger and accounts payable data did not have complete descriptions, making it difficult for correct categorization.

  • There was no contract visibility due to multiple contracts with same vendors for different sub-categories.

  • In quite a few cases, the client had paid an advance for 3 years, making it difficult to determine the budget for future years.

  • The organization required research on new technologies and suppliers.

  • The software usage by the organization was not known for particular vendors. Hence, the organization wanted to determine if they were under-licensed or over-licensed as per the contracts.  

 

​Alldyn was the consulting firm engaged by the client firm. Alldyn gave Proacure the spend analytics work that included spend categorization, spend baselining and spend better which we call as Spend Hypercube.

 

Process

  • Alldyn shared with us the dump of GL, AP, 500+ contracts, RFIs, POs and invoices.

  • Spend categorization  

    • The meta data from the POs and invoices was captured to fill in missing descriptions in GL and AP data.

    • The vendor data was cleansed and enriched to categorize spend as per the client taxonomy.

  • Spend baselining

    • This involved more than 100 vendors

    • The spend data for the last 12 months was captured through the Accounts Payable systems.

    • In addition, we read sourcing documents such as contracts, change letters, order forms, RFIs, email communications and purchase orders for each vendor to understand the spend committed by the company as compared to what was paid as per the AP.

    • A reconciliation was done between the AP data and the contractual position, and key differences were reviewed.

    • The output of this activity was an interactive current year plus future 5-year spend profile, which could be diced and sliced according to category, spend type, vendor etc.

  • Spend better

    •  The usage logs were analyzed and compared with the contractual licensing to find cases of under-licensing and opportunities in case of over-licensing.

    • The task was to estimate the demand from the user logs in terms of numbers of users per application, how frequently the users were on the application and grade the users from frequent users to casual users. This enabled the team to optimize the costs by either reducing the plan features from Platinum to Silver or change from an online version to desktop version.

    • We studied the pricing matrix of different software vendors from the invoices and compared them with the information available on the internet regarding different licensing options.

    • We leveraged our experience of having worked with other clients to understand if the contracts needed to be renegotiated during the RFX process.  

 

Key Findings/Savings

  • 21% savings achieved on IT spend by the client

  • Proacure team in India provided analytics firepower with quick turnaround time to Alldyn consultants each day in the morning at 8 am EST to help them leapfrog and take strategic decisions for IT spend optimization.

  • The Spend baseline provided crucial inputs for running an RFX by Alldyn consultants.

  • The Spend better helped Alldyn to optimize licenses for compliance and savings. Over licensing / Under licensing - opportunity to save maintenance / subscription cost by canceling the licenses in case of over licensing and to buy additional licenses and avoid audits / penalty payments in case of under licensing

  • Optimizing license metrics from a commercial perspective, such as concurrent users to named users, and from user licenses to CPU licenses etc.

  • Benchmarking using our experience of working on other clients for this category as well as publicly available data

  • Discovered overpayments through wrong billing, duplicate billing, unclaimed rebates etc.

Story of collaboration between two boutique procurement firms – Alldyn, a consulting firm, and Proacure, a procurement analytics company. Alldyn comprises of top consultants from McKinsey, BCG, Deloitte, KPMG and Mitchell Madison group. Rolf Thrane, President Alldyn was named one of the top 25 consultants by the Consulting magazine.

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