Tag: Custom Benchmarks

Leveraging Contract Benchmarking: Strategies for Negotiating with Veeva Systems | Blog

This blog shares how Everest Group helped a large life sciences company negotiate best-in-class rates for Veeva Vaults and CRM during contract renewal negotiation. Continue reading to discover how contract benchmarking can empower your enterprise to make effective deals, or get in touch.

Veeva Systems, a cloud-based software provider, has established a prominent market position in the global life sciences industry. The business’ market success often leaves customers with limited to no leverage during commercial negotiations, with prohibitively high costs of switching to a different provider and few other viable market alternatives. This leads to difficulty when attempting to negotiate better contract prices with Veeva.

However, by gathering accurate contract benchmarking data for the various Veeva products, procurement teams can negotiate top-tier rates and contract terms.

Let’s explore an example of how Everest Group helped this large US life sciences company identify savings opportunities in their Veeva Vaults and CRM contract renewal negotiation.

The supplier background

Veeva Systems offers several software products to help clients capture clinical trial data, enhance regulatory compliance, control quality, manage adverse events for clinical and post-marketed products, and more.

In addition, the company’s full-fledged CRM suite, Veeva Commercial Cloud, enables sales, medical, and marketing teams to work together more seamlessly. Customers also use Veeva professional services to implement Veeva products, manage programs, configure applications, integrate or migrate data, and garner sampling expertise.

Veeva has created a strong foothold by leveraging its state-of-the-art product suite. Most major pharmaceutical companies use one or more Veeva products. We have observed that Veeva’s wallet share has significantly increased with most customers over the years, due to the widespread adoption and use of their software products.

How we helped the customer 

Like many other existing Veeva customers, our client’s spending with Veeva increased significantly over time. The renewal proposal was nearly 2.5 times their current spend. To help the client get the best rates, we leveraged our internal contract database to identify similar large Veeva deals for the same Vaults, CRM, and professional services.

We followed our standard rigorous normalization approach to identify deals in our contract database that were similar in nature and size to the client’s deal with their software provider. This ensured a like-to-like comparison and offered contextual benchmarks for the client.

In addition to providing the client with the price benchmarks for various Veeva products and services, we also shared some tactics to help them negotiate effectively with Veeva.

Some of the key recommendations were:

  • To seek a ramp-up plan instead of further negotiating peak prices. This provides the customer with the flexibility to pay a fee lower than the peak price for the initial one or two years, allowing them to optimize the total contract value (TCV)
  • To leverage year- and quarter-end sales team targets to get extra discounts. Veeva may agree to higher discounts in contracts signed during the close of their fiscal year or quarters than other times

While each relationship with Veeva is unique, we firmly believe these recommendations and the right contract benchmarking can put any enterprise in a better negotiating position.

To discuss software contract negotiation or for a detailed analysis, contact Rahul Gehani and Udit Maheshwari or [email protected]. Explore Everest Group’s contract benchmarking offerings, or join our LinkedIn Live discussion on delivering commercial value in outsourcing contracts on.

Contracting for Value: Balancing Expectations and Reality in Outsourcing Engagements | Blog

Everest Group’s Strategic Engagement Reviews (SERs) reveal several key trends that hinder enterprises from realizing maximum value from business process services (BPS) contracts. As enterprises rethink their outsourcing strategies, reevaluate current contracts, and rebalance work, these findings are highly relevant. Read on for insights into the research.

Connect with us to discuss BPS contracting.

Recently, when reading the Aesop fable The Tortoise and the Hare to my toddler niece, I was struck by its resemblance to the current state of outsourcing engagements. During the pandemic, service providers were in emergency mode to ensure business continuity for their clients, which increased satisfaction scores in 2021. However, providers faltered in maintaining the same momentum going into 2022 during the period of the Great Resignation. Providers were not prepared for the sudden large-scale attrition in the services industry, resulting in inconsistent service delivery quality and, consequently, impacting client satisfaction.

Decreased buyer satisfaction from key issues study

Fast forward to today, we see the recent banking collapse already casting a haze over the business landscape. As the saying goes, “Where there’s smoke, there’s fire.” Enterprises are investing more cautiously, given the current cost pressures along with fears of an economic slowdown and uncertainty. With every dollar being scrutinized, enterprises are rethinking their outsourcing strategies and evaluating the value realized from their outsourcing engagements. Let’s explore this further.

Key observations from strategic engagement reviews (SERs)  

Over the past year, Everest Group has supported many leading enterprises in evaluating their outsourcing contracts across different functional areas and benchmarking them against industry standards by leveraging our proprietary Strategic Engagement Review (SER) framework. The framework enables 360-degree assessment of outsourcing engagements with analysis across various dimensions, including solutions, pricing, contract terms, provider delivery and performance, and transformation.

While most of these contracts remain operational with transactional/tactical processes, outsourcing complex and upstream work has increased. We also observed the scope is expanding into adjacent and/or non-traditional areas such as risk management and compliance and environmental, social, and governance (ESG). These advancements are the result of joint efforts by enterprises welcoming providers as strategic partners and providers building robust capabilities to support the judgment-intensive processes.

Strategic Engagement Reviews (SER) framework

While benchmarking commercials remains a high priority for enterprises, the focus is shifting to understanding how to enhance the value from outsourcing engagements (beyond cost) and transform operations through best practices and digital adoption.

Below are a few observations from these engagements:

  • Most of these contracts inaccurately reflect client satisfaction due to irrelevant tracking metrics and unclear communication between parties regarding outcomes
  • Most of the contracts lack innovative commercial constructs that often impede full value realization out of the engagement
  • Both enterprises and providers need to fulfill certain existing gaps to embrace and implement more mature transformation models
  • This can be achieved by considering dedicated change management practices as the heart of any outsourcing engagement

Are performance dashboards merely a facade?

Indeed, performance dashboards tracking Service Level Agreements (SLAs) look as green as the proverbial “grass on the other side,” but the reality is not as rosy for a myriad of reasons. This phenomenon is often called the “watermelon effect.” Much like a watermelon that is smooth and green on the outside, hiding a red core, service metrics can be on target on the surface, but underneath, they may indicate poor service delivery and enterprise dissatisfaction.

Unclear communication regarding outcomes that lead to contract value leakage is the primary reason for this occurring. With the focus on client-centricity and winning deals, providers often commit to almost all client demands without properly clarifying how the “value gains” will be achieved. This leads to incongruity between the implementation and the client’s vision. For instance, productivity gains can be achieved either through digital resources or full-time equivalents (FTEs). Failing to mention these intricacies often results in difficulty in agreeing on the realized value after the implementation.

Aligning on well-defined outcomes won’t necessarily lead to maximum value realization without identifying and tracking the right metrics to govern the service delivery quality. We often find contractual SLAs that measure activity and workflow steps without aligning with the strategic business outcomes. Measuring irrelevant metrics may dilute the service level credit mechanism, which determines the provider’s fees tied to SLAs.

The holy grail for measuring outcomes and avoiding excess provider payouts is tracking relevant metrics that truly represent the end business goal. For example, if the goal is process standardization, then operational metrics such as payment processing accuracy might be relevant. For more mature organizations looking for large-scale transformation for topline improvement, outcome-oriented metrics, such as Days Sales Outstanding (DSO) could be better.

Sharing is indeed caring – the need for gain-sharing commercials

Enterprises often are dissatisfied with providers’ lack of proactiveness in bringing in innovation for transformation. This stems from the prevalence of the typical time-and-value commercial construct, which doesn’t incentivize the provider to exceed contractual commitments.

By embracing a gain-sharing pricing model that incentivizes providers to bring in more value-adds, enterprises can ensure providers have skin in the game. This approach not only fosters collaboration between the provider and enterprise but also builds an alliance as both parties work hand-in-hand towards a common goal. Moreover, this strategy further establishes the pathway for improved trust within the relationship, which is essential for the provider to act as a strategic partner.

It takes two to tango! Two to transform!

To draw a parallel about these engagements, a contract is like two rowers wading a boat through a turbulent river – it takes joint efforts to row through the perilous journey to reach the shore safely! Likewise, the onus of creating a sustaining long-term outsourcing relationship with maximum value realization lies with both the provider and the enterprise.

While the lift-shift-fix transformation model appears to be the most prevalent, there are profound reasons more mature transformation models are not being implemented. Although enterprises want providers to proactively pitch their technology solutions, the reality is that the willingness to embrace these contributions is limited! The reason enterprises are reluctant to adopt provider technology beyond point solutions is simply because this typically entails heavy provider ownership of the technology infrastructure. Consequently, enterprises want to avoid operational dependency that might increase future switching or termination costs.

On the other side, we also see providers being a bit risk-averse about challenging the in-house enterprise technology landscape to maintain good relationships with their clients by avoiding ruffling the features of the enterprise infrastructure!

While this type of arrangement minimizes provider intervention and operational dependency, it also limits cost efficiencies and business value that comes from leveraging provider technology. True value realization from outsourcing engagements will be achieved when enterprises provide more ownership of processes, visibility into organizational data, and greater flexibility to operationalize providers’ transformation initiatives. Concurrently, providers need to outline a clear transformation roadmap for enterprises, enabling them to visualize their journey ahead.

It’s high time that we see the “C” in change management as an underrated pivot to outsourcing

The change management aspect of resources is often underestimated in outsourcing relationships. Enterprises report that poor change management initiatives from providers can lead to disgruntled employees, resulting in employee attrition that indirectly affects the outsourcing project quality. Therefore, it is important to take a more proactive and structured approach to increase employee engagement and productivity in the outsourced service function, rather than approaching change management reactively and on an ad hoc basis.

What is the best way forward?

As enterprises plan for renewed growth, it will be intriguing to see how the outsourcing landscape evolves amidst the anticipated geopolitical unrest and recessionary environment. Some questions we’ll be following are: Will organizations need to rebalance work? Will increased provider rates challenge the cost advantages of outsourcing? Will large-scale transformation initiatives take a back seat to increased demand for short-time-to-value products in the near term?

To benchmark your current outsourcing contract, contact Everest Group. For more information, reach out to Prateek Singh, Practice Director, BPS, and Asmita Das, Senior Analyst, BPS.

Join our webinar, Key Issues 2024: Creating Accelerated Value in a Dynamic World, to discover insights into the current perspectives of IT-BP industry leaders and the major concerns, expectations, and trends for 2024.

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