Action. Situation. RampRate 1

Transcription

1 Case Study Industry: E-Commerce Geography: Global RampRate Solutions: RampRate HyperSource.IT! Decision Execution Platform, CDN Optimization, Telecom Expense Management (TEM), RampRate Professional Services Situation As one of the 20 most highly trafficked websites worldwide, ebay s need to build out infrastructure to accommodate both organic growth and acquisitions was constant, expensive, and time-critical. ebay was well-known in the e-commerce industry as a thought-leader and innovator, creating a distinct competitive advantage through the skillful management and progression of its IT infrastructure. Having negotiated contracts superbly for years, ebay had some of the best rates and contract terms in the industry. However, each new acquisition added a layer of amendments to ebay s outsourced data center, network, and CDN contracts, causing a strain on its top-notch infrastructure team, which was being pulled from innovative projects to address contract- and growth-related issues. Action Created 13% savings in restructured data center contract through removal of excess capacity and by replacing custom circuits with standard circuits, while also allowing flexibility for early exit. Achieved 16% rate reduction from telecom provider through comprehensive renegotiation of nine-figure contract. Achieved 26% cost reductions from strategic WAN providers through route redundancy and uncompromising SLAs. Created 22% outsource provider-related savings through contract expiration, while also strengthening ebay/supplier relationships. Saved 4,320 hours (two years) of staff time on contract negotiation and management. Stronger supplier contract terms with more accountability, flexibility, and fluidity. IT team freed up to focus on innovative projects rather than contract-related issues. RampRate 1 RampRate 1

2 Results Fueling Innovation With massive savings achieved through RampRate s solutions, ebay has turbo-charged their outsourced infrastructure and funded further innovation. As ebay s growth and pace of acquisitions accelerated, its outsourced data center, network, and CDN contracts were amended with new and custom conditions and usage patterns. The Details ebay as Innovator ebay services over 100 million active users with $68B GMV (gross merchandise volume) annually. Its status as an innovator is well earned and includes consolidating hardware SKUs and using advanced internal metrics. The company created a distinct competitive advantage through its skillful management of IT infrastructure. New Acquisitions = New Contract Rates and Terms Each time ebay acquired a new subsidiary its IT team managed to create savings and synergies as it integrated the new part of the family into its best-in-class infrastructure and facilities. As its growth and the pace of acquisitions accelerated, ebay s outsourced data center, network, and CDN contracts were amended with new and custom conditions and usage patterns. Maintenance of Outsourcing Harder with Growth Under conditions of such high growth, sourcing lifecycle management, and contracts in particular, started to become a distraction to ebay s elite IT team. The highly driven technical and procurement staff was patching holes in contract agreements so it could continue to prioritize the innovation that ebay had made its hallmark. Potentially costly gaps began to arise as Global Foundation Services (GFS), the team responsible for managing outsourced supplier relationships, grappled with the scale and complexity of constant supplier renegotiations, including: 10-year-old MSAs and SLAs with suppliers who had since been acquired twice. A billing model that was designed to accommodate growth but did not operate as effectively when capacity was removed. Underperforming bandwidth providers whose services had not been cancelled. Content delivery network (CDN) services that were not being utilized to their fullest potential. Usage that had skyrocketed past scale discount bands with no cost reductions implemented. ebay s VP of GFS new that his team s talents could not be stretched to lead in both technology innovation and sourcing efficiency, and picked the higher value path. I knew I was leaving a bit on the table in our outsourced contracts. But the corporate mandate is growth and innovation, and when further contract improvement seemed to be marginal, my team s first priorities had to move elsewhere. - Dean Nelson, Vice President of GFS RampRate 2

3 Minor Victories Lead to Major Opportunities for Improvement RampRate was able to address these problems quickly and allow ebay to realize risk-free cost efficiencies. Overall, RampRate s review of ebay s outsourced provider portfolio proved it to be one of the most favorable portfolios for any company. However, continually working on these and more serious issues was taking its toll on the team s ability to focus on innovation. RampRate deepened its engagement with ebay and the GFS team, resulting in more than a dozen RampRate-led projects for ebay and its subsidiaries, including paid consulting engagements and brainstorming sessions surrounding its ongoing innovation efforts. With each engagement there was a clear ROI. Average savings exceeded 21%, with one project exceeding a 50% cost cut. % Savings Engagements included: Optimizing data center utilization. Integrating content delivery amidst acquisitions. Strategic guidance on Europe and CDN. Telecom restructuring. Management reporting and strategy. Data Centers: Optimizing Utilization for Cost Savings and Cleaner, Greener Outcome Once RampRate looked under the covers of expiring data center deals, it became possible for both ebay and its suppliers to gain incremental value. Suppliers recovered power they could resell, and ebay received eight-figure savings with only minor reengineering. With greater efficiency, ebay was able to take a leading step toward cleaner, greener data centers. Comments one of ebay s suppliers involved in the data center optimization, I m not going to say it was completely painless, but at the end of the day we have a much healthier relationship. RampRate 3

4 RampRate was a risk-free proposition money wise. If they didn t save us at least twice their initial fee we d get a full refund. And with 100 big-name clients, there had to be something there. But I was worried that in negotiating lower rates they might undermine my key relationships. When they came in and said they could carve out 27% savings, I thought it was impossible without undermining key relationships. But they hit that number and the relationships are stronger than ever. - Paul Santana, Manager of Data Center Operations RampRate s holistic approach to advisory service supports our goal to preserve and strengthen client/supplier relationships while realizing financial and time savings as well as risk reduction for clients. Content Delivery: Integrating Acquisitions for Cost Savings ebay had a relationship with a CDN supplier who had also served many of the companies ebay acquired. After merging with ebay, many of the acquired companies were still paying higher rates than ebay, with different commitment structures, inconsistent billing, and other issues. Not seeing an upside, the CDN supplier declined to integrate the agreements of the acquired companies with ebay s existing agreements. RampRate took advantage of a key term the ebay team put into its contract with the CDN supplier a mid-term price reset and turned it into a lever for change. By using this lever to restructure pricing not only for the corporate entity but also for all users, ebay realized substantial savings. It also built a scale discount structure for the future and removed minimum revenue commitments that put a ceiling on potential savings. As a result of these changes, ebay was comfortable extending the contract term with the supplier to ensure companies acquired by ebay realized the same contract terms. Europe and CDN: Strategic Guidance via Advanced Toolkit Along with executing ebay s strategy, RampRate also became part of ebay s thoughtleadership organization, contributing to such revolutionary innovations as a fully data-driven selection of the right locations in Asia Pacific and Europe and the optimal usage of new and advanced CDN capabilities. With the analysis generated by its HyperSource.IT! Decision Execution Platform, RampRate helped: Cut the time frame for decision-making. Obtain approval for EU expansion. Facilitate change in use of CDN services. Identify optimal data center provider in the EU location of choice. Identify second CDN to load balance the first. Telecom: Restructuring for Cost Savings Gradually other divisions and business units began taking advantage of RampRate s capabilities through engagements of their own. One such engagement involved the comprehensive renegotiation of a ninefigure contract with ebay s strategic telecom supplier. Working with a set of expert TEM (telecom expense management) subcontractors possessing deep familiarity with the supplier s sales team, RampRate achieved a deal that was approved for signature and then carved out an additional 17% in top-line rates, more than doubling financial impact to date. After RampRate 4

5 closing, RampRate continued with a no-charge audit that uncovered seven-figure overbilling and recovered the full amount for ebay. Management Reporting and Strategy RampRate continues to provide ongoing operational support to ebay to evaluate providers, develop savings targets, or justify/support business decisions. Initiatives to date include: Advice on restructuring a managed services RFP to focus the provider on services delivered rather than hours spent. Price benchmark and capacity analysis of data centers in five key U.S. metros RampRate was able to complete this over a weekend due to its proprietary, big-data-driven software tools. Evaluation of contracts and renewals. Yearly savings forecasts for procurement teams. Support of development and deployment of ebay s DSE (Digital Service Efficiency) dashboard a new standard for how IT service efficiency is measured. RampRate participated in several strategy sessions. Tangible Results, Strategic Prominence Results realized by ebay include: Expected 22% savings before the next supplier renewals. Time and cost savings of more than two person years. Stronger supplier contract terms with more accountability. More flexible/fluid supplier relationships. In addition, and perhaps most importantly, these tangible benefits allow ebay s IT team to focus on innovation within the e-commerce space without the internal distraction of supplier analysis, contract negotiation, and complex data gathering. About ebay With 128 million active users globally, ebay is one of the world's largest online marketplaces where practically anyone can buy and sell practically anything. Founded in 1995, ebay connects a diverse and passionate community of individual buyers and sellers, as well as small businesses. Their collective impact on ecommerce is staggering, and more than 500 million items are listed on ebay. About RampRate RampRate is a leading global sourcing advisory firm serving some of the world's most important brands. We advise on and help Global 1000 companies transact for data center, telecom, CDN, RIM, IT support, and software maintenance services. We leverage our proprietary sourcing decision execution platform and acquired sourcing data to optimize each client s bill of outsourced IT. In our 14-year history we have optimized IT service contracts exceeding $24 billion for clients such as Sony, AT&T, Intel, and CBS who save an average 23.8% on their IT services purchases with no risk, and typically recover 1000s of hours of valuable staff time by leveraging RampRate. Our clients also enjoy a 99% success rate on their sourcing transactions. The aggregated service provider information derived from the 1000s of sourcing transactions we have engineered yields valuable insight to our clients and partners. RampRate 5