Situation:

• In 2019, Hosting and Hostway merged.  Management and the transaction advisor estimated sourcing synergies of $2.25M in annual earnings improvement.  Inside Consulting was engaged to identify and deliver sourcing savings in support of of the merger targets.

Insights and actions:

• The premise of the sourcing synergy estimates was primarily based on increased volume and leverage. Detailed contract-level analysis, however, revealed that two-thirds of the cost base presented far more compelling sourcing opportunities (such as credible threats of competitive displacement and demand management potential), and that increased volume was the key lever for only 5% of spend.
• Based on this fundamentally different assessment, we developed tailored go-to-market strategies and competitive sourcing plans, including:
  • Public cloud spend optimization via instance reservation and pre-purchasing on the combined spend base at an instance family level.
  • Where the two firms used different solutions, we worked with relevant stakeholders to conduct extensive demonstrations and technical evaluations, developing migration plans and quantifying potential switching costs. These findings then directly informed contract negotiations.

Impact:

• Ntirety realized $4.94M in technology spend savings, more than 2X the internal targets (23% of addressable spend).
• Excluding anticipated system retirements (the “easy synergies”), Ntirety realized $3M in annual savings versus internal targets of $600K. This represented 17% savings on addressable spend and was 5X the internal target.