A US transportation company needed to make cuts to its IT operating budget to reverse cost overruns. The national company had a long-standing outsourcing agreement with a service provider, but it had not implemented effective service level agreements (SLAs) and consumption-management processes to control costs. As a result, it had outsourced 750 terabytes of data at an annual cost of more than $20,000 per terabyte, an over-investment that contributed to runaway IT outsourcing expenditures of $225 million a year. The IT division needed to trim $36 million from its 2012 budget—without impacting the quality of service.
The company engaged PwC to help analyze its IT outsourcing spending and to build a business case for a cost-efficient, sustainable infrastructure strategy. Our team worked with the CIO and business-unit leaders to examine all service provider expenditures. We helped the client develop a strategy to increase efficiencies and reduce redundancies. We also helped them develop a business case to reduce an additional $5 million in server costs; develop requirements for a messaging solution to save the company more than $2.5 million annually; and craft a clear IT operating model to manage demand and control costs.
Impact on client's business
The recommendations and roadmap provided the transportation company with more than $10 million in annual savings with no impact to service levels. The processes to monitor consumption and better negotiate service agreements could enable the company to reap future advantages in cost savings and efficiencies. We also helped the client identify long-term strategies to realize the benefits of a variable-cost IT model, including the use of a hybrid cloud model to support non-production environments and lower-cost data storage solutions. Ultimately, these new processes and strategies should help the company gain and maintain an edge in the hyper-competitive transportation industry.