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Elevating the Role of Procurement and Sourcing in Strategic Technology Initiatives

Nov 11, 2019

According to Gartner, organizations spend an average of 62% of their technology budgets on vendor products, services and outsourcing. However, when it comes to promoting the purpose and expected benefits of adopting the appropriate policies and processes, Sourcing, Procurement, and Vendor Management (SPVM) leaders too often fail to develop a communication and change plan. How can procurement and sourcing take a greater leadership role and go beyond admin work and tactics?

One thing all projects have in common is that they must perform and produce results profitably. This means that planning and provisioning of services a project requires must include ongoing and recurring costs as well as initial investments. It is vital to measuring and achieving the profitability of any project to be able to calculate its likely total cost of ownership (TCO) in advance.

Challenges in Communication Costs

Communication costs constitute a major portion of those ongoing costs, and they present some significant challenges to those responsible for selecting the most cost-effective services among a large and growing number of choices. Some of those challenges include:

• New services and technologies are constantly emerging and others sunsetting. Today, 5G wireless service promises to redefine the rate at which data services can be consumed thanks to dramatically increased speed. Conversely, the continuing growth of the “Internet of Things” creates more load, more demand for datacom and related technologies to connect more and more devices to the internet. Introductions of new technologies almost always impact decision-making around telecom and datacom.

Mobile services are not the only ones affected. Fixed-line technology is changing dramatically as well. Formerly popular landline services such as ISDN, DSL, and PRI-to-PBX-based services are rapidly being replaced by voice-over-internet-protocol (VoIP) services that often leverage both private IP networks and the public internet to reduce overall costs. Eliminating the need to maintain a separate voice network also reduces TCO when voice traffic leverages the IP data network.

Not only are procurement decisions informed by knowledge of these emerging services, so are renewals which also usually fall within the purview of the Procurement department. While rates for aging services tend to become lower, price performance for new services may significantly exceed that value. The tendency to just accept offered renewals must become a thing of the past.

• Telecom and datacom companies are constantly changing services, prices, terms and conditions, and more. Many offer “unlimited” consumption plans, then they don’t. Some offer “pooling” in which one program services a large group of users. Their individual consumption may vary, but it’s their total usage that matters. The best available plan at any point in time may easily be surpassed by newly introduced programs and plans. It becomes vital to keep track of these as they emerge.

Carriers often raise rates on older services to discourage customers from continuing to use them. Procurement specialists must stay current on these comings and goings to best benefit the profitability of all telecom initiatives.

Planning for Your Digital Transformation

Many events beyond the frequent changes made by carriers may precipitate the need to research, plan, and execute migration to new telecom and datacom services. Mergers and acquisitions often create the need to determine the best way to bring two or more environments together. Significant changes in business activity may need to be considered. New company offerings may be fueled by enhanced communication capabilities.

Some of the considerations which will require attention include:

• Start early so you can realize benefits immediately. This prevents needing to extend existing contracts which can become unnecessarily expensive.
• Plan for changes. Expansion or contraction of the business, the availability of new relevant technology, company mergers, or adoption of new strategies are all changes which impact telecom and datacom needs.
Don’t pay for what you need next year, this year. Given the rate and variety of possible changes it makes sense to avoid being “locked-in” to anything so you can nimbly make changes as new conditions emerge.
• Identify your desired outcome. Determine your response to survey results and benchmarking. Decide which services should be eliminated, which extended and renewed, and which should be replaced.
• Identify opportunities to consolidate multiple countries with one vendor to achieve consistent contracts and optimize competitive pricing
• If you don’t have a mobility hardware or equipment fund, don’t accept full minimum spend or connection commitment.
• Ease the overall management of renewals and maximize your volume discount activities by making all contracts co-terminus. Negotiating for 15 lines 100 times doesn’t make sense if you can negotiate for 1500 all at once.
Evaluate your current inventory BEFORE getting quotes. Identify services no longer in use due to departure of employees, sites that have been discontinued, and any services which are no longer needed.
Make no assumptions about contract terms and conditions. Read ALL the small print.
• Confirm the true definition of any claims made during negotiation. For example, an IP service may be referred to as “unlimited” in use. Only in the small print may you find that this unlimited service is throttled beyond a certain threshold.

Elevating the Role of Procurement and Sourcing in Strategic Technology initiatives

Reading about all there is to know about sourcing and procurement of communication services has probably left you with the accurate perception that there’s a lot to know. Many existing Procurement personnel may not have the experience or knowledge to participate in a meaningful way.

This leaves you with the question of whether to replace them with skilled telecom specialists or to have them trained. And, if the latter, how to have them trained.

The solution is to engage MDSL to help with your next communications migration. Our team includes experts in each of the disciplines mentioned and many more. Some of the areas we provide help with include:

• Identify contracts that are approaching the end date
• Benchmark existing pricing to determine target outcome
• Gather local country specific requirements
• Build RFP Template and usage profiles
• Execute RFP process with vendors
• Evaluate bids and best and final offer
• Negotiate with vendor and determine best outcome
• Validate commercially that final contract aligns with final offer
• Legal terms reviewed and contract is signed

In everything we do, the most important value is “knowledge transfer.” In essence we often obsolete ourselves with our clients by preparing their sourcing and procurement people to perform intelligently in the telecom space, thus contributing significantly to the profitable performance of every telecom project on their own.

Written by Ed Mulligan