# Case study: A $2.7 million saving that wasn't a saving

Source: https://ollie.coach/case-studies/a-2-7-million-saving-that-wasnt-a-saving
Author: Oliver Fernandez, MBA
Published: 2026-08-21
Enterprise software · Global enterprise software customer (anonymized) · Global agreement and ROI classification, 2025

$2.714M of value over three years — correctly called cost avoidance, not savings.

## In short

An enterprise workflow platform was bought differently in every region. Consolidating it into a single global structure produced a three-year outcome roughly $2.714M below the expected future-state cost. Because that comparison included growth, true-ups and regional expansion, Finance classified the value as cost avoidance rather than a reduction in existing spend — making the claim smaller on paper and far stronger in front of an auditor.

## Results

- Future-state TCO: $9.099M (Three years, without the negotiated outcome)
- Executed TCO: $6.385M (Three years, as signed)
- Value delivered: $2.714M (Classified as cost avoidance)
- Regions unified: 3

## The company was trying to become one customer

The enterprise workflow platform was already important to the organization, but the commercial structure did not yet look like one global enterprise.

Different regions had different arrangements. Europe had reseller-based agreements. The Americas had its own timing and economics. APAC was being brought further into the platform. Products, user counts and renewal dates did not line up neatly.

For the CIO, the opportunity was larger than a conventional software renewal. Could the company move toward a single global commercial structure, standardize more of the platform and create room for future growth?

That sounded attractive. It also made the financial comparison much harder.

> **THE COMPLICATION**
>
> When the future agreement includes more users, more regions, more products and future growth, today's spend is no longer a sufficient baseline.

## The old number was real — but incomplete

An early global-contract strategy showed an annual run cost of roughly $922,000 for the existing environment excluding Europe. The proposed future structure was approximately $1.014 million per year for three years.

If those were the only two numbers shown to Finance, the project could look like a cost increase.

| Early commercial view | Approx. value |
| --- | --- |
| Current annual run cost (excluding EMEA) | $922K |
| Proposed annual global-contract cost | $1.014M |
| Proposed three-year cost | $3.042M |

But the future requirement was not the same as the old one. APAC was being added more fully. License quantities required true-up. Growth had to be accommodated. Europe would eventually move from reseller arrangements into the global model. The organization was also standardizing capabilities.

The right question therefore wasn't whether the new contract was cheaper than today's invoice.

> **THE REAL QUESTION**
>
> What would the company reasonably expect to spend over the same future period if it did not secure the new commercial structure?

## This is where savings conversations go wrong

Business cases like this create a temptation. A team negotiates a much better future position. Someone calculates the difference against what the company otherwise expected to pay. The number is large. Then the entire number gets called "savings."

The problem is that several different things may be hiding inside that word. Some value reduces an existing budget. Some prevents a supplier increase that had not yet hit the P&L. Some comes from changing quantities or scope. Some represents better total cost over a multi-year period.

All of those can be valuable. They are not the same thing.

## The future-state comparison

As the global platform strategy matured, the company built a future-state commercial model rather than relying only on current run rate.

| Three-year comparison | Approx. value |
| --- | --- |
| Expected future-state TCO without the negotiated outcome | $9.099M |
| Executed / negotiated TCO | $6.385M |
| Difference | $2.714M |

Commercially, the result was significant. But Finance still had to answer a more disciplined question.

> **THE FINANCE QUESTION**
>
> How much of the $2.714M represents a reduction in existing spend — and how much represents future cost the company successfully prevented?

## What would you do?

Imagine you are the CFO reviewing the business case with the CIO. The technology organization has negotiated a future agreement approximately $2.714 million below the modeled three-year cost of the alternative future state. The commercial result is well supported, but the comparison includes growth, true-ups, regional expansion and future supplier economics.

| Option | Choice |
| --- | --- |
| A | Call the full $2.714M hard savings. The company negotiated it, so it is savings. |
| B | Reject the value entirely because the company is still spending more than today's historical run rate. |
| C | Call everything cost avoidance. It is future-state value, so none of it should count as savings. |
| D | Build a bridge from today's approved baseline to the future state and classify each component according to what actually changed. |

Which answer gives management the most useful picture of the decision?

## What happened

The company treated the $2.714 million as cost avoidance rather than pretending it was a like-for-like reduction in existing spend.

That did not make the commercial outcome less valuable. It made the claim more credible.

The organization had negotiated against a future state that included real growth and expansion. The agreement reduced what that future was expected to cost. Finance could therefore recognize the economic benefit without implying that $2.714 million was being removed from an existing budget.



> **THE DISTINCTION**
>
> A good deal does not become a better deal because you give the value a more impressive label.

## Why the baseline matters before the negotiation

If Finance and the business wait until after the supplier agreement is finished to decide how value will be measured, the winning outcome can influence the baseline. That creates an obvious credibility problem.

The better approach is to agree the rules first. What is the current baseline? How will growth be treated? What counts as demand reduction? How will implementation costs be handled? What qualifies as cost avoidance? Over what period will TCO be compared?

Once those rules are set, the commercial result can be measured against them rather than the other way around.

## The Parsimoney lesson

Parsimoney separates commercial value into categories because executives need to know what actually happened.

| Value type | Plain-English meaning |
| --- | --- |
| Finance Impact | We reduced a cost that otherwise would have remained in the financial baseline. |
| Demand Management | We changed how much the business needed or consumed. |
| Cost Avoidance | We prevented a credible future cost or increase from materializing. |
| TCO Impact | The full comparable economic outcome improved after scope, timing and implementation are normalized. |
| Other Commercial Value | We improved flexibility, risk, working capital, service or protections without forcing the benefit into a savings number. |

> **AUDIT-WORTHY ROI**
>
> The purpose of ROI classification is not to make the number smaller. It is to make the number believable.

## The CIO and CFO were solving different parts of the same problem

The CIO needed a global platform structure that could support the business. Finance needed a financial story that could survive scrutiny.

Those goals were not in conflict. The commercial decision became stronger when both were satisfied. The technology team could say: "This is the right future structure." Finance could say: "And this is the value we can responsibly attribute to it."

That is a far stronger management conversation than arguing over whether a large number deserves to be called savings.

## Why this case matters

Organizations with little formal procurement capability often measure supplier initiatives with a simple before-and-after comparison. That works when nothing else changes.

But important business decisions rarely stay that simple. Companies grow. Demand changes. New regions are added. Products are upgraded. Implementation costs appear. Suppliers propose increases. Contracts cover different periods.

The more strategic the decision, the more important it becomes to separate the quality of the commercial outcome from the accounting label attached to it.

You can create enormous value without reducing today's spend. And you can report an enormous "saving" without creating much value at all.

## Three questions to take back to your business

| # | Question |
| --- | --- |
| 1 | Did you agree the baseline before you knew the negotiation result? |
| 2 | Can Finance reproduce your savings or avoidance number from the same source evidence? |
| 3 | Are you calling different kinds of value "savings" because it is easier — or because it is actually correct? |

> **IF YOU REMEMBER ONE THING**
>
> Credibility is part of ROI.

## Before and after

| Measure | Before | After |
| --- | --- | --- |
| Commercial structure | Regional and reseller agreements | One global contract |
| Baseline used | Today's invoice | Modeled future state |
| Value label | \"Savings\" | Cost avoidance |
| Measurement rules | Set after the deal | Agreed before the deal |

## Principles applied

- Principle 01: Why Cost Resilience Beats One-Off Negotiation Wins (https://ollie.coach/blog/why-cost-resilience-beats-negotiation-wins) — Consolidating six commercial positions into one global structure was resilience work, not a one-off negotiation win.
- Principle 04: Decide Before You Negotiate (https://ollie.coach/blog/decide-before-you-negotiate) — The measurement rules — baseline, growth treatment, TCO period — were agreed before the negotiation, so the result could not bend the baseline.
- Principle 09: Activity Is Not Value (https://ollie.coach/blog/activity-is-not-value) — A large number is not automatically value; classification is what tells management what actually happened.
- Principle 10: The Contract Is Not the Commercial Reality (https://ollie.coach/blog/contract-is-not-commercial-reality) — The signed agreement described the future structure; the value categories described the commercial reality behind it.

## FAQ

### Why not just call the whole $2.714M savings?

Because no existing budget line fell by $2.714M. The company negotiated against a future state that included growth, true-ups and regional expansion. Calling prevented future cost a reduction in current spend is the fastest way to lose Finance's trust in every future business case.

### Doesn't cost avoidance sound weaker than savings?

It sounds smaller and it is more believable. Audit-worthy ROI is worth more to an executive team than an impressive number nobody can reproduce from source evidence.

### When should the baseline be agreed?

Before the negotiation result is known. If the baseline is set afterwards, the outcome influences the measurement, and the credibility problem is structural rather than accidental.

A good deal does not become a better deal because you give the value a more impressive label.

Next step: take the Cost Resilience Health Check at https://ollie.coach/health-check
Vocabulary: https://ollie.coach/glossary