Quote Management: A Smarter Way To Reduce Telecom Expenses Savvy managers use competitive price requests from multiple vendors more frequently than others to reduce telecom expenses. Requesting multiple quotes for competitive prices has long been time consuming. When small expenditures were involved, it may not have produced enough savings for the time and effort. Until now, most automated quote management systems have been missing the features to make them effective for telecom services. With automated quote management systems designed specifically for telecom services, managers are now able to use quotes for new services to save money, ensure more timely delivery, and improve quality of service from suppliers. This paper will examine critical considerations and benefits to managing telecom quotes. Copyright 2010 Telesoft
Table of Contents Introduction... 3 Common Misconceptions... 3 Unifying Decentralized Purchasing... 4 Run a Smarter Procurement Department... 4 Benefits of Integrating TEM with Procurement... 5 Conclusion... 6 Next Steps... 7 Free Telecom Cost Savings Analysis... 7 Page 2
Introduction In the competitive telecom market where prices for most services have been declining, effective sourcing offers the promise of being able to generate large savings for telecom budgets. New contracts can often be negotiated with 25% to 45% reductions in rates. Unfortunately, sourcing is not a strategy that works all the time. First, organizations have to wait for the contract expiration date or competitive review periods in contracts that allow for renegotiation of rates based on market conditions. Second, for many organizations, the costs of switching all of the services from one telecom provider to another are too high to take advantage of lower rates. In addition, the impact of a new contract is often limited to a small portion of the entire telecom expenditures and it is rare to have all the contracts expire at the same time. A smarter way to reduce telecom expenses integrates the competitive dynamics of sourcing, in which carriers submit price quotes, with the steady persistent approach to cost savings that Telecom Expense Management (TEM) programs provide. Common Misconceptions Misconception Contract expiration is the only time that managers can request quotes to secure more competitive prices. Organizations need volume purchases to get more competitive pricing. The largest percentage reduction in an annual contract will always result in the greatest savings for an enterprise. Meeting Minimum Annual Revenue Commitments (MARCs), prevents companies from switching business among different telecom service providers. When installation timeframes are critical, procurement teams should always route the order to the provider that had the fastest installation the last time. Reality Managers can submit requests for new pricing whenever they procure new services. Prices for technology and telecom services have been declining for the past two decades. Often, the most current quote will have the lowest pricing. Often carriers are unable to implement reductions for all regions. Shopping for telecom services on a regional basis usually produces a larger net savings. Most MARCs are low. Enterprise spending on many telecom services are predictable. If projections show the commitment will be met, enterprises should take advantage of less costly alternatives. Installation timeframes vary based on carrier business and other factors. The best way to ensure timely installations is to ask and compare carrier commitments. Page 3
Unifying Decentralized Purchasing Large companies often have regional offices that tend to procure telecom services locally. Managers from corporate headquarters need to strike a balance between micromanaging purchasing decisions, and providing too much autonomy where regional offices are not leveraging the power of volume purchases for the entire organization. Defining a unified strategy for sourcing of telecom services helps organizations with multiple sites simplify and streamline the contracting process, while reducing the actual costs of the services. Decentralized purchasing initiatives can be unified with a common direction and best practices. Regardless of the organizational structure, using common sourcing templates and policies from an automated quote management system will reduce administrative burden and resources required for managing each step of the acquisition cycle. This involves establishing templates for requests on how carriers will submit price quotes, defining the weighting and selection criteria, establishing common terms and conditions and Service Level Agreements (SLAs), and creating metrics with scorecards to measure performance. Run a Smarter Procurement Department In addition to clearly communicating the strategy and procurement policies to executives with contract authority for telecom, organizations can benefit from automating these practices. Busy procurement professionals rarely have time to contact manually each potential service provider, and shortcuts can be costly. Instead of working from past experience and assumptions that may no longer be accurate, managers need an efficient method to send requests to multiple service providers. A central part of this strategy, which will help ensure that organizations get the best deal, is to request competitive quotes from multiple service providers. Automation of the process that managers use to send requests for quotes shifts the balance of power in favor of enterprises. It does this by empowering managers with better information to make smarter decisions about streamlining the contracting of services, improving contract governance, securing better contracts, and improving vendor management. Defining the weighting for selection criteria is critical because the best deal often depends on more than just pricing. Procurement professionals must also compare delivery dates, terms and conditions, SLAs, and service quality. In some cases, opportunities to diversify network providers and establish redundancy by using multiple suppliers may prove to be an important factor in selecting the best supplier. Finally, a forecast of penalties for failing to meet a MARC may influence some decisions on which carrier should get more business. Page 4
Procurement managers need a flexible approach when they make procurement decisions on the needs of the organization. During periodic strategy reviews, executives at corporate headquarters can review reporting from an automated quote management system and develop suggestions to improve the process. Benefits of Integrating TEM with Procurement One of the challenges of TEM programs is that several functional groups get involved in different aspects of the program, but often fail to share information and do not see the impact of their actions on the other groups. This includes the following resources:» The sourcing team who negotiate contracts» Procurement engineers that place orders with carriers» The team that processes invoices and allocate expenses for chargebacks» Managers responsible for validating bills, identifying cost savings» The accounts payable department that pay telecom invoices TEM programs are able to get these different departments and other business managers to improve collaboration. Four areas where there are often breakdowns in TEM programs from the failure of these groups to collaborate effectively are listed below: Breakdown Lack of access to the contract or special pricing for carrier services Failure to maintain an accurate inventory of telecom services Chargeback information is missing or incomplete Visibility into open, pending, or closed telecom quotes Consequences No way to ensure that new services on bills and charges for them are valid No way to ensure that invoices reflect the services that are ordered Lack of visibility and accountability for charges and usage of new services No visibility to higher management levels to analyze procurement activity Integrating an automated quote request system with the TEM program addresses breakdowns in tracking special contracts or rates, inventory, and chargebacks. Capturing the critical information in centralized solution makes it possible to update the inventory to ensure that invoices accurately reflect new prices, new services which appear on bills were actually ordered, and expenses are properly allocated to the appropriate business units. The best time to capture this information is when requesting the new service from the carrier and placing the order with the service provider. Page 5
Conclusion Automating the process of requesting multiple bids from competitive service providers through quote management enables companies to save money by getting better prices. Automation also helps to strike a balance between promoting vendor participation and the use of more suppliers, without incurring the added costs that often come from working with additional vendors. Automation allows managers to set reminders for contacts that have not submitted a bid, and quickly compile data to determine the best quote. Automated quote management tools enable organizations to define a unified procurement strategy across the organization. This allows managers to apply best practices while leveraging the benefits of having local personnel apply their specialized knowledge of regional providers to improve purchasing decisions. A flexible approach to the evaluation and weighting helps to ensure that other factors like delivery dates, terms and conditions, SLAs, service quality, fulfillment of MARCs, and network redundancy through diversification of service providers are considered before finalizing the selection. Reporting on quotes and purchasing decisions enables managers to oversee the decisions, and eliminate any bias or favoritism for improved contract governance and vendor management. Lastly, automated quote management brings the opportunity to use automation to integrate areas that have been managed manually with TEM. This enables organizations to capture updates to pricing for new services, proactive notification that new services will appear on bills and allocation chargeback information for better accountability and visibility into expenses. Ultimately, automated quote management provides a smarter way to reduce telecom expenses by combining the competitive dynamics of sourcing with the steady persistent approach to cost savings that Telecom Expense Management (TEM) programs provide. Page 6
Next Steps Free Telecom Cost Savings Analysis See what quote management and Telecom Expense Management can do for you. Telesoft is the trusted partner in Telecom Expense Management (TEM) software and services. For more than 25 years, Telesoft has worked with clients to reduce fixed and mobile telecom spend to improve their bottom lines. Let Telesoft help you uncover savings. In just 30 minutes we will:» Show you how much you can save with telecom expense management.» Pinpoint opportunities to lower your current telecom expenses.» Provide a detailed report showing the savings you can expect in 4 major areas of telecom expense management. Telesoft Corp. 1661 E. Camelback Road, Suite 300 Phoenix, AZ 85016 1.800.456.6061 www.telesoft.com info@telesoft.com Page 7