At a glance
- A key system, with billion dollar trade volumes
- Contract heavily favouring supplier, with major risks for the bank, plus high solution costs
- This project has improved the bank’s commercial position, with renegotiation of many points
MOT and Renegotiation of Key Software Contract
Scope:Over a number of years the suppliers’ solution had evolved to become key to the bank. An initial review of the contract revealed major risk exposures and significant costs, triggering the comprehensive contract MOT and renegotiation plan. Lacking in house resources, the bank also engaged Turnstone to manage subsequent negotiations with the supplier
Key Business Benefits:Around half of the red clauses were resolved in the initial rounds of negotiation, with the remainder to be concluded with the roll out of a completely new agreement at next renewal. In addition, an alternative hosting provider was sought, to reduce the cost of hosting.
The bank are now in a safer position with regard to this critical system and will be in a stronger position at contract renewal. The process has also laid the foundations to explore the wider market and competitor offerings.
Firstly a cost benchmark revealed that server hosting prices and day rates were significantly in excess of market norms, with questionable costs for the software itself.
Secondly, using Turnstone’s proprietary Contract MOT methodology, a full analysis of the contract was conducted. This identified 26 ‘red’ clauses, which put the bank at serious disadvantage and/or high risk. These were chiefly around:-
- Weak service descriptions and poor SLA’s with no meaningful commitment or redress
- Unfavourable payment and cost mechanisms, with no cost granularity
- Nothing around Exit – in terms of what, when, cost and how
A negotiation plan was drawn up based on these reds and on the benchmark.
Turnstone were then engaged to commence a structured and methodical renegotiation process with the supplier, working to resolve each of the identified areas.
“We were delighted with Turnstone’s careful approach to this critical supplier. Firstly their ‘Contract MOT’ revealed the meaningful risk areas in the contract. More importantly, the subsequent negotiation plan initiated a successful mid term renegotiation with the supplier. Out of this we achieved several important improvement which helped to secure our position and gain clarity on cost”
Senior Vice President of Technology, EMEA
