Case Study - UK Utility Company

Our client was being pressured into changing an existing IT outsourcing agreement to one based on "Joint Venture" partnership principles. Below is a brief outline of the major 'Before' and 'After' positions of this Lucidus intervention.

Before Existing Arrangements

• Our client was excited by the prospect of recovering financial benefit to fund its ongoing large outsourced IT service
• The spreadsheet financial position offered by the outsourcer painted a "Rosy" picture of the upside to the relationship and, understandably, avoided potential downsides
• This relationship was to be formed and controlled by the creation of a new "Joint Venture" company

After Lucidus Intervention

• Using Lucidus value modelling techniques, the value to each party was modelled over the estimated 20 year life of the outsourcing agreement
• Value was articulated as direct, indirect and non financial value
• Market potential for the products of the joint venture was modelled
• Both Upside and downside value to each party was modelled

Outcome...

• Outsourcer would make significant money on both upside and downside
• Arrangements left little incentive for outsourcer to push products of the joint venture in order to deliver expected revenues to our client
• The practical market for the proposed products of the joint venture were severely limited
• IPR in joint venture products skewed heavily in favour of outsourcer even though high proportion currently owned by our client
• Inequities of the arrangement were discussed (by our client) with the outsourcer
• Following those discussions, our client decided not to enter into the joint venture arrangement