Pharmaceutical
– Distressed Exit and Multi-provider Recontract
The client, a FTSE 100 pharmaceutical company operating in over 150 countries and with an annual IT spend more than US$1B, was highly reliant on outsourced services, particularly a major full scope infrastructure and telecommunications contract.
However, the actual performance of the supplier was well below the required standard, and the arrangement did not meet the businesses demand for flexibility, agility and cooperative working with other key providers.
Client Objectives
A new strategy was formulated, involving the replacement of the current monolithic arrangement with several smaller, more agile contracts, and the creation of a collaborative supplier ecosystem based on shared objectives, standards, incentives and behaviours, into which incumbent providers would be drawn. Because the existing infrastructure provider was being terminated, timescales were tight and fixed, and this was coupled with a challenging cost savings target.
As part of the sourcing strategy, the client had insourced accountability for the SIAM function, with a TOM based on a very lean internal team supported by contractually defined collaborative behaviours and incentives, embedded in a common collaboration agreement. However, the contract did not provide any details on how these behaviours would be evidenced, measured or enforced.
A joint client/consultancy team was created to deliver this major change programme and embed the new operating model post go-live.
Skills & Capabilities Provided
As part of the external consultancy team, Lifecycle associates carried out key roles in both the execution of the sourcing transactions and the successful implementation of the supplier ecosystem during and after transition.
Taking over at short notice after the departure of one of the client team members, a Lifecycle associate acted as commercial lead for the main infrastructure hosting and data centre contract.
Post contracting a specific role was created in the contract for an Ecosystem Arbiter – an independent role which was co-funded by all the participants (client and providers) and would act to coach all parties, monitoring behaviours and intervening to resolve issues, including acting as a binding point of escalation for multi-party disputes. A lifecycle associate acted as this Arbiter for the first eighteen months post go-live.
Client Benefits Realised & Project Outcome
In this role, we:
• Worked with the client finance team to design and agree the contract financial model and embed it into future budgeting processes;
• Negotiated pricing with the selected winning bidders, resulting in additional savings in excess of US$20m per annum;
• Launched and executed an urgent go to market for the new data centre LAN equipment which had been omitted from then original service transition requirement.
• Coordinated with client serviced management teams to set and finalise service level targets and associated service credit mechanisms;
• Creating measurable behavioural Performance Indicators against which both supplier and client adherence to the agreed collaboration principles could be assessed;
• Established joint governance forums for discussing and resolving cross-supplier issues.