Cost and performance improvements for a global insurer

Efficio helped a multinational global insurance company negotiate the outsourcing of its operational HR function. Efficio was engaged once the client had selected its preferred outsource partner.

In addition to securing the benefits already identified as targets, Efficio achieved additional cost savings of more than 10% improved service levels and increased flexibility for the client - despite having few negotiating levers at our disposal. The success of the project also created a proven model which could be rolled out across the rest of the gruop's international operations.

Background

Our client, a global insurance company, was looking to achieve financial savings and performance improvements by offshoring and outsourcing the operational elements of its Human Resources and Learning functions. With operations in 28 countries, serving 17 million customers worldwide, the potential benefits for the client were significant - but realising them depended on achieving an outsourcing model which could successfully deliver their objectives.

With annual costs exceeding £12m for HR Admin, Payroll, and Learning and Development (L&D) services, the UK operation was selected as the initial country for outsourcing these elements. Success would mean that a similar model could be rolled out in other countries.

Efficio was engaged to oversee final negotiations and provide an external view on whether the commercial position landed represented a sustainable, viable and attractive opportunity for the client.
 

Approach

Efficio worked with the client team to systematically address and resolve issues with the entire outsource programme contract. Using our deep market expertise and knowledge, Efficio helped the team to successfully:

• Challenge stakeholders to drive out the most optimised technical and operational specifications
• Perform a robust, fact-based benchmarking exercise to challenge charges and rates proposed by the service provider
• Develop a detailed negotiation strategy with clear objectives and targets (including achieving buy-in for the creation of new and effective negotiating levers)
• Communicate the negotiating stance clearly and coherently to the supplier
• Build a comprehensive set of service and commercial schedules for inclusion in the agreement
• Undertake discussions with the supplier legal team to deliver a secure commercial contract to the client
• Challenge assumptions around the deal to tackle risk premiums in the price and avoid misinterpretation beyond service go-live

Results

Efficio’s engagement helped deliver a number of significant benefits for the client, including:

• Increased client confidence by achieving targeted savings already identified
• Achieved additional cost savings of 10% in excess of the £2m target, through fact-based negotiations
• Further 2-3% estimated savings through a stronger position on FX risk and indexation
• Enhanced service levels via a performance regime that provided the right incentives to the service provider
• Price transparency through a detailed pricing model, providing the ability to manage future changes in demand
• Increased price flexibility through development of a roadmap to utility-based pricing further into the contract
• Favourable positions (in line with market or better) on key contractual terms such as liability, termination and service standards
• Clear ownership and responsibilities for both the client and service provider, for transition and beyond

Furthermore, the project set out the best practice ways of working between Procurement and HR. Perhaps most importantly, the project established a set of key commercial principles to ensure the best possible outcome for the client, and a proven template for future outsourcing deals across the whole group.