17 February 2011 | Adviser Q&A
I have been asked to find cost savings from an incumbent supplier providing telecom hosting. There is little appetite internally to move this spend. How should I approach this?
Purchasing manager, Hertfordshire
John Hatton, Trading director, Xchanging
Data and telecoms networks often form the critical backbone of a business and therefore require extensive risk management. Your technical colleagues will be reluctant to change sourcing arrangements if there is the slightest possibility of increased risk.
However, there are many capable suppliers in the marketplace. Many suppliers means active competition, which in turn means significant savings. A tender is by far the best way of leveraging a better deal from your incumbent – though you should also be prepared to move the business following thorough adjudication.
The market has evolved and you will need to determine whether to procure via (a) renting of space (or power usage); (b) uptime; or (c) a cloud-based service. You should prepare a business case that outlines risks and the commercial opportunity. Make sure you familiarise stakeholders with it before presenting it, and get a senior sponsor on board from the outset.
Craig Wellman, Director of business development, Azzurri Communications
Fear of disruption in service sounds like the primary barrier to change here. But new technologies and increased market competition means firms who have not recently reviewed their contracts will not be achieving best possible value.Business telecoms customers are particularly at risk from being stuck with inflexible proprietary technologies, hit with unpredictable costs and in effect “paying off the mortgage” of their chosen carrier.
My suggestion would be to build a strong business case to put to your stakeholders by researching the market, pointing to companies who have successfully changed supplier. This will help to assuage doubts.
I would look to highlight how a fresh procurement can ensure your firm takes advantage of “convergence” through consolidation. Most firms have numerous suppliers for different aspects like hosting, fixed-line voice and data networks, all of which create overheads.
Bringing these aspects together into a managed service from just one supplier, under a single SLA, could be a smart move.
Alexandra Sandercock, Director, Turnstone Services
This is a common challenge for procurement. You need to create some leverage for negotiation, and the starting point is often to complete a market benchmark to understand whether the current costs are above market value, and if so, by how much. As the telecoms market changes quickly, this is a worthwhile exercise – aside from simple cost savings, new technologies, service levels and processes may be brought to light which could bring significant benefit to your organisation.
This benchmark should be undertaken with involvement from your internal telecoms team, so they are not alienated from the process. The figures from the benchmark will give you a starting point for internal discussion. If market costs are significantly lower, your internal colleagues may have more appetite to change, and you now have both leverage and points for negotiation with the incumbent.
Key points
- Counter your colleagues’ fear of disruption with examples of success stories
- Research the market to identify new technologies that could benefit your organisation
- Involve internal stakeholders in the process to ensure they do not feel alienated
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Send you questions to adviser@supplymanagement.com
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writers’ personal views and should be regarded as general guidance only.
