Actionable recommendations and techniques to instate a proactive contract renegotiations approach within your own organization. How to perform a detailed assessment of your current sourcing needs with regards to your current vendor capabilities. How to understand the cost basis for the current set of services in market time. Techniques for effective negotiations. How to streamline outsourcing relationships and leverage them to retain a competitive edge in the marketplace.

1. A THREE-STAGE APPROACH TO
EFFECTIVE CONTRACT RENEGOTIATIONS
Donald Mones, Former VP, Vendor Management, Viacom!
Hemant Puthli, Senior Partner & Advisor, Neo Group!
October 14, 2014!

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© 2014 Neo Group Inc. Proprietary
! Since 1999, we have been helping clients achieve
business objectives and address business
challenges by leveraging global services and
sourcing.
! We have a singular focus on the global services
supply chain.
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analytics, globally recognized experts, proven
methodologies and co-creation with our clients.
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NEO GROUP OVERVIEW
ADVISORY SERVICES
GOVERNANCE SOLUTIONS
SUPPLY MONITORING &
ANALYTICS
Our Featured Clients include:

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© 2014 Neo Group Inc. Proprietary
TODAY’S PRESENTERS
Donald Mones
Former VP, Vendor Management
Viacom
Hemant Puthli
Senior Partner & Advisor
Neo Group

4. © 2014 Neo Group Inc. Proprietary
QUICK POLL
4
What has been your
greatest challenge in
previous vendor
contract renegotiations?!

5. © 2014 Neo Group Inc. Proprietary
QUICK POLL
5
With regards to your
current vendor contracts,
when will your current
agreements expire?!

6. © 2014 Neo Group Inc. Proprietary
CONTRACT RENEWALS: A PERSPECTIVE
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§ Significant changes have occurred over the course of most
in-place contracts:!
§ Many in-scope services may be 10-40% less today as a result of
factors such as cloud, automation, more remote services, etc.. !
§ Changes in the buyer’s world (the client and the client’s business
ecosystem) and/or in the seller’s world (the incumbent service
provider and the global sourcing industry)!
§ Changes at the level of business strategy/ organization structure
business processes/ legal and regulatory framework/ service delivery/
engagement and pricing models/ and so on!
§ Contract renewals are a key opportunity to re-align sourcing
strategy and operating models!
§ Important to view the opportunity window from a strategic perspective!
§ That view should include market, organizational, operational, financial
and legal dimensions!

7. © 2014 Neo Group Inc. Proprietary
RENEGOTIATION OPTIONS
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Uninformed
Renego-a-on
Rebid
Keep
Provider
Benchmarked
Renego-a-on
Auto
Renew
Renego-a-on
Con-nuum
Scope
Change
Delivery
Model
Change
Rebid
Change
Provider

8. © 2014 Neo Group Inc. Proprietary
CONTRACT RENEWALS: WHAT’S REQUIRED
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A comprehensive change analysis can help in making and
prioritizing decisions on the future course of action!
§ Early, informed preparedness is key to success!
§ It is recommended that the process of trying to arrive at ‘how to
handle the renewal’ be initiated at least 12 – 18 months before the
end-date of the contract term!
§ However, its never too late in the cycle to change the paradigm
before extending, terminating or changing!

9. © 2014 Neo Group Inc. Proprietary
QUICK POLL
9
How long in advance do
you typically begin your
renewal/renegotiation
process?!

10. © 2014 Neo Group Inc. Proprietary
NEO ENGAGEMENT RENEWAL FRAMEWORK
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The Neo Group framework enables organizations to
determine the optimal course of action and its
implementation in a proven, three-stage approach:!
!
1. Discovery
2. Impact Analysis
3. Execution
!

11. © 2014 Neo Group Inc. Proprietary
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!
Discovery – Understand the market, organizational,
operational, financial and legal dimensions!
§ Change Assessment – What is the process and level of
change required !
§ Benchmarking – Do you know where your operational
performance stands in comparison to your peers?!
§ New Models – Identify and build your new business case !
!
STAGE 1: DISCOVERY

12. © 2014 Neo Group Inc. Proprietary
STAGE 2: IMPACT ANALYSIS
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Impact Analysis – Review and identify gaps in your
operations model and potential areas of failure.!
!
§ Gap Analysis – Identify your “current state” as it compares
to your “to be“ state through quantitative and qualitative
analysis!
§ Scenario Envisioning – Identify potential problems and
opportunities!
§ Recommendations – Create contingency plans and
identify cost benefit analysis to your proposed solutions !

13. © 2014 Neo Group Inc. Proprietary
STAGE 3: EXECUTION
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Execution!
!
§ Benchmark and Renegotiate (with incumbents)
§ Role consolidation – standardize existing roles, add new
(future-oriented) roles; normalize across incumbent vendors!
§ Benchmark per consolidated and normalized roles!
§ For each vendor, identify rate card items that are above or
below benchmark rates!
§ Set negotiation targets based on differences thus identified!
!
§ Requirements Definition and Partner Selection (new vendors)
§ Short-list vendors from the industry!
§ Define requirements and discuss with vendors to co-develop
solutions!
§ Down-select based on solution quality, delivery capability
assessment, site visits, references, pricing!
§ Negotiate and finalize!
§ Sign fresh contracts!

14. © 2014 Neo Group Inc. Proprietary
QUICK POLL
14
How far above/below an
industry benchmark are
you typically willing to go
for rate card negotiations
(what is your cut off point)?!

15. © 2014 Neo Group Inc. Proprietary
STAGE 1: DISCOVERY, WHERE CHANGES HAVE OCCURRED15
Customer & Industry"
Functional Organization"
Global Sourcing
Industry"
Services Provider/
Vendor Organization "
Internal !
(Client Enterprise)!
External !
(Supplier Markets)!
Demand! Supply!
Entities
Engaged!
Environmental
Forces!

16. © 2014 Neo Group Inc. Proprietary
DRIVERS: WHAT CHANGES MIGHT HAVE OCCURRED
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What might change – Business: "
• Industry Structure!
• Customer Segments!
• Business Processes!
• Compliance Imperatives!
• Customer Needs/
Expectations!
What might change – Function:
• Strategy/ Architecture!
• Services Portfolio!
• Organization Structure!
• Sourcing Strategy !
• Vendor Management!
What might change – Industry: "
• Players (New Entrants/ Exits)!
• Delivery Locations!
• Service Maturity!
• Engagement Models!
• Pricing!
What might change – Vendor: "
• Business Strategy!
• Delivery Capability/ Capacity!
• Account Management!
• Engagement Models!
• Pricing!

17. © 2014 Neo Group Inc. Proprietary
DISCOVERY: SUPPLY MATURITY
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Founda'onal
Elements
–
Building
Blocks
Leadership
Capability
HRM
Processes
Customer
A/C
Management
Organization
Structure
Technology
Edge
Service!
Capability!
• Service depth!
• Delivery methodologies!
• Project & Performance management!
• Q&A!
• Alignment of management!
• Management depth!
• Recruitment & Staffing!
• Training!
• Performance Evaluation!
• Focus on HCM!
• HR team capability!
• Account management set-up and capability!
• Attention given to issues!
• Value-addition!
• Creating goodwill!
• Focus on new and emerging technologies!
• Technical thought leadership!
• Knowledge sharing!
• Market orientation!
• Clarity of vision!
• Capability to handle growth!
• Empowerment!

18. © 2014 Neo Group Inc. Proprietary
STAGE 2: IMPACT ANALYSIS
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Gaps in
Strategic Objectives!
Legal/Terms!
Operating/Engagement Model!
Pricing!
Financial!

19. © 2014 Neo Group Inc. Proprietary
SERVICES PORTFOLIO REVIEW
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Sunset & Retire!
Innovate to Add
Value!
Reengineer to
Reduce Cost!
Retain As-Is!
Total Cost of Service Delivery!
ValueDeliveredtoBusiness! Low!
Low!
High!
High!
Develop a roadmap for Services based on Cost and Value!
S1
S2
S3
S4
S5
S6
S7
S8

20. © 2014 Neo Group Inc. Proprietary
SERVICE COMPONENT DRILL-DOWN
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S2
Objectives
Structure
Process
Scope
Scale
S1 S3 Sn
Metrics & CSAT
Management
Overhead
Methods & Tools
Capability: Roles
Capacity: FTEs
Portfolio of
Services!
Drill-downintoeachService!
Cost
Drivers
Service
Components
Resource-
based
Pricing!
Service-
based
Pricing!
Pricing
Models

21. © 2014 Neo Group Inc. Proprietary
CUSTOMER’S PERSPECTIVE
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§ Know the objectives before beginning contract discussions!
§ Allow enough time for reviews, redlines, refinement & business
stakeholder updates!
§ Have decision makers in the “room” or readily available to resolve
escalations!
§ Understand the other sides overall goals (financial, market, reputation,
political)!
Getting to the “hand shake” between buyers and seller!

22. © 2014 Neo Group Inc. Proprietary
THE CUSTOMER’S OBJECTIVES FOR THE RENEGOTIATION
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Objectives:
§ Achieving cost savings!
§ Accommodating changes in scope!
§ Resolving performance or schedule issues!
§ Addressing new, emerging or changed threats or
risks, e.g. with respect to security, regulatory,
industry challenges!
§ Responding to technological change, legal change
business change!
§ Implementing a new sourcing strategy!
e.g. multi-sourcing!

23. © 2014 Neo Group Inc. Proprietary
QUICK POLL
23
Other than cost savings,
what is the most common
reason to consider
renegotiation (as opposed
to auto-renewal)?!

24. © 2014 Neo Group Inc. Proprietary
BATNA = BEST ALTERNATIVE
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Win – Win !
• adj. Of or being a situation in which the
outcome benefits each of two often opposing
groups: a win-win proposition for the buyer and
the seller.!
!
BATNA - Know your best alternative to a
negotiated alternative - BATNA stands for Best
Alternative to a Negotiated Agreement. !
!
!
The acronym was derived after research on negotiation conducted by the
Harvard Negotiation Project. !

25. © 2014 Neo Group Inc. Proprietary
THE IMPACT OF CULTURE
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26. © 2014 Neo Group Inc. Proprietary
CULTURAL TYPES
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27. © 2014 Neo Group Inc. Proprietary
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THANK YOU FOR JOINING US!
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Questions? Feedback?
We’d love to hear from you!
Atul Vashistha
Chairman & CEO
atul@neogroup.com
Hemant Puthli
Senior Partner & Advisor
hemant@neogroup.com
www.NeoGroup.com
www.GlobalSupplyRiskMonitor.com