Thursday, June 27, 2013

2013 State of Price Benchmarking - report courtesy of Alsbridge

With the global economy still in recovery, today’s business leaders remain challenged to “do more with less” by seeking ways to streamline operations, cut costs and become more efficient. More than 80% of companies engage in outsourcing to reduce expenses, gain access to variable resources, increase time-to-market, and focus on core competencies. As the global economic recovery continues, IT and business process budgets continue to grow, but slowly.

The total 2013 global outsourcing market is nearly one trillion dollars with approximately two-thirds in Information Technology Outsourcing (ITO) and one-third in Business Process Outsourcing (BPO). The magnitude of outsourcing spend is enormous and vitally important to companies as part of their overall management strategy. With this much at stake, Alsbridge polled its subscriber base comprised of sourcing buyers, providers, and consultants from global companies to determine the current state of price benchmarking in the IT and business process market.

The full 2013 State of Price Benchmarking report provides insight into the current state of information technology and business process price benchmarking on a global basis. The report, based on 662 survey respondents, takes and in-depth look at:

  • The history of price benchmarking 
  • The need for benchmarking 
  • Different types of benchmarks
  • Best practices for benchmarking
  • Key takeaways
  • The benefits of benchmarking 
  • Major study findings


Ten major findings emerged from the 2013 study. These findings most often speak to the distinctions between the various benchmarking types and the results that can be achieved from each. Alsbridge’s evaluation highlights key findings for each topic.

Major findings include:


  • Finding 1: “Do It Yourself (DYI) Benchmarks are Still Common 
  • Finding 2: Smaller Contracts are Benchmarked More Frequently
  • Finding 3: IT-Related Scope Benchmarked More Frequently than Others 
  • Finding 4: General Price Checking Drives Benchmarking 
  • Finding 5: Benchmarking Delivers Results in Less Than 90 Days 
  • Finding 6: Slightly Less Effort Needed for In-House Benchmarks 
  • Finding 7: Greater Savings are Identified by using Independent Benchmarks 
  • Finding 8: Independent Benchmarks Deliver More on the Savings Promise 
  • Finding 9: In-House Benchmarks Produce Less Value 
  • Finding 10: Buyers Most Often Renegotiate or Re-Compete Their Contract 


Summary:

  • Benchmarking can work and help deliver lower contract prices.
  • Decide the approach you will employ and the level of granularity you need based on your benchmark’s purpose and objectives.
  • Benchmarks can be conducted in a fairly short timeframe thus leading to a potential savings opportunity for those who may be renegotiating an end-of-term contract.
  • Given the general success and ROI achieved by benchmarking, ensure you stay in-line with market prices by benchmarking on a regular basis.
  • Benchmarks are most often conducted to position the buyer for renegotiating, re-competing, repatriating and adding more services to a contact.
  • There is significant value (greater achieved savings, greater ROI, defendability with providers) in having an independent benchmark.


For your next benchmark, you may want to reflect on whether your company has the capability (know-how, discipline, skill-set, experience, current market database, analytics) and capacity (cycles, time beyond managing their day job) to properly develop your benchmarking strategy and execute a benchmark project.

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