As part of a four year transformation strategy to replace its aging technology stack, strengthen their expertise and reduce the total cost of ownership, a $12 billion US-based organization was seeking a solution that would resolve problems they were experiencing in the delivery of their applications development, maintenance and support functions. In this case study, WGroup facilitated the outsourcing RFP process with service providers so the client could evaluate partners based on value-creation capabilities, and not on cost alone. The resulting outsourcing contract implemented drove a metric-driven organization, measurable operational improvements, and expanded the service catalog of the IT organization.

1. Opportunity
As part of a four year transformation
strategy to replace its aging technology
stack, strengthen their expertise and
reduce the total cost of ownership, a
$12 billion US-based organization was
seeking a solution that would resolve
problems they were experiencing
in the delivery of their applications
development, maintenance and
support functions. At the time, the
IT organization supported both new
Application Development and the
Application Maintenance & Support
(AMS) effort with a team made up of
experienced full time staff, a leading
consulting firm, and numerous small
local contractors who understood
the specific underlying technologies
and were geographically proximate
to our client’s main location.
While the consulting firm was focused
exclusively on new development, the
internal staff was challenged with
supporting both development and
the maintenance and support for
legacy systems. Complicating this
issue was the re-training needed
by the internal staff on the new
technologies. Meeting development
timelines and supplying the business-
expertise required to complete these
strategic initiatives required this client
to move staff wherever possible to
focus on those initiatives and backfill
the AMS functions to available
small local contractors. As a result,
costs rose, chargebacks were difficult
to manage and customer requests
for small enhancements to legacy
systems were put on hold. The client
wanted a third party service provider
to provide the needed application
maintenance support to free up staff
and reduce the dependency on the
small contractors for support.
WGroup was engaged to manage the
overall process of assessing the situation
and directing the activities that best
met the client’s unique challenges.
Approach
Under direction from WGroup,
an AMS core team made up
of representatives from IT, the
business and finance was formed.
A communication program was
established and customer buy-in for
the outsourcing effort was obtained.
Once goals were articulated and
project organization was in place,
WGroup performed an assessment
of the services, technologies, existing
contractual obligations and current
costs. Detailed financial and service
goals were established. Once these were
understood and agreed upon and all
requirements were defined, WGroup
developed a strategy, based on client-
Drive Your Business
Applications Outsourcing Focused
on Value, Not Cost Alone
IT Sourcing Strategy Met Objectives of Balancing
Cost Reductions with Major Service and Quality
Improvements
Consumer Products | Applications Outsourcing
1
WGroup facilitated
the outsourcing
RFP process with service
providers so the client
could evaluate partners
based on value-creation
capabilities, and not
on cost alone. The
resulting outsourcing
contract implemented
drove a metric-driven
organization, measurable
operational improvements,
and expanded the
service catalog of the
IT organization.

2. stated success criteria, from both an
IT and a business perspective.The IT
division’s core objectives consisted of:
1. Establishing an internal
dedicated AMS function
2. Redeploying and re-skilling
internal staff to support
applications development initiatives
3. Strengthening expertise in
key areas of the technologies
used by the client
4. Ensuring ongoing best practices
were followed in service support
5. Complying with all audit
and legal requirements
6. Reducing the TCO of
AMS services
The objectives for business lines were:
1. Transition to the new
service model with minimal
impact to the business
2. Establish a partner relationship
that allows for dynamic demand
changes by the business
3. Deliver services at improved
and measured service levels
4. Create clear understanding
of AMS activities
5. Clarify chargebacks to the business
An RFP was issued to eight (8) service
providers with demonstrated expertise
in the key technologies relied on by
the client. WGroup facilitated the
process with service providers so the
client could evaluate capabilities and
solutions based on value-creation
capabilities of the service provider, and
not on cost alone. Following proposal
submission from those providers, the
core team evaluated each proposal.
A total of 79 detailed responses were
solicited. Each response was scored by
the core team and weighted. To avoid
creating any bias based on pricing,
proposed pricing from the providers
was withheld from all but the finance
representatives on the team. Each
financial proposal was compared
against market pricing for similar
services. Following the core team and
finance team scoring, the project team
selected two finalists. Reference checks
and site visits to both the client’s and
provider’s facilities were organized and
conducted. These visits afforded the
client an additional opportunity to
probe the capabilities of each provider
and see how they envisioned meeting
the specific requirements of the client.
A recommendation was made to
client executive management. The
awarded provider’s strengths included:
an understanding of the unique
challenges facing our client, the
provider’s capabilities, a commitment
to improving overall processes within
the client organization not just those
processes related to the AMS functions,
a strong risk management program
and demonstrated value-creation
capabilities unique among the bidders.
Insight & Advice
Initially the client considered not using
a consultant given the experience of
their IT leadership with outsourcing.
But as the client recognized early, the
amount of due diligence needed to
conduct a proper search and selection
for a partner to manage a large portion
of the IT service catalog and budget
was a massive project. The client did
not want to take focus away from other
initiatives and also thought an outside,
non-partial, experienced consultant
would drive a better outcome.
The client reviewed proposals from
three advisory firms and selected
WGroup to assist them in this
WGroup
2
The service provider
that was awarded the
contract demonstrated
“value creation” capabilities
that were unique
among the bidders.

3. process. WGroup was selected based
upon their relevant knowledge of the
marketplace and industry, relationships
with the potential vendors, and
their expertise in Outsourcing
RFP and Transition processes.
WGroup was instrumental in
preparing the client information and
structure which facilitated a fair and
thorough RFP Process, which in turn
made the client very comfortable
making the final partner selection.
Results
The resulting outsourcing contract met
the client’s expectations, and brought
additional value to the organization.
The value is identifiable in several areas:
• The contract that was developed
between the client and the
partner service provider has
been deemed a best practice for
the organization. Many other
subsequent contracts have been
modeled after this agreement.
• At the time of application support
transition, the client was also
embarking on an Information
Technology Service Management
(ITSM) tool project. The service
provider provided resources to
complement the client ITSM team
to develop and implement ITIL
V3 practices as part of the project.
• The agreement includes a set
number of hours and cost for
Service Requests. This arrangement
proved very successful, so in the
subsequent calendar year, this
prearranged number of hours
was increased by 50 percent.
• Within six months, the new
application support organization
eliminated the large backlog
of incidents and requests that
existed and decreased major
incidents by 60 percent.
• The combined application support
organization had client retained
staff and has been able to absorb
many more applications with
minimal increase in cost. In
addition, the service provider has
been able to provide resources
to support applications utilizing
emerging technologies.
• Within six months of steady state
and with the performance and
credibility of the service provider,
the partner has established an
off-shore BPO team for one
of the business functions and
has been a preferred partner for
software development resources.
• Prior to the contract, strategic
projects were too heavily staffed
(greater than 55 percent) with
external consultants and contractors.
The new agreement has allowed the
client to shift internal staff
formerly performing application
support to strategic contracts
resulting in majority of staff
working strategic projects are
now from the client teams.
In summary, the IT sourcing strategy
and execution met the objective of
balancing cost reductions with major
service and quality improvements. The
outsourcing contract implemented
drove a metric-driven organization,
measurable operational improvements,
and expanded the service catalog
of the IT organization.
Applications Outsourcing Focused on Value, Not Cost Alone
3
WGroup was
instrumental in
driving a process that
enabled the bidding service
providers to showcase
how their capabilities
could drive value and
best meet the specific
requirements of the client.

4. WGroup’s Unique
Approach to
Sourcing Advisory
WGroup aligns outsourced services to
value creation.The firm helps clients
move away from a price-focused
procurement approach to a more
sophisticated one that requires IT
services be linked to value creation.
Refer to a summarized view of
WGroup’s Sourcing model below.
WGroup consultants bring experience
Contact Us
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Malvern, PA 19355
610-854-2700
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About WGroup
Founded in 1995, WGroup is a boutique management consulting firm
that provides Strategy, Management and Execution Services to
optimize business performance, minimize cost and create value. Our
consultants have years of experience, both as industry executives and
trusted advisors, to help clients think through complicated and pressing
challenges to drive their business forward.
For more information on WGroup, visit http://thinkwgroup.com
in both sourcing and IT to help
clients manage all facets of sourcing
engagements—from aligning the
right strategy and approach, to
ensuring that the tactical execution
and transition hit every milestone.
Contact WGroup to learn more
about our outsourcing advisory
services and client success stories.
“Sourcing holds the
promise of driving value
for the organization.
Leading organizations
recognize that sourcing
strategies built with the
wrong approach do not
create value and often
destroy it, leading to
years of recovery.”
Harry Wallaesa
President and
CEO, WGroup
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