Today’s guest blogger, Timothy C. Colwell, SVP of Global Business Analytics at AOTMP, shares some best practice advice on executing a successful strategic telecom sourcing initiative…
Strategic sourcing is rooted in the philosophy that the success of the activity will drive consistent business value for the duration of the established contract. Often, sourcing event objectives are shortsighted in that they seek immediate financial benefits while assuming technical performance and customer care will follow. This does not imply that securing the best rates automatically means that technical performance and customer care will be sacrificed; rather, it suggests that without a plan to secure a well-balanced contract, complete performance is less likely.
Approaching telecom sourcing as a strategic event serves to align business objectives with the best possible telecom carrier, which will yield the most effective performance for the contract duration. To execute a successful strategic sourcing initiative, the following should be incorporated into the process:
- A technology roadmap supporting long-term technology requirements
- Defined technical, financial and operational business objectives
- A relationship management plan supporting the contract lifecycle
A technology roadmap begins with an understanding of immediate service needs. This is gleaned from a service inventory, as well as voice and data consumption trending. While technology innovation changes at a pace greater than that of the average telecom contract term, the goal of a strategic sourcing initiative should be to predict communications needs as they relate to business demands. By understanding voice and data usage trends and planned business consumption across fixed and mobile service suites, enterprises can focus their attention on carriers that likely have the ability to support their telecom service needs today and into the future. Addressing technology upgrade and migration contingencies affords the flexibility needed to take advantage of yet to be offered technologies introduced during the contract term.
When considering business objectives for the sourcing event, a well-rounded perspective on business needs should be adopted. Technical aspects of service should address availability, compatibility and reliability. Methods that telecom carriers use to deliver service play an integral role in assessing these key technical attributes. For example, understanding whether or not a carrier controls end-to-end network services will shed light on the ability of the carrier to fully commit to required service availability and reliability. By contrast, carriers reselling services will only commit to technical performance for the portions of the network they control. Exploring the details of how services are delivered increases awareness of potential risks that threaten technical performance expectations.
Financial business objectives should be viewed through a total cost of ownership lens. The tendency is to focus pricing objectives on service line item price points. While this is necessary, a complete understanding of cost enables a better understanding of the financial impact of a given carrier contract. ‘Other’ charges above and beyond line item pricing can account for as much as 40% of the cost of telecom service. For this reason, evaluation of non-recurring charges, one-time and recurring administrative charges, cost recovery fees, and surcharges is just as important as line item service charges when evaluating service cost.
Operational business requirements are perhaps the most commonly underappreciated objectives in a sourcing event. These objectives should clearly identify requirements for engineering support, technical design support, help desk support, service ordering support, billing support, and account management. Over the past several decades, operational support and customer service have greatly declined in the telecom market. Carriers are pressed to reduce their prices to compete in the open market and support is typically the first casualty as costs are cut in efforts to reduce prices while maintaining margins. Establishing clear expectations for operational support requirements and accepting that there is a cost for meeting expectations enables enterprises to be more objective when evaluating carrier cost as it relates to meeting their requirements.
As unpopular as the thought may be, enterprises are required to manage their carriers and associated relationships in today’s market. Defining requirements for business relationship management should occur in the sourcing event and before a carrier is selected. Requirements should address account management, customer care and business relationship management objectives. By addressing relationship management objectives within sourcing events, enterprises will be prepared to evaluate carrier capabilities and competencies before selection, which lessens the likelihood of buyer’s remorse.
As you plan for your next sourcing event, incorporate these strategic sourcing elements to improve sustained contract value and support telecom lifecycle management for your organization.
Want to hear more from Tim Colwell on best practices for strategic telecom sourcing? Register for Ecova’s upcoming webinar co-presented by AOTMP.
Timothy C. Colwell is AOTMP’s Sr. Vice President of Global Business Analytics and is owner and author of AOTMP’s Industry Best Practice Library. AOTMP is a leading authority on driving efficiency and performance into enterprise fixed and mobile telecom environments, working hand-in-hand with both enterprises and industry suppliers.