Insight

Commercial Insight: How to deliver commercial benefit from your managed infrastructure service provider

Insight

Insightful technical and commercial decisions helped Marinar rescope and upgrade its Infrastructure whilst achieving sustainable business benefits

*Protecting our clients’ confidence is of utmost importance at ITAA. While our case studies are based on true projects, we have used fictitious names and removed or changed other identifiable details.

Background

Marinar is a global retailer with more than 1400 stores in 75 countries, plus a strong e-commerce solution. With their hardware reaching end of life and a need to accommodate a migration to SAP S/4HANA, they had a technical and commercial requirement to optimize their infrastructure.

Their existing on-prem estate was a managed hosting solution on dedicated infrastructure that had evolved with the supplier over many years.  Marinar had recently negotiated a sound commercial agreement with SAP for S/4HANA, the delivery of which required an increase in on-prem hardware.  With budgets under increasing pressure, minimizing Infrastructure TCO was a priority.

The commercial strategy’s key objectives were to:

  • Specify what proportion of the managed solution could be terminated, considering legislative requirements, technical complexity and end-of-life hardware
  • Review the service levels for the hosted infrastructure to ensure they met business needs
  • Explore the market for the new hardware requirement considering the technical specification, warranty available, and commercial terms

Our role was to collaborate with the technical teams to establish their current capacity requirements with the hosting supplier, define the exact requirements to take to market for the future state given the wider S/4HANA requirements, and finally to negotiate the contracts for the new hardware and renegotiate the managed hosting solution.

Our approach

Step 1: Preparation for market

The infrastructure market is split between traditional hardware providers and managed hosting service providers, many customers use a hybrid model of on-prem, hosting and increasingly cloud.  With any new investment it is important to carefully consider your organization’s current estate in order to design and deliver a cost-effective and futureproof solution.

Marinar’s technical team defined the future requirements ensuring they reflected the migration to S/4HANA, enabling us to construct a request for proposal (RFP) to evaluate the supplier market. The market scope was limited due to the technical requirements to run S/4HANA, the RFP was issued to 4 suppliers.  We then summarized supplier capabilities in market appraisal reports, shared with Marinar. The evaluation of supplier responses was swift and simplistic, as not all providers could meet the specification.

The second element, to modify the existing service to deliver both cost and service efficiency.  We produced a roadmap with the technical team to identify kit to be switched off immediately, and the phasing as the S/4HANA migration progressed.  Service levels were also reviewed and where possible reduced.

Step 2: Evaluation & Negotiation

Leading the wider project team, we developed a scorecard to evaluate the supplier responses, with relevant subject matter experts scoring each section of the responses. It became clear that only one supplier could meet the requirement.  We developed a negotiation strategy to achieve maximum commercial advantage:

  • negotiations were led by us and the CIO to retain leverage and mitigate risk of the lead supplier discovering their position
  • the supplier’s year end was approaching which increased Marinar’s leverage
  • 3-year’s maintenance and support was included as standard, we increased it to 5 years
  • 15% discount on professional services was negotiated to assist with the migration

Next was to address the incumbent agreement.  We identified the key individuals who would constitute the negotiation team, some of whom were the day to day technical team, plus finance and commercial.  Our negotiation plan drove the team to:

  • Bring more commercial than technical focus, a change in the dynamic of the relationship historically
  • Agree the delivery of the roadmap for hardware termination, migration, new service levels and commercial benefits

Step 3: Contract Implementation

The project was complex as the migration to S/4HANA became a reality.  The new hardware had to be implemented as part of the wider project and handed over to Marinar’s BAU support team.  At the same time the incumbent supplier was reducing its on-premise estate and reducing service levels on other areas of the estate.  We were integral in managing the party’s obligations and keeping Marinar’s technical team focused to deliver the optimal outcome.

Key risks mitigated were:

  • Reduced service levels degrading performance of business systems to an unsatisfactory level
  • Delays in the migration from the incumbent to new hardware impacting overall move to S/4HANA
  • Both suppliers not being able to deliver on their promises, either in the short or long term, leading to a longer project timeline and increased costs.

Our breadth of experience with hardware and hosting providers allowed us to develop a supplier relationship management (SRM) program for Marinar, tailored to the suppliers in the project, and with scope to be adopted more widely across the business. It took account of supplier culture and behaviors, knowledge of which is key if you are to deliver the most value from any agreement reached.

Step 4: In-life management

It became clear early in the project that the incumbent supplier had been left to manage the on-premise capacity with little input or guidance from the Marinar team. Once we worked with the team on their estate and requirements, it highlighted opportunities for hardware to be removed or redeployed, delivering to Marinar significant savings on support and maintenance costs.

Reviewing support levels also reduced costs. Marinar was paying a premium for hardware that did not need such a high level of support, either because their requirements had changed over time or elements of support had auto-renewed and fallen out of the consolidated contract.

Our capability in reducing costs and optimizing contracts delivered tangible results both in terms of savings and service delivery. Implementing a robust SRM program provided a cycle of relationship and contract review that underpinned Marinar’s technical strategy going forward.

Results

Marinar had to balance the investment in new hardware against the need to renegotiate their current infrastructure agreement. Despite these parodies, the project was able to:

  • Maintain leverage with the incumbent, who did not want to lose the existing agreement
  • Create commercial benefit from the new investment with market insight providing optimal leverage by optimizing the existing estate and contract terms, we delivered 10% direct cost savings against the existing multi-million-pound budget.

The contract negotiated for the new hardware delivered:

  • 20% Hardware discount
  • 3 years maintenance and support increased to 5 year at no additional cost
  • 15% Discount on professional services to assist with the migration

Defined negotiation strategies meant no information leaks from Marinar during the procurement process, delivering a coherent approach to the supply base as well as maximum value to the final agreement. An agreed strategy and roadmap for internal teams with incumbent suppliers will change ingrained behaviors and deliver improved commercial and supplier performance for the future.

We take processes apart, rethink, rebuild, and deliver them back working smarter than ever before.