eSourcing Communications

Avotus recently released a whitepaper on eSourcing for Communications and Why You Need More than Ariba, Procuri, and SAP‘s Frictionless Commerce.

According to the white-paper, sourcing and procuring business-critical products and services such as voice and data communications requires a solution specifically designed for the complexities of that environment. This is because the communications market is changing and creating new and unique challenges, modern communications system configurations are becoming more complex, and market pricing is difficult to determine without the proper infrastructure and expertise.

Some of the difficulties that the paper points out are:

  • long procurement cycles for new communications contracts
  • incorrect or incomplete implementation of new contracts
  • limited or no visibility into corporate communications infrastructure and usage
  • lack of an automated system to verify, reconcile, and pay communications invoices
  • negotiations with carriers may elicit a rock-bottom price but this price may not necessarily encompass high quality service levels or accurate implementation and billing

Furthermore, it points out that an organization must specify the scope of the project, the exact network connections, technologies, and locations, including demand volume, and terms and conditions, including required performance levels for the services, in order to obtain a worthwhile bid.

The report then claims that general purpose systems, built around a commodity and single-purchase structure, do not have the ability to handle the kind of complex relationships that are typically involved in communications environments.

And although this paper provides a lot of good advice on communications procurement, this is one point where I can’t agree. (Although I understand why they would argue it – since they provide a communication analytics solution.) Here are six reasons why I disagree:

  1. If you break down your needs into the network connections required by technology and by location, then, assuming you specify the required service and performance levels and capture the associated performance levels specified, you can ask suppliers to bid by technology and location and allow an apples-to-apples comparison on bid components.
  2. Most leading RFP technologies allow for the specification of bids on a line by line basis, and the leading ones will allow qualitative factors (such as service or performance levels) and tiered bid structures or discounts to be captured.
  3. A true sourcing decision optimization tool will allow for the construction of a scenario that takes into account all component costs, discounts, and relevant service levels and produce a hypothetical optimal solution by technology and location. This will allow the buyer to determine which provider is the most cost-effective in each location and each technology and evaluate the strengths and weaknesses of each bid.
  4. The best way to get a great deal in communications is to understand where the best deals are to be had, not in network design or vendor selection – since a well-designed network is a cost-effective one and most vendors will be cost-competitive when they want your business. This requires a spend analysis 2.0 tool, not a customized RFX, usage tracking, and invoice management platform.
    Take cell phone usage for example, the utilization across your user-base will lie on some variant of a bell curve – with most of the users being near the middle. The best way to get a great deal is to use a great spend analysis 2.0 tool like BIQ, find out what the median user base is, ignore the low and high utilization users, and cut a great deal on a plan for the majority. For the minority, if they are low utilization users, just don’t give them a phone (and keep shared phones on hand for when they travel and actually need a phone), and if they are high utilization users, figure out if they actually need the phone that much. If they do, get them individual plans on a case-by-case basis, and if there are enough of them, negotiate a different deal with a different carrier.
    For regular phone lines, analyze your historical usage data to better qualify your needs by technology and location, identify your best performing suppliers, and compare the bid results of your top suppliers (as identified by your decision optimization tool) to determine who to negotiate with.
  5. Usage management and invoice reconciliation is important, but it too can be done with a spend analysis 2.0 tool that allows you to build cubes on the fly from all relevant data.
  6. A good spend analysis tool connected to an appropriate marketplace with a database of all standard vendor pricing can be used to gage the true market price.

Nevertheless, they do have a decent recommendation for a telecom procurement cycle:

  1. Design the specific network required
  2. Decide which vendor(s) is (are) capable of providing the required services (at the required performance levels)
  3. Source the network and negotiate the contract(s)
  4. Begin the many coordinated provisioning projects to implement the designed network
  5. Order the services from one or more vendors depending on network scope
  6. Indicate acceptance (or not) of the individual service components
  7. Receive and validate the invoice(s) during the entire life of the network … from the first circuit installation to the last circuit disconnect.
  8. Change network scope through service additions, changes, and disconnects as the business dictates.
  9. Before the contract expires, determine latest scope of inventory, usage, and costs.
  10. Begin the sourcing process again sufficiently before the end of the current contract to ensure adequate time for proper vendor evaluation and selection, should a change of vendors be required.