Salvaging an IT outsourcing deal gone bad

Client Results Story

Opportunity

BankCo, a large bank, had complex and inefficient IT. Its IT costs were significantly above the industry standard, thanks to legacy systems, regulatory issues and a lack of scale. Management wanted to reduce IT costs by 30%. BankCo hired an external service provider (ESP) to initiate and drive an IT outsourcing initiative, but BankCo did not create a thorough deal rationale and skipped financial analysis and a Request-for-Proposal (RfP) process. This created business and IT issues.

BankCo found itself unable to execute the deal alone and asked Bain for support.


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Next Approach

Approach

Bain team devised the following approach to turn around and successfully execute the deal:


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Next Recommendations

Recommendations

The Bain team issued the following recommendations:

  • Enforce board involvement 
  • Initiate/manage involvement of bank-wide stakeholders 
  • Help to align outsourcing initiative with business and corporate strategy 
  • Retake process control from ESP and actively drive negotiations, contract design and communications 
  • Completely rebase financial and strategic deal analysis 
  • Assess ESP's cost base and enhancement initiatives to estimate ESP margin and potential of "managed base case" 
  • Drive comprehensive risk analysis effort as basis for regulatory approval process

Bain managed to finalize the multi-billion Euro IT outsourcing contract.

Next Results

Results

Bain helped to create tangible value through outsourcing. An alternative "in-house" scenario played a key role as appropriate decision making baseline and comparator for executive management.


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  • IT
  • Outsourcing & Offshoring
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