SOURCE: Pace Harmon

Pace Harmon

October 22, 2009 10:01 ET

Pace Harmon Warns Against 'One Size Fits All' Approach to Hardware + Outsourcing Services Bundling

Outsourcing Advisor Pace Harmon Recommends Evaluating Individual Deal Components to Capitalize on Best Deal -- Whether Bundled or Unbundled

VIENNA, VA--(Marketwire - October 22, 2009) - As a result of the recent M&A activity from several major hardware and outsourcing services companies, Pace Harmon -- an outsourcing advisory services firm -- is advising enterprises to explore all possible procurement options before deciding whether to pursue new bundled or unbundled product/services options. The company recently released its "Dell-Perot Systems Acquisition Market and Customer Impacts" report to assist organizations in evaluating next steps for existing and future supplier relationships.

Regarding the significant recent hardware and outsourcing acquisition announcements, e.g., Dell-Perot Systems, Xerox-ACS, Pace Harmon doesn't expect a material impact on the general market, but expects each of the newly combined companies to aggressively seek to leverage key synergies and cross selling opportunities from their new partnerships -- similar to the direction HP-EDS has been taking since its combination last year.

"For companies currently engaged with suppliers involved in acquisitions, it is imperative to proactively take steps to protect current and future Agreements," said Steve Martin, partner, Pace Harmon. "Considering the opportunities for complementary benefits between the new entities moving forward, customers looking for best-in-class solutions should consider what each supplier brings to the table and whether their specific IT needs are best met with a one-stop-shop or several competitively selected suppliers. Additionally, these suppliers may decide to sweeten the pot with a tailored bundle when negotiating a deal for either hardware or outsourced services, but customers should be wary of the possible pitfalls of being locked into long term contracts that are dependent on an 'all-in' set of services."

Pace Harmon's report sheds light on the benefits and drawbacks of bundling options and emphasizes that there is not a "one size fits all" situation. Considerations include: whether the current service providers' agreements terminate at the same time; where a company falls in its technology refresh cycle; whether the company utilizes significant amounts of hardware; whether the company's IT requirements are US-centric vs. global; whether a reduction in the number of suppliers is desirable; whether the need for single threaded supplier accountability is central to the IT governance model; and whether capital or operating expense is preferable for the company's financial needs and strategy.

Additionally, the report advises companies currently in the down selection or negotiations phase of a procurement event with any of the involved companies, to consider the following steps:

1. Keep Key Personnel Intact: Ensure critical account team members are locked in through stringent Key Personnel clauses that preclude either supplier (in a to-be-formed new combination) from moving account team members to the other's strategic accounts.

2. Protect Against Integration Issues: Confirm the inclusion of liberal termination rights and clear service level agreements relating to areas that are more prone to suffer in an integration, e.g., invoicing and back office support functions, account team disruption.

3. Leverage Buying Power Now: While suppliers are always interested in new or retained business, there is increased priority on securing big accounts right before and after an acquisition is secured.

4. Engage Legal Counsel: Legal representation should develop appropriate assignment and successor-in-interest terms.

Pace Harmon's clients include Fortune 500 and select high growth middle-market companies spanning industries such as Telecommunications, Health Care, Financial Services, Manufacturing, Technology, and Energy.

To download a full copy of the report, please visit www.paceharmon.com.

About Pace Harmon

Pace Harmon is an outsourcing advisory services firm providing guidance on complex outsourcing and strategic sourcing transactions, process optimization, and supplier program management. Founded in 2003 and headquartered in Tysons Corner, Va., Pace Harmon provides pragmatic and insightful advice that helps its client base of Fortune 500 and other large enterprises maximize the benefits achieved from their mission-critical supplier relationships. For more information, please visit www.paceharmon.com.

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