Salvaging an IT outsourcing deal gone bad

BankCo turned to Bain for support to execute a major deal upon realizing the inefficiency of its legacy IT systems, which contributed to unsatisfactory risk analysis. To facilitate the deal's regulatory approval process, Bain helped BankCo drive negotiations and rebase financial analysis. The resulting IT solutions were aligned with the business and corporate strategy.

BankCo, a large bank, had complex and inefficient IT. Its IT costs were significantly above the industry standard, thanks to legacy systems, regulatory issues and a lack of scale. Management wanted to reduce IT costs by 30%. BankCo hired an external service provider (ESP) to initiate and drive an IT outsourcing initiative, but BankCo did not create a thorough deal rationale and skipped financial analysis and a Request-for-Proposal (RfP) process. This created business and IT issues.

BankCo found itself unable to execute the deal alone and asked Bain for support.

Next Approach

Bain team devised the following approach to turn around and successfully execute the deal:

Next Recommendations

The Bain team issued the following recommendations:

Enforce board involvement
Initiate/manage involvement of bank-wide stakeholders
Help to align outsourcing initiative with business and corporate strategy
Retake process control from ESP and actively drive negotiations, contract design and communications
Completely rebase financial and strategic deal analysis
Assess ESP's cost base and enhancement initiatives to estimate ESP margin and potential of "managed base case"
Drive comprehensive risk analysis effort as basis for regulatory approval process

Bain managed to finalize the multi-billion Euro IT outsourcing contract.

Next Results

Bain helped to create tangible value through outsourcing. An alternative "in-house" scenario played a key role as appropriate decision making baseline and comparator for executive management.