Major Insurance Underwriter $32.3 million in savings

The client “MIU” is a global professional services firm with revenues of approximately $12 billion. Its 60,000 employees provide analysis, advice and transactional capabilities to clients in over 100 countries. MIU was unable to determine what technologies were being used corporate wide. They had grown by acquisition and the acquired companies were permitted to run their businesses as silos.

MIU understood that it was failing to take advantage of economies of scale. They were also aware of their inability to assure any level of compliance with contract terms or governmental regulations. They feared an audit of any kind but were prepared to reveal internally the extent of their non compliance and to expedite corrective measures.

They turned to Levy LeGette to help them understand what they had, who was using it, where it was, and finally, how it was acquired (e.g., purchase or lease). The future expansion and integration of their diverse IT systems was depending upon the outcome of Levy LeGette’s services.

Levy LeGette’s first step was to gather as much available data as it could from IT and accounts payable departments. The corporate legal department handed over an amazingly slim portfolio of enterprise wide IT contracts it had on file. We realized that MIU’s records were virtually non existent. There were less than a dozen executed contracts and some notes and working documents for other contracts – all ranging in date from the 1960’s to the 1980’s. There was no indication in the files that any price or discount schedules had been amended. There was no indication that any of the twelve executed agreements still governed MIU’s use of the original hardware and software acquired so long ago.

There was a bit more success in working with accounts payable where we found hundreds of IT vendor payments being made. Many of these records did not reference a written agreement; others referenced agreements that MIU could not produce. We had to begin our work with a physical inventory of hardware, software, maintenance programs and services used by MIU’s five major data centers.

Levy LeGette worked to create written records regarding the acquisition, use (and in some cases retirement) of hardware. All products were cataloged, with written notations made to alert MIU to contract expiration and other events that required attention. An event resolution table was built to help MIU take appropriate action depending on what triggered an event.

Written certification verifying compliance with licensing terms for all software were obtained from applicable vendors, all of whom worked cooperatively with Levy LeGette to help MIU get back on track. No penalties were assessed by any of the vendors Levy LeGette worked with on behalf of MIU.

Levy LeGette also effected the cessation of payments for products no longer in use after discovering huge sums of money were being spent for products that had been scrapped and even sold by MIU over a period of years.

In one instance, an IT manager fearing immediate dismissal continued to approve lease payments after he had sold a mainframe on the secondary market. Levy LeGette addressed vendor billing and negotiated the immediate return of all amounts paid based on vendor accounting/billing errors. Where such amounts could not be repaid without the vendor resorting to bankruptcy protection, Levy LeGette negotiated repayment schedules in the form of credits applied towards the purchase of upgrades.

In instances where technological growth demanded the purchase of hardware or software licenses from other vendors, Levy LeGette helped coordinate the sale of MIU’s outdated equipment to secondary market dealers. For a move from one software vendor’s platform to another vendor’s platform, Levy LeGette negotiated competitive upgrades through fair bidding. The redirection of previously paid amounts towards the overall upgrade of MIU’s IT environment, and the re creation of written accounts and executed agreements enabled the IT and corporate legal departments to take control of systems running their businesses and enforce the contract terms mitigating the risk in acquiring and maintaining those systems.

Day to day operations were further improved after Levy LeGette identified missing control processes. Some of these processes included:

  • hardware inventory,
  • purchasing records for software licenses (proof of license),
  • Inventory & purchasing tie ins
  • purchasing records and contract terms
  • license compliance
  • distinctive inventory records for leased products
  • the use of standard amendments to vendor agreements for all purchases under $25,000
  • the use of an automated process to help MIU determine vendor compliance with contract terms negotiated by Levy LeGette, e.g., Price & discount, SLA compliance, application of purchase credits & Shift of responsibility to vendor for pick up of demo products

Levy LeGette negotiated 26 master enterprise wide hardware and software agreements and amended 458 standard vendor agreements. We recorded transactions involving 48 different software development/customization agreements and drafted, negotiated and effected the execution of an equal number of amendments to them. Levy LeGette tracked down 718 vendor agreements that had previously not been recorded by any of the parent company’s purchasing (or accounting) units and amended those agreements pursuant to MIU’s ongoing needs.

Needless to say, MIU was pleased, if not amazed. The amazement and sheer relief came from realizing that their house was now in order. In fact, they were speechless after our executive summary and final presentation when we announced a total hard dollar savings of $32.3 million as the result of our efforts.