1. Case Study:
Restructuring a multi-year IT Outsourcing
contract for a Large Health System
Background
The client had entered into a very large IT outsourcing contract with a global services provider with a significant offshore
capability. The scope of the contract covered server, network, and end user computing. The contract was comprehensive in
scope, with substantially all of IT infrastructure operations being handed over to the vendor. Due to several acquisitions
and mergers, the scale and complexity of the engagement had changed dramatically. However, the performance against
contract objectives was short of expectations due to a variety of reasons.
Specifically, the following issues were identified in the current state:
The client, a major health system, needed expert help to restructure a large outsourcing contract for improved service
quality, while adjusting contract pricing to reflect significant scope changes and market benchmarks.
• The size of contract had increased significantly, both on
the steady state work as well as on projects
• Market stakeholders believed that the quality of service
has decreased significantly since the transition of the
services to Vendor
•
the IT infrastructure, lack of discipline in change
management processes, and lack of thorough root cause
analysis and proactive actions.
• The Service Level Agreements were not aligned with
business objectives
The business continued to suffer due to lack of stability in

2. The client needed expert advice to restructure the contract and drive operational and service quality improvements, while
adjusting contract pricing to reflect industry benchmarks.
Approach and Results:
Over a period of 12 weeks, by working closely with the CIO and the IT leadership, we were able to identify the appropriate
measures of performance that would reflect internal stakeholder needs, and developed an approach and a framework for
driving joint accountability for the future state goals and objectives. Through a series of workshops and in-depth
discussions, we were able to drive agreement on the right critical performance indicators and a service quality
improvement framework. We approached this effort as a 3 stage process:
• Assemble & align project teams
• Identify key documents & data
collection requirements
• Conduct pre-launch meeting
• Release pre-launch data request
• Conduct project kickoff
• Develop and refine negotiating
strategy
• Negotiate desired outcomes with
vendor
• Finalize negotiated agreement
• Analyze current state
(contract, financial, operational,
relationship & risk)
• Build consensus around sourcing
objectives, scope and organizational
readiness
• Conduct high level market and
relationship assessment
• Conduct a workshop to align goals
among various stakeholders
• Identify and assess sourcing options
• Develop high level financial cost/
benefit analysis
• Create business case and discuss
options (renegotiate, recompete,
repatriate)
Assess Prepare Negotiate
As a result of structured and facilitated discussions, the parties were able to arrive at a broad agreement on a variety of
issues. These included:
1) Redefining SLA's to reflect end-to-
end system availability at a
divisional/application level as against
the earlier metric of computing
availability and uptime in aggregate
at the server level. A clear roadmap to
achieve 99.99% availability was
agreed upon with the vendor. Client
level dependencies such as
infrastructure upgrades, such as
server/LAN refresh programs, were
agreed upon, along with timelines, in
order to achieve the agreed
milestones for improved system
availability.
• There were significant perceived gaps in the vendor's
technical capabilities
• The execution of project work was seen to be lacking in
demand management, as well as quality of deliverables
• The cost base in certain areas was seen to be off market
benchmarks

3. At the end of the renegotiation discussions, we were able to drive clarity on the revised scope and scale of work, adjust the
fee structure to reflect enhanced volumes, and a commitment to infrastructure upgrades that would drive overall the
performance of IT operations at the enterprise level.
1. Application availability for critical systems: 99.95% minimum, increasing to 99.99% in 6 month period
2. Support SLA's: 23 additional stretch SLA's with substantial penalties for failures
3. Improved pricing and volume discounts: Nearly 20 Million in identified savings potential
Key outcomes for client:
2) A revised computation of risk pools
and weightages to reflect the future
state focus on specific towers, regions
and metrics
3) Rebaselining of volumes and range
of devices to be supported as a part of
the contract
4) Adjustments to the fee structure
based on resource unit (RU)
measurement, revised volume
discounts, and a slab-wise fee
structure for project work.
5) Adjustments to the “dead band”
and ARC/RRC to reflect the new
agreement
6) Agreement to upgrade project
demand management processes, and a
slab-wise fee structure based in
increasing volumes beyond agreed
thresholds
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Damo Consulting Inc is a management consulting, research and advisory services firm focused on
IT strategy, Global Sourcing, and Analytics. Our firm works with large enterprises and global service
providers in the healthcare sector.
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