Can Finance and Procurement teams take the lead in telecoms cost management?
It’s our experience that most businesses look to negotiate better prices with their vendors (normally in return for contract extensions) as their primary method of telecoms cost reduction. Often procurement teams will be asked to take ownership of such activities and manage the process, either via a tender or more commonly through tactical negotiations.
Whilst this approach often delivers a satisfactory short term result, it regularly fails to truly challenge whether current services, processes, support and contracts are really fit for purpose; and whether these areas are optimised to the needs of the business and its usage profiles. There is an inherent assumption that a reduced tariff is all that’s required to bring costs under control; however with services like mobile, the tariff is only one element of optimising costs.
Unfortunately for many business this approach means that significant savings are being left on the table. More often than not, it also results in the renewal of contracts that already were struggling to adapt to underlying changes in requirements and usage trends and profiles. For example in mobile, with rapidly changing mobile data usage and personal use of corporate devices.
Procurement and finance teams can double their impact of cost savings by leading and changing the approach to telecoms cost management and procurement.
Our personal experience is that IT teams are rarely set up to proactively search for hidden costs, wastage and usage issues. Most are struggling with limited resources, higher priority projects and are set up to re-actively deal with new service requests, faults and issues, Despite good intentions most never find the spare resource or time to truly challenge telecoms costs and usage; and most believe that a relatively consistent bill means that costs must be under control. Occasionally “roaming bill shock” or some other exceptional event will trigger a rapid review of mobile costs or usage; however typically such reviews don’t result in addressing the underlying causes of overspending. And so, most businesses fail to recognise that they are continuously overspending by 20% or more without noticing.
Procurement and finance teams by contrast are better placed to take a more proactive approach. With the right targeted questions and by looking “inwards” at the full spectrum of telecoms usage, processes and behaviours, before engaging with vendors, these teams can place their businesses in a much stronger position to deliver long term sustainable savings and even better contract terms.
By adopting a process of first looking ‘inwardly’ to optimise telecoms costs and usage prior to engaging in vendor negotiations, businesses can drive better results in two key ways.
First, you’ll be able to rapidly identify and drive out business wastage and excess costs, which for many businesses will deliver a 10-20% cost saving. Most of this overspending will be hidden from view in the monthly consolidated invoice, and will require more detailed analysis; however these areas are often pure profit for your suppliers and unless they are found and removed will typically remain after the new tariffs and terms are applied.
With costs optimised in the short term, you’ll then also be able to negotiate based around your real business needs and usage. And by first truly understanding the usage and requirements of the business, rather than accepting the “status quo” position, procurement teams can often negotiate significantly better terms. You’ll also prevent suppliers from seeking to “lock” in this wastage and excess cost with new spend commitments.
Want to learn more about effective telecoms procurement?
At Utelize we have identified hundreds of different ways that businesses can optimise their mobile and telecoms costs and procurement processes. If you’re interested in learning more visit our Resource Centre (www.utelize.co.uk/resource-centre/) where you can download our wide range of best practice guides and detailed methodology for telecoms procurement.