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Three Considerations to Achieve Strategic Sourcing Savings

Strategic sourcing and negotiation of contracts for telecom services can lead to reductions of rates by 20% to 40%. However, before you realize these savings consider terms and conditions in telecom contracts. Also, recognize that complex telecom bills have a wide range of services that require a system to verify new rates and special pricing are implemented properly. Finally, changes in consumption of telecom services by employees call for shifts in strategy and new efforts to negotiate contracts for the new services that they are consuming and reductions in Minimum Annual Revenue Commitments (MARCs) for areas with declining use.

Terms and Conditions

Telecom rates are only part of what determines the ultimate price and cost for telecom services. Knowledge of how the language in the contract and the terms and conditions affects the ultimate price of services is critical to getting the best deal. Read last week’s blog post to learn more about this issue.

Why a 35% Reduction of Rates Does Not Always Produce A 35% Cut in Spending

Second, achieving savings requires verification that new rates are implemented accurately. Enterprises need an automated system that compares prices on invoices to contracts. Organizations receive too many bills with different services to do this manually. A good system will pay for itself by identifying carrier billing errors. In addition, unless organizations clearly reference the new contract and special pricing arrangements when new orders are placed they will pay too much for services. A full lifecycle TEM solution with an inventory system for service requests.

When creating telecom cost justification Return on Investment (ROI) models and calculating the actual savings remember that actual savings depend on how much is spent on the services in the contract. So a reduction of 35% in rates on one contract does not produce a 35% reduction in total spending. Few organizations are able to negotiate all of their contracts at the same time because contracts have different expiration dates. A new contract with a 35% reduction in rates for telecom services that represent 25% of an enterprise’s overall expenses will save 8.75% of its overall expenses. Over time you may be able to achieve a 35% reduction in spending, but this requires you to re-negotiate all of your contracts. If you fail to act, you can be sure that spending will rise.

Finally as consumption shifts to new categories organizations must adjust their sourcing strategies. For example, as use of mobile services grows fixed services will decline. Carriers benefit from these trends because enterprise sourcing teams focus on services that represented the largest spending in prior years and neglect new areas of growth. This is why it is critical to benchmark your telecom services and align your sourcing for future consumption needs. Learn how Avotus Intelli-Sourcing can provide you with a professional services and automation that save you money.

Tagged: Strategic sourcing savings, contracts for telecom services, telecom contracts, telecom rates, Terms and Conditions, Minimum Annual Revenue Commitments, MARCs, telecom cost justification, Return on Investment, ROI, negotiation of contracts for telecom services

 

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