Summary of Article:
- CIOs face the pressure of reducing costs while businesses demand more technology investments to stay competitive with innovation.
- Many cost takeout programs fall short of their goals because they lack the discipline and rigor to identify opportunities, eliminate cost, and prevent it from returning.
- To realize savings and support long-term strategy, CIOs need to enhance spending visibility and require vendors to adopt a pricing model based on client centric outcomes.
CIOs understand that technology is more vital than ever to business success. They are spending budget on essential new technologies such as AI, customer experience (CX), the ever-growing cloud sprawl along with individual vertical market requirements.
At the same time, CIO’s are under pressure due to the uplift in interest rates and continued inflationary pressures driving the rise of prices with tech staples such as computer chips, applications, and the ever-escalating people cost. Most have already made simple cuts; now they need to deal with hard budget choices that impact service quality, risk, and strategic investments.
Making the challenge worse, most cost takeout programs fall short of their goals. 90% of companies have implemented a cost governance framework in recent years, with only one out of four meeting their projected cost reduction goals. Almost half missed their goals by more than 50%. And costs that are cut often come back, leaving the need to go back and find more savings later. A chronic complaint amongst business leaders is the TEM savings promises fell short of defined expectations.
A contract structure where the service provider and the client both benefit financially from the value created (eliminating shadow IT, lowering IT opex, reducing technical debt, etc.) by a specific set of IT expense management processes is illustrative of a gain share model. Service providers must share both benefits and risks equally.
E78 structures all client engagements based on a gain share methodology or ROI guarantee. Our willingness to de-risk even lifecycle managed services is pivotal to a strategic cost takeout program. Our strength lies in over 25 years of cross-disciplinary expertise, blending financial, contractual, and technological insights. This depth allows us to approach IT optimization comprehensively, offering solutions that are both innovative and practical.
E78 managed services are all ROI guaranteed to be at least cost neutral and audits are contingency based. Even with clients who have a TEM in place today, we can deliver average savings of 15%-30% for audits and 30%-50% in sourcing and advisory services.
With E78 Partners, financial success is not just a goal, but a guarantee. Our approach ensures ROI at every stage, turning strategies into measurable financial gains and value creation. E78 Partners excels in transforming recurring technology expenses into strategic assets, and we do it with a guarantee – your ROI is assured, year upon year, for the entire duration of our partnership.
Outcome-based pricing is a model that requires a long-term outlook. It is not a program change but a journey that both the TEM service provider and the client must undertake with a clear mutual benefit mindset. The client must be open and share their vision and business strategy to allow the TEM service provider to be a real business partner to them. The outcomes also must be agreed upon clearly and have to be measurable with a high level of trust between the two parties.
This model has great potential for both the buyer and the service provider, but it depends on ongoing cooperation, transparency, and communication. Partners must ensure that every dollar spent is an investment toward their client’s company’s future. If done in the right way, it will give a competitive advantage and lead to long-term benefits for both parties in this very competitive business world. If your organization seeks a reliable partner to optimize your tech stack and assist in key finance activities, connect with your E78 operating partner, a trusted partner/agent, or contact us directly for a discussion.
