Costain – Azure Cloud Operations Contract Review

The Challenge

Costain, a £1.3bn FTSE-listed construction and engineering business, engaged Swan Procurement to review a proposed three-year, £4.8m renewal of its Azure cloud operations contract.

Following an extended IT-led negotiation process, the agreement was escalated to the CFO just one week prior to expiry with largely unchanged commercial terms, including a proposed 3% uplift despite evidence of declining Azure consumption.

There were also concerns around the overall commercial structure of the agreement, particularly whether the operating model, role mix and cost base remained aligned to the organisation’s actual cloud requirements.

The Assessment

Swan Procurement performed a detailed commercial assessment of the proposed renewal, decomposing the agreement and benchmarking:

Fixed management costs relative to Azure consumption
Individual role rates by experience level
Onshore/offshore delivery mix
Market positioning of the overall operating model

The assessment identified several material areas of commercial exposure, including:

Management costs approximately 30% oversized relative to Azure spend
Average resource rates more than 15% above current market levels
No commercial mechanisms to flex costs in line with consumption changes
No meaningful service credit or under-performance protections

Based on these findings, Swan Procurement developed a structured negotiation strategy and supported the organisation directly through the supplier negotiation process.

The Outcome

Secured approximately £250k annual cost savings
Prevented a multi-year commitment to an inflexible commercial structure
Improved commercial flexibility by aligning the extension term with the existing Microsoft Azure agreement
Preserved the option to competitively retender and consolidate the services alongside the future Azure renewal
Strengthened the organisation’s commercial position and future negotiation leverage

By independently benchmarking the agreement and restructuring the negotiation approach, Swan Procurement enabled Costain to regain commercial control over a strategically important cloud operations contract.