Why benchmark IT contracts?
Market prices for IT services are difficult to understand and are in a constant state of motion – frequently dropping. Benchmarking of contracts is necessary to ensure that you pay the right price. Benchmarking should be used to optimise costs, as a recurrent part of the contract management process and as the basis for a new contract. When it comes to maintenance, it is important to distinguish development costs from maintenance tasks so that the latter can be benchmarked independently.
When should benchmarking be used?
In the absence of price adjustments to a contract over the past three years, market price developments will indicate that there is a significant difference between contract prices and current market prices. You can also initiate contract benchmarking as part of an RFP process or contract negotiation, or when introducing new services into the contract. Regular benchmarking should be part of any infrastructure and maintenance agreement to ensure compliance with market prices.
Zangenberg Group has the largest benchmark database of active contracts in the Nordic region. In a benchmark process, we review the contract and calculate a market price for the contract at the agreed time. The price in the contract is then adjusted to the price specified in the benchmark report. Our benchmarking model and methodology are transparent and, given that they are based on the same method that providers use to calculate prices, they are also predictable. All providers accept it as a valid price control mechanism. In combination with other price control methods, such as efficiency gains, it is a highly efficient tool.
A benchmarking process starts with data collection, in which the scope of the contract and the financial and technical baseline are determined. We adapt the complete mapping of the current infrastructure and/or maintenance to market standards, facilitating normalisation of the services provided. Once normalisation is complete, we validate that data is comparable.
We then submit a final benchmarking report containing observations and recommendations.
- Full documentation of the contract in the Zangenberg Analytics framework, which the market recognises as the leading benchmarking method
- Benchmarking of prices compared to market prices, based on data from the past quarter
- Instructions for optimisation measures to ensure that prices comply with market prices