Menu
Subscribe now to get our latest insights.

Intuit Mailchimp

topics

IT Procurement & Sourcing Summit 2024

We at HEX are excited to connect with Europe’s top IT procurement and sourcing heads at the IT Procurement & Sourcing Summit 2024 in Amsterdam on . As your trusted sourcing advisors, we bring 100% data-driven insights, powered by our proprietary ™ —an invaluable tool for benchmarking decisions based on over a decade of real transaction data.

Don’t miss the opportunity to discuss how we can drive your IT procurement strategies forward. , fill out our contact form, and let’s secure some time to discuss how we can support your next big move.

Your future sourcing decisions could be a PING away! We’re just a form away, so lock in your spot and let’s explore how HEX Advisory Group can empower your procurement strategies!

2023 Vendor Consolidation Realities

23

While analysts may have you believe that deal sizes increase due to vendor consolidation, we as advisors at HEX are assisting clients first-hand with vendor consolidation mandates targeting 20-25% spend reduction via effort elimination, hyper-automation, right-sizing, right-pricing, and 3rd-party Op-model and contractual transformation.​

: https://bit.ly/3ZJrJZ4

Hi-Fidelity Sourcing Advisory

Anyone can run an RFP dog and pony show with multiple bidders. This is a lazy, long-drawn, expensive, and self-serving way of running a sourcing program. Instead, HEX Advisory Group has the chops to expeditiously secure contemporary solutions, modern contracts, and competitive commercials with any vendor/s by drawing upon its senior practitioners, recent transactions’ benchmarks, and clearly defined end-states.

To know more click here.

Why consider Recruitment Process Outsourcing (RPO)

During and post-pandemic, Talent is among the most secular agendas across all firms pan industries. And as firms are scrambling to get the appropriate talent onboard, recruitment process operation is the backbone to execute the talent strategy. As a result, recruitment process outsourcing (RPO) industry has been seeing a sharp growth especially post H2 2021.

A combination of factors are in play that influence enterprises to outsource their recruitment processes.

Payment Integrity Engagement Models

As a result of the increasing complexity of the health plan environment, coordination of payments to multiple parties and a wide range of government and private health plans remains a challenge. Payment Integrity solutions are reducing the rising healthcare waste and fraud to ensure that claims are paid correctly, free of leakages. Using advanced analytics and data mining, patterns are identified across billions of lines of claims to predict errors in claims, thereby helping firms to reduce waste and focus on value-based care for patients.

We see broadly three types of engagement models in the Payment Integrity space:

  • Business Process as a Service: Service provider offers Healthcare Payment Integrity to client as a service via a combination of platform (either proprietary or white labelled) and managed operations
  • Platform License: Providers license the software to an enterprise who then manage the operation
  • Software as a Service: Payment Integrity platform is offered on a SaaS model. The platform can be hosted on customer’s environment or on cloud. The engagement is based on an outcome-based pricing e.g., based on % of validated overpayments of recovery Per Member Per Month along with Fixed annual hosting price (if applicable)

Are your metrics measuring the business impact?

What you control is governed by the metrics you measure and report on. But are the right metrics being measured? Traditionally, the functional and back-office metrics have been linked to the respective functional areas and the linkage to enterprise objectives, if at all, may not be evident. The Business Level Agreements (BLAs) framework can help fill this vacuum and ensure that the reported metrics are linked to the business priorities.

Some of the typical BLAs used in F&A processes:

  • Accounts Payable: Error free payments, DPO, PO penetration
  • Accounts Receivable: DSO, Cash Application Time, Average Time to Bill
  • General Accounting: Days to close month-end, Reconciliation Cycle Time

A well thought out set of BLAs is a great mechanism for the support functions (and service providers) to see their impact on the business and the other way round. Enterprises are increasingly embedding these in the contracts to drive risk-sharing and partnership behaviours.

Transaction Based Pricing Model

This is an output-based pricing model wherein the fees structure is based on the transactions / Resource Units (RUs) handled. Buyers should consider this model in the following scenarios:

  • Fluctuating but predictable volumes with reasonable accuracy (availability of historical data to validate this and baseline is critical)
  • Buyer landscape has lower degree of customization, and the processes are largely standardized
  • Procurement has a positive experience of using pay-as-you-go models
  • There are no restrictions (regulatory or compliance related) in sharing resources as the providers may deploy ‘bubble’ teams across multiple clients
  • Relationship with the provider is strong and transparent and the providers have a complete visibility into the buyer’s demand funnel

Adoption of SD-WAN

SD-WAN allows for more agile ways of working and improves site availability through simplified and faster failover and relocation of traffic. It helps optimize costs as once implemented, it allows for better aligned demand and supply model to reduce underutilised assets and increase efficiencies as well as utilise a range of cheaper underlying connectivity.

While it offers benefits of technology-agnostic overlay and dynamic routing, without a clear strategy and transformation plan, many of the SD-WAN benefits can be limited or lost such as the ability to consolidate multiple network functions in a single platform.

Could a ‘Virtual Captive’ be your Panacea

Virtual captives are increasingly becoming an acceptable solution as they occupy a median position in a spectrum that is occupied by third party outsourcing on one end and captives on the other. For the mid-market enterprises, who end up experiencing a ‘small-fish’ syndrome with large third-party providers and captive remains a pipedream due to lack of capital/appetite, virtual captive offers best of both worlds. It is essentially a hybrid model wherein a local provider will provide all the necessary infrastructure (managed facility, hardware, connectivity etc), talent (sourcing, recruitment & HR), compliance and support services (accounting, compliance, IT operations) while letting the client retain full control of the operations.

Some of the specific advantages this sourcing model offers

  • Higher degree of control: This model allows the enterprise to have full control of the business operations while the back-office set-up and processes are managed by the local provider. The enterprise leadership can practically walk-in and focus on business without having to worry about the ‘operational’ and ‘compliance’ overheads on Day 1.
  • Transparent and Flexible Pricing Model: The most common construct is a cost-plus structure wherein the provider charges a mark-up on costs i.e., Talent (typically 70-85% of the costs), Infrastructure and Support function costs. Numerous as-a-service pricing models (GCC-as-a-service, Talent-as-a-service, Compliance-as-a-service etc) are also available for enterprises who may want to a bundled price or specific services.
  • Reduced time to market: Mature providers are able to provide a significant jumpstart to the timeline leveraging their well tested operations templates and readily available workforce.
  • Low Capex: Unlike a captive that involves significant upfront investments in infrastructure set up, this is a fully variable ‘Pay as you grow’ model. This is extremely useful especially for mid-market enterprises who can test the concept without necessarily having to block large sums of capital.

Pricing Trends for Strategy and Consulting Services

The heated demand is leading to a drive for talent thereby heating up the salaries in onshore and offshore geographies – thereby increasing the cost to serve for Consulting service providers by as much as 10%-20% on a fully-loaded op-cost per FTE basis depending on the underlying technology type and resource seniority. However, enterprises remain cautious and price sensitive on consulting spend and >80% of consulting engagements have some form or fashion of line-of-sight into tangible outcomes / impact.

Currently, the preferred pricing models for S&C are fixed fee based for clearly ring-fenced scope, outcomes, timelines, and with contractual flexibility to pause and/or terminate. Enterprises are also open to risk-gain share mechanisms BUT should be tread with utmost clarity and thought on scope due-diligence, underlying assumptions, dependencies, and outcome versus risk thresholds, else can be detrimental to an already diminishing margin turf for service providers.

Since the cost to serve for S&C is expected to remain elevated in the near to medium term, this segment of business is expected to see margin pressure. A negative margin scenario is only to be expected if providers do not push for a well-defined scope or outcomes, do not size/solution the effort and staffing accurately, or undercut strategically or competitively for downstream execution-led gains. Opportunistically leveraging the perceived ‘premium and niche skills’ market can offer consulting providers with some margin-cushion at a deal-level.

Deal Trends in the Summer of 2022

The mega deals market (>$100M TCV) is shrinking. In general, enterprises are reconsidering large scale transformation investments, breaking down larger programs and staggering them over budget cycles based on priority or predictable RoI. Exceptions may be seen in the Telecom, Transportation, Utilities, Mining, and Energy verticals spurred by the infrastructure spending bill.

Small to mid-sized deals market ($5M – $15M ACV) will continue to see momentum driven by bite-sized initiatives, cost and operations focused mandates, and mid-cap enterprises coming out of the woodwork to sustain their business in a tightening liquidity market. Nearly 60% of new deal value is expected in this segment.

Providers will need to reevaluate their sales strategy – do they invest resources in chasing the few large deals involving long spin cycles or get better at closing smaller deals with shorter spin cycles.

PERSPECTIVES

HEX Dabbles in Real-World Remedies, NOT Rhetoric

Could a ‘Virtual Captive’ be your Panacea

Virtual captives are increasingly becoming an acceptable solution as they occupy a median position in a spectrum that is occupied by third party outsourcing on one end and captives on the other. For the mid-market enterprises, who end up experiencing a ‘small-fish’ syndrome with large third-party providers and captive remains a pipedream due to lack of capital/appetite, virtual captive offers best of both worlds. It is essentially a hybrid model wherein a local provider will provide all the necessary infrastructure (managed facility, hardware, connectivity etc), talent (sourcing, recruitment & HR), compliance and support services (accounting, compliance, IT operations) while letting the client retain full control of the operations.

Some of the specific advantages this sourcing model offers

  • Higher degree of control: This model allows the enterprise to have full control of the business operations while the back-office set-up and processes are managed by the local provider. The enterprise leadership can practically walk-in and focus on business without having to worry about the ‘operational’ and ‘compliance’ overheads on Day 1.
  • Transparent and Flexible Pricing Model: The most common construct is a cost-plus structure wherein the provider charges a mark-up on costs i.e., Talent (typically 70-85% of the costs), Infrastructure and Support function costs. Numerous as-a-service pricing models (GCC-as-a-service, Talent-as-a-service, Compliance-as-a-service etc) are also available for enterprises who may want to a bundled price or specific services.
  • Reduced time to market: Mature providers are able to provide a significant jumpstart to the timeline leveraging their well tested operations templates and readily available workforce.
  • Low Capex: Unlike a captive that involves significant upfront investments in infrastructure set up, this is a fully variable ‘Pay as you grow’ model. This is extremely useful especially for mid-market enterprises who can test the concept without necessarily having to block large sums of capital.

Pricing Trends for Strategy and Consulting Services

The heated demand is leading to a drive for talent thereby heating up the salaries in onshore and offshore geographies – thereby increasing the cost to serve for Consulting service providers by as much as 10%-20% on a fully-loaded op-cost per FTE basis depending on the underlying technology type and resource seniority. However, enterprises remain cautious and price sensitive on consulting spend and >80% of consulting engagements have some form or fashion of line-of-sight into tangible outcomes / impact.

Currently, the preferred pricing models for S&C are fixed fee based for clearly ring-fenced scope, outcomes, timelines, and with contractual flexibility to pause and/or terminate. Enterprises are also open to risk-gain share mechanisms BUT should be tread with utmost clarity and thought on scope due-diligence, underlying assumptions, dependencies, and outcome versus risk thresholds, else can be detrimental to an already diminishing margin turf for service providers.

Since the cost to serve for S&C is expected to remain elevated in the near to medium term, this segment of business is expected to see margin pressure. A negative margin scenario is only to be expected if providers do not push for a well-defined scope or outcomes, do not size/solution the effort and staffing accurately, or undercut strategically or competitively for downstream execution-led gains. Opportunistically leveraging the perceived ‘premium and niche skills’ market can offer consulting providers with some margin-cushion at a deal-level.

Deal Trends in the Summer of 2022

The mega deals market (>$100M TCV) is shrinking. In general, enterprises are reconsidering large scale transformation investments, breaking down larger programs and staggering them over budget cycles based on priority or predictable RoI. Exceptions may be seen in the Telecom, Transportation, Utilities, Mining, and Energy verticals spurred by the infrastructure spending bill.

Small to mid-sized deals market ($5M – $15M ACV) will continue to see momentum driven by bite-sized initiatives, cost and operations focused mandates, and mid-cap enterprises coming out of the woodwork to sustain their business in a tightening liquidity market. Nearly 60% of new deal value is expected in this segment.

Providers will need to reevaluate their sales strategy – do they invest resources in chasing the few large deals involving long spin cycles or get better at closing smaller deals with shorter spin cycles.

1 2
Subscribe now to get our latest insights.

Intuit Mailchimp

Back To Top
error: Content is protected !!