Tag: outsourcing

For Growth Objectives, Select A Service Provider Suitable For A Deeper Partnering Relationship | Blog

Companies that contract with third-party service providers to build and evolve digital platforms that help them compete must understand that this calls for a different kind of relationship. A partnering relationship with a deep commitment between both parties. A much more dynamic, fluid relationship. Not an arm’s length relationship with a provider that focuses on driving efficiencies. Unfortunately, not all service providers are equally strong in this kind of partnering relationship.

Read more in my blog on Forbes

Beroe Partners with Everest Group to Offer Deep Insights into Global IT Services and BPO Markets | Press Release

Beroe Inc, a global SaaS-based procurement intelligence and analytics provider, announced its partnership with Everest Group, a global research firm focused on strategic IT, business services, engineering services, and sourcing. The partnership will enable Beroe to further strengthen its intelligence offering with category-leading market and supplier research.

Beroe will integrate Everest Group’s research on supplier identification, monitoring, and locations for key technology and process outsourcing-related categories onto the Beroe LiVE.Ai platform. Procurement teams will be able to access Everest Group’s rich research around Supplier identification (including PEAK Matrix® summaries), service provider spotlights, and location-specific analysis on Beroe’s AI-powered intelligence platform, Beroe LiVE.Ai.

“We are delighted to be partnering with Everest Group and extending its unmatched research insights with procurement teams around the globe. Our partnership with Everest Group will add greater depth to our intelligence offering on Beroe LiVE.Ai,” said Beroe Inc Chief Executive Vel Dhinagaravel.

Beroe LiVE.Ai is an AI-powered intelligence platform tailored for procurement and sourcing professionals – providing market intelligence, supplier risk information, category benchmarking, cost models, market monitoring dashboards, and supplier discovery.

“We’re excited to support Beroe customers through Beroe LiVE.Ai. Everest Group brings robust market intelligence gathered over 30 years of research on complex services markets and providers,” said Amy Fong, Partner, Sourcing and Vendor Management Programs, Everest Group. “Partnering with Beroe will extend this research to a broader group of sourcing organizations and power better decision making and competitive positioning for category managers and their stakeholders.”

About Beroe

Beroe is a global SaaS-based procurement intelligence and analytics provider. We deliver intelligence, data, and insights that enable companies to make smarter sourcing decisions – leading to lower cost, reduced risk, and greater profits. Beroe has been a trusted source of intelligence for more than 15 years and presently partners with 10,000 companies worldwide, including 400 of the Fortune 500 companies. For more information about Beroe Inc., please visit https://www.beroeinc.com/.

About Everest Group

Everest Group is a research firm focused on strategic IT, business services, engineering services, and sourcing. Our research also covers the technologies that power those processes and functions and the related talent trends and strategies. Our clients include leading global companies, service and technology providers, and investors. Clients use our services to guide their journeys to maximize operational and financial performance, transform experiences, and realize high-impact business outcomes. Details and in-depth content are available at www.everestgrp.com.

Media Contacts:

Debobrata Hembram ([email protected])
Jennifer Fowler, Cathey Communications ([email protected]) for Everest Group

Optimizing Guidewire Licensing: A Guide to SaaS Vendor Management Pricing

With increased competition and cost pressure in the property and casualty industry, insurers are rapidly modernizing technology and moving to the cloud. Top SaaS vendors like Guidewire and Duck Creek are playing increasingly important roles in insurers’ modernization journeys. Getting the correct licensing for your enterprise needs is critical to the success of these strategic partnerships. Read on to learn the key aspects that go into Guidewire pricing to negotiate smarter and make more informed purchasing decisions.     

How does Guidewire charge for its platforms?

The most common Guidewire products we see clients use are InsuranceSuite and InsuranceNow. For both platforms, Guidewire’s annual fees are charged as a percentage of the annual Direct Written Premium (DWP) of the procuring enterprise.

An incremental license fee applies to all DWP increases once the enterprise exceeds the DWP baseline contracted during the term period. The incremental fee is typically staggered in nature and decreases as a percentage with increased DWP.

Negotiating the right fees for the platform remains a key stepping-stone to realizing commercial success and increased ROI for the platform. Some of the key negotiating levers in SaaS vendor management scenarios are:

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Five factors to focus on beyond fees

While subscription fees remain the most important aspect of the commercial agreement, the following factors play a key role during negotiations:

  • Non-production environments

The number of non-production environments (NPEs) included in the subscription is an important parameter to consider.

Similarly, Guidewire provides additional credits that can be redeemed to provision NPEs. These NPEs are typically used to provision dev, test, pre-production environments and come in multiple sizes from Guidewire – Standard, Enhanced, Performance, etc. Since these environments are chargeable (post credit redemption), it becomes extremely important to internally calibrate enterprise requirements for NPEs and understand if the provided credits will suffice now and in the future.

  • Price renewals

Price hikes during contract renewals are one of the most dreaded conversations for an enterprise, especially for a niche vendor like Guidewire. Negotiating favorable terms around price renewals is critical. Typically, we observe enterprises pushing for renewal prices to be capped at a mutually agreeable percentage.

  • Price lock-in

Guidewire typically provides multiple add-ons like Predictive Analytics, DataHub, etc., at additional costs. While these may not be immediate enterprise requirements, they may later become necessities. In certain scenarios, Guidewire offers price holds for some of these products.

We recommend price lock-ins at the time of contracting for add-ons that may become requirements in the future and also advise that customers take these two additional steps:

      • Be sure the price lock-in term is longer to take into consideration the implementation period
      • Negotiate a broad price lock-in that includes all add-ons that may become future requirements
  • Service credits

In addition to the core product, Guidewire significantly cross-sells its services. It typically offers service credits that come with conditions. Using service credits is restricted up to a certain percentage of the invoice value (thereby allowing Guidewire to bill for the remaining invoice amount) and the credits expire.

Both of these conditions are geared towards allowing Guidewire’s professional services arm to make inroads into the client environment. Based on our benchmarking engagements, some of the key negotiation points for clients remain around service credits adequacy and the validity period, and the increased usability of each invoice.

  • Support costs

Support costs are an often-overlooked aspect of the agreement. As is the case with most top SaaS vendors, platform support remains with the product vendor, and the cost is baked into Guidewire’s licensing fees. However, Guidewire charges a certain percentage of the subscription fee for extended support if the enterprise is currently on an earlier product version.

This can be a tricky scenario since enterprises may choose not to upgrade due to various reasons – making this one of the most important aspects to benchmark and negotiate as part of your SaaS vendor management.

To learn more about how Everest Group can help your enterprise optimize and navigate through your Guidewire license procurement and SaaS vendor management, please reach out to [email protected].

Learn more about pricing in the services industry in our webinar, Outsourcing Pricing: 3 Pitfalls and 2 Unknowns Enterprises Need to Know in 2022.

 

Is the Request for Proposal in Procurement Dead?

Despite its historic success, the Request for Proposal (RFP) in procurement may be dying in today’s fast-moving environment. Alternatives are emerging that deliver greater flexibility and agility, leading to more innovative solutions. But RFPs still have life left to get the best pricing when comparing similar commodity services. To learn the best practices, read on.   

While RFPs have successfully delivered great business results for decades, a growing sentiment is that the process has its limitations, especially in complex deals. In seeking proposals for services, no perfect model exists for finding the best solution and balancing cost, quality, and risk. The sourcing approach always relies heavily on the skill and experience of the specialists delivering the activity.

Some of the shortcomings we see in using the RFP outsourcing services process include:

  • RFPs are slow – The sequential approach from gathering business requirements through to contracting can take more than six months for most complex procurements, which is a disadvantage in high-speed environments. Best-in-class organizations take far less time for the same activities in IT strategic sourcing initiatives, completing the process in nine to 10 weeks, according to our IT Sourcing Pinnacle Model Assessment
  • RFPs lack agility – Buyers can become tied into less-than-optimal solutions because they fear adjusting or adapting the requirements will lead to a lot of reworking and additional time communicating with suppliers. Customer concerns that the whole process might need to be restarted if they make changes limits flexibility
  • RFPs make direct comparisons difficult – An RFP can be effective in comparing pricing on a consistent set of business requirements where exact specifications can be documented.

However, using an RFP submission is not of value when comparing like-for-like services that can be delivered in multiple ways while still meeting Key Performance Indicators (KPIs) or Service Level Agreements (SLAs). Using an RFP can lead buyers to make decisions purely on price and not on the fitness for purpose of the solution offered

Most procurement and sourcing teams know the traditional RFP process has its restrictions, so why is it still being used?

Procurement, finance, and senior leadership teams who traditionally prefer to look across a set of “line-item costs” and compare suppliers to make a selection are comfortable with the RFP process. It is clear who is offering the best price, even if it does not help identify the best solution.

Other more informal approaches may leave procurement teams open to allegations that a “proper” process was not completed. It is important to have an audit trail of procurement activities for many reasons including compliance. The RFP is seen as a very robust and traceable way to conduct a procurement event.

Alternatives to the request for proposal in procurement

To address some of these issues, procurement teams are using alternatives to the traditional RFP approach that can either stand alone or be used alongside a traditional RFP in outsourcing services. A few emerging approaches we see are:

  • Joint solutioning sessions – The buyer and selected suppliers work collaboratively to develop a solution to address a business problem or opportunity. As an example, a leading agriculture company conducts regular solutioning workshops with suppliers to shape requirements for white space IT Research and Development (R&D) solutions. Generally, this format works best for newer services but is not recommended for commoditized solutions such as Application Management Services (AMS)
    • Pros – A collaborative approach where a solution is shaped in partnership with the supplier is more effective at addressing a dynamic set of requirements and allows suppliers to include all elements, including value-add services and technology as part of their solution
    • Cons – This method does not allow for comparisons between suppliers as each solution delivered is unique. Conducting multiple workshops across suppliers poses the risk of information asymmetry, while conducting one workshop may discourage suppliers from sharing ideas. Further, suppliers can tend to get sales-oriented across workshops and preferred suppliers with leadership presence in the workshop, more skin in the game, or better connections may get an undue advantage
  • Pilots – Running a pilot with a supplier to test a new concept/model
    • Pros – Works well with an incumbent and when the solution can be quickly deployed into operation
    • Con – Ineffective when looking to bring in new suppliers, and costs are high to implement a pilot that may not progress to operation
  • Reverse auctions – Traditionally used to source simple services or goods, reverse auctions are becoming increasingly popular in outsourcing services. However, the complex and dynamic nature of e-auctions requires robust technology and advanced supplier training.
    • Pros – A proven way of getting competitive pricing for commodity products
    • Cons – Not suited for extremely complex service procurement where the method of delivery is not comparable across solutions offered. An unclear process or underlying assumptions can lead to an unfair bid comparison. Therefore, the process must be standard with clearly laid out assumptions for all stakeholders

Examples of outsourced services well-suited for auctions

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Source: Everest Group, The Effective Use of E-auctions in Outsourced Services

Agile sourcing recommendations

When deciding if an RFP is required as part of a procurement event, it is important to weigh if the ability to compare pricing across consistent deliverables is first, important, and second, possible. If the answer to both of these is “no,” then an alternative solution may be more appropriate.

In cases when an RFP is required either to meet internal requirements or to compare across like items, we see an increased focus on “agile sourcing.”  This method is less sequential or waterfall-like and more agile, similar to approaches used in project management and software development.

We will cover more on this topic in the coming months, so stay tuned for future blogs. For now, let’s look at the following best practices we have observed in an agile model that shorten the RFP process while driving increased value:

  • Run pilot projects with suppliers before awarding additional spend
  • Share a standard list of obligations in the pre-contract phase
  • Provide suppliers with all details, accessorial charges, and potential changes during the RFP process
  • Initiate supplier discussions earlier and more frequently
  • Conduct one-day supplier workshops instead of lengthy discovery and selection processes
  • Reduce multi-page proposals to single-page templates to clearly explain requirements and engagement
  • Keep suppliers involved for as long as possible. Procurement can discuss terms and conditions with all suppliers, not only the ones they will contract with
  • Run the initial round of negotiation and contract drafting in parallel to the sourcing process
  • Ensure constant interaction occurs across the sourcing lifecycle between the buying organization and the supplier to develop the contract collectively and incrementally

No standard approach exists for skipping steps in an RFP. Each sourcing exercise is unique and procurement leaders typically rely on their teams’ expertise to decide on the sourcing methodology.

While times are changing, RFPs are still alive and have their place for commodity items where the costs for like-for-like items need to be compared. But the age-old process may no longer be suitable for complex services deals where innovation is key. To move into the future, sourcing teams should start evaluating alternatives.

To discuss RFP outsourcing services further, please reach out to [email protected] or [email protected].

Learn about current outsourcing pricing in our webinar, Outsourcing Pricing: 3 Pitfalls and 2 Unknowns Enterprises Need to Know in 2022.

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