AGL operates Australia’s largest private electricity generation portfolio, with a total capacity of 10,413 MW, which accounts for approximately 20% of the total generation capacity within Australia’s National Electricity Market.
They are an active participant in gas and electricity wholesale markets with 3.7 million customer accounts, including residential, small and large business and wholesale customers.
AGL has three simple strategic priorities: growth, transformation and social licence. AGL thinks about growth as meeting customer needs along three horizons:
- Optimising the existing portfolio for performance and value.
- Evolving and expanding core energy market offerings.
- Creating new opportunities with connected customers.
To enable their strategy, AGL needed to improve their telecommunications contracts and operating model to:
- Transition to a relationship that allowed for a more agile and cost effective client/provider engagement.
- Improve services and align the contracts with AGL’s strategic cloud-based roadmap.
- Deliver savings to support the implementation of its strategy, and give AGL the ability to manage and measure costs going forward.
Cost Down Revenue Up Pty Limited ‘CDRU’ (part of the Digital Lifecycle Group) was selected as the strategic sourcing partner to support this initiative. The CDRU people, sourcing process and telecommunications bill analysis tools have been collectively brought together to successfully implement this strategic sourcing assignment.
The CDRU approach known as the USP (Understanding, Solutioning, Proposing) process mapped out very clearly, and in practical steps what had to be done over a 6 month period, with an additional 3 months to finalise contracts and initiate vendor transition.
The Understanding process took a forensic approach to Telecommunications services across what is a large scale, distributed and in many cases remote network service footprint. A Total Cost of Ownership ‘TCO’ view produced an annual expenditure baseline, including all hidden costs, and justified future ICT investments and upgrades.
The Solutioning process identified multiple areas of focus including upgrading support for project, collaboration, contact centre and security services. Improvements in Telecommunications across all Operational, Corporate Data, Fixed Voice and Mobile Networks were also identified.
The Proposing process, included a final Best and Final Offer process, detailed supplier due diligence and financial business sensitivity modelling with supplier options compared on ‘apples-for-apples’ basis against predetermined client evaluation criteria. CDRU made a board level recommendation to AGL, which was accepted.
The first step was CDRU providing a detailed ICT service cost/value baseline and mapped out high-level Future Telecommunications Organisational needs. This involved CDRU projecting savings based on its extensive market benchmarks. This set a very valuable strategic and tactical agenda for which areas of ICT needed both investment and also a cost focus. The strategic agenda included CDRU ‘outcome’ certainty from the outset to ensure sourcing risk was minimal, timeframes were compressed and early benefit realisation was achieved.
The benefits of the CDRU ‘USP’ sourcing process can be summarised below:
- Significant network improvements with single points of failure removed, improved flexibility using SD WAN and increased bandwidth across key sites.
- Improved turnaround times for project statements of work and project delivery.
- 24×7 support for critical services including contact centre and collaboration.
- Altered the contract structure to enable AGL’s future strategy.
- Double Digit operational cost reduction, year one and beyond.
- Additional funds are now available for future strategic enablement projects.
In addition to the tangible savings, the USP process improved the ongoing supplier vendor management through more flexible, fit-for-purpose contracts. CDRU were able to fix the schedule, price and deliverables for supplier transition, lowering the risk of benefit capture.
We specialise in strategic sourcing and achieving predictable technical, business and financial outcomes but also implementing supplier transition and ongoing vendor management services.
From the outset, the AGL engagement was planned strategically and with early clarity both parties have benefited strategically. This is best described as initial strategy, sourcing, vendor transition and ongoing vendor management outlined with contracted outcomes agreed at the outset.