Summary
ARG assisted a $13 billion in revenue technology and consulting company reduce its IT spend by 30%. The project is a case study in clearly defined goals and consistent communication leading to a true partnership.
Acquisitions create turmoil in IT organizations. Establishing accurate inventory, assessing future needs, and driving reductions in services to meet future needs frequently ends in frustration. Priorities shift in these situations, forcing IT leaders to reallocate resources away from driving post-merger economies to addressing the operational needs of the newly combined entity.
Bringing in ARG as a consultant to take the network synergies and cost reduction work off the shoulders of the IT staff achieved dramatic results. Not only did the team exceed their reduction goals, but the client IT staff also gained significant operating agility and control.
Situation
Mergers and acquisitions create turmoil in organizations. The integration of staff and operations distract from hitting performance goals to move the combined organization forward. Frequently, the synergies available are not obtained because the new organization has significant new initiatives. The inefficient legacy environments, known as “technical debt,” remain unaddressed.
The adage, “if it isn’t broke, don’t fix it,” applies to many such situations. It’s not that the IT organizations don’t consider synergies a priority, but their accountabilities and project load increase within the new organization while the combined staff count typically decreases. IT staff efficiencies typically decrease and new roles and ways of working are adopted.
ARG had a long-standing relationship with a medium-sized company that was acquired by a much larger organization. The Chief Information Officer (CIO) of the smaller organization was promoted to head IT for the larger combined organization. ARG was one of the key partners the new CIO leveraged to hit their aggressive targets.
Problem
As is commonly the case, mergers and acquisitions frequently rely on cost savings through synergies to enhance the value of the transaction. The IT organization was tasked with obtaining a specific cost reduction goal.
Once established in the new role, the CIO brought ARG in for a series of strategic planning meetings. ARG was tasked with 1) understanding the new environment, 2) making recommendations for immediate synergies and cost reductions, 3) reducing the number of providers and invoices, and 4) establishing a technology roadmap for future improvements in both technology delivery and network optimization. The overall goal was to reduce network spending by 15%.
Additionally, ARG wanted to keep the client open and flexible to new technology developments and what seemed like an inevitable merger and acquisition activity. It’s easy for organizations to sit on comfortable technology during times of upheaval. Collectively, ARG and the CIO knew that the organization had to move forward intelligently for a successful result.
Additionally, the organization had been struggling with service interruptions due to unpaid invoices. The organization was diligent about paying invoices, but many of the more than 200 locations had established network services independently and were inconsistent in forwarding invoices for processing. Even though IT had not coordinated the services and did not handle the invoices, they were blamed for the service interruptions. The disconnections were an unnecessary distraction for the IT team and needed to be eliminated immediately.
Approach
ARG poured over contracts and invoices, creating a comprehensive inventory of billing assets in the client’s communications networks. Multiple siloed networks were identified utilizing dated technology that, while functional, were inefficient from both a cost and a management perspective.
ARG recommended to the client that an Information Technology Expense Management (ITEM) service be implemented. ITEM provides a platform upon which current inventory and expenses can be managed from a central control panel. Network migrations can be tracked and changes in billing confirmed. ITEM provides excellent visibility to complicated networks and network migrations – exactly what this client needed.
Immediate benefits of the ITEM platform were derived by addressing excessive late payment fees and non-payment service disconnections that had been plaguing the organization. Through ITEM’s ingestion of service provider invoices, tagging billing elements with the appropriate accounting codes, and uploading ITEM output directly into the client’s accounts payable system. This streamlined invoice processing allowed the client to catch up on overdue charges and pay on time, eliminating service disruption events and minimizing late fees.
ITEM provided client management with a network portal for their internal network managers. While ITEM offers a consistently updated view of the network installed, pending installation or disconnect, the client continued to run their manual worksheet inventory process in parallel as a check. Over time, ITEM became the trusted universal source of truth for communications services.
With a complete inventory and billing management system in place, the client challenged ARG to hunt for additional savings. The request was to find $1 million in annual savings out of a total network cost of approximately $6 million budget.
Action Plan
Leveraging the ITEM platform, ARG was able to assess immediate opportunities accurately and confidently for economic and operational efficiencies. Spending was categorized by several variables such as total contract cost, contract status, and commitments, as well as client requirements versus service delivered.
Targeting the larger spending buckets that were either out of term or coming out of term shortly and where significant savings seemed likely, ARG created a priority list of network recommendations. For those services that did not immediately rise to the highest priority but that were at the end of the contract term, ARG undertook a contract renegotiation strategy to commit to a short-term contract renewal in exchange for immediate cost reductions. Lower priority items were noted and designated for further consideration once the major elements had been addressed.
ARG targeted several legacy MPLS networks for replacement with fiber-based internet access and recommended the client evaluate SD-WAN to enhance the quality of user experience over the public internet. Transitioning the organization from disparate premises-based phone systems to a single cloud-based unified communications as a service (UCaaS) platform was also on the roadmap.
The CIO accepted the plan and ARG went to work!
Plan Execution - MPLS
ARG conducted several discovery sessions with user groups to understand the current and future needs of the network elements under consideration. These discovery sessions allowed ARG consultants to narrow the large field of potential providers to a manageable number of providers that met all client criteria.
ARG approached this shortlist of providers – 10 or so – with the client’s requirements, goals, and objectives. First under consideration was replacing an expensive MPLS network with fiber-based dedicated internet access. Backup connectivity would be provided with diverse fiber-based internet, or broadband internet, as the requirements indicated.
As the providers responded, ARG analysts realized that no single provider would optimize the service delivery required by the client. A hybrid solution utilizing multiple carriers was recommended to the client. While the hybrid approach was contrary to the desire to minimize the number of providers utilized by the organization, the savings and diversity offered by a multi-provider approach were worth the small inconvenience of multiple suppliers. Additionally, the ITEM service already implemented mitigated much of the management effort the client sought to avoid in their vendor reduction strategy.
The organization quickly adopted the network refresh strategy. Internet orders were placed and ARG’s Project Experience team took over the task of monitoring and managing order progress, troubleshooting when issues arose, and ensuring a smooth installation process. ARG’s Project Experience organization took much of the provisioning tasks off the client team, allowing them to focus on more strategic activities.
Once the replacement services were installed and tested, ARG worked with the client to place disconnect orders with the former provider. ARG’s Client Experience group tracked the disconnects and managed the numerous billing tickets to a successful conclusion. Had the client attempted to manage the disconnect process themselves, they would have left tens of thousands of dollars on the table. With ARG’s expertise, the client was able to recover all credits owed.
Plan Execution - Voice Services
Client IT staff named ARG’s UCaaS transition initiative “Project Unicorn.” The client had attempted to transition to UCaaS several times previously. In the minds of the IT staff, if ARG was able to get it done, it would be like seeing a Unicorn!
For project Unicorn, the client requested that ARG conduct a formal request for proposal (RFP) process. The UCaaS services were going to be a major purchase, potentially displacing longstanding strategic relationships and the client wanted everything done by the book.
ARG, through its requirements discovery process, identified key stakeholder needs and use cases. ARG drafted an RFP covering use case UCaaS functionality, requirements around specific needs and security.
Key to the client’s voice services requirements was a secure infrastructure platform in which the UCaaS platform was housed. ARG surveyed the key players in the industry, accessing senior executives in each of the providers to access their respective progress towards a platform meeting the client’s security requirements.
ARG identified several “hosted” approaches that met the security requirements, but not all approaches were considered true UCaaS offerings. Nine providers received the RFP and eight submitted comprehensive responses.
ARG collated the provider responses into a proprietary scoring system that allowed specific requirement weighting. Bidder responses and ARG’s knowledge of the bidder’s offering were combined into a consolidated review that informed the client’s decision panel on where key issues arose in each response. The response matrix was facilitated by heat mapping the responses relative to their satisfaction with the requirement.
Along with the provider RFP response matrix, ARG prepared a market analysis of the bidders that included financial strength, investments in their respective platforms, analyst reviews, and similar clients supported by the bidders. The vendor considerations were supported by an extensive financial model developed jointly by ARG and the client. Joint development ensured consistency and agreement around key modeling assumptions and methodologies.
After a narrowing of bidders, ARG hosted several vendor days where the RFP finalists were able to conduct technical deep dives and operating organizational discussions. ARG pursued the finalists to craft their best offers around key client needs, including a substantial transition credit and turn-up period.
Once again, ARG’s Project Experience team shepherded the project through an initial pilot and then the organization-wide rollout. The entire project took 8 months. The methodical approach, informed by over a thousand UCaaS implementations, by ARG allowed the client to direct the activities, but avoid involvement in much of the minutia required to transition 10,000 users.
After Unicorn was successfully implemented, ARG’s Client Experience organization began methodically working with the client to cancel the older voice services. Network cancellations are notoriously difficult with providers, as they attempt to leave services in as long as possible to eek the last remaining profit potential from the services. Precise communication, tracking of cancelation dates, and auditing billing were affected by the Client Experience team with the assistance of the ITEM platform.
At the conclusion of Project Unicorn, the client requested a financial post-mortem review. Collectively, the team agreed that while COVID-19 had delayed the overall implementation, the final project delivered exactly what had been modeled at the start of the project.
Outcomes
Two and a half years into the relationship with the merged companies, and multiple acquisitions since, ARG and the client still operate as a team. The client truly views ARG as an extension of their staff to the point of the Procurement Department will send departments seeking network services directly to ARG.
Invoices and providers have both been cut in half.
Savings have exceeded the client’s goals. To date, the savings program exceeds 30%!
ARG and the client maintain close alignment with daily staff interactions regular touchpoints with senior management and a quarterly business review to ensure strategic alignment. The client has implemented a quarterly scorecard process for all IT vendors. ARG enjoys consistently high scores but strives to increase its value to the client and immediately address any issues that arise between the partners.
ARG can help with your technology procurement and ongoing management and support. Email info@myarg.com to find out how to add ARG’s resources to your team.
