Services
Introduction
This paper will lay out the 53 critical success factors to minimize the costs of vendor services.
We’ll primarily use examples from telecom, but this applies to services purchased from vendors
in general.
Overview
The process is simple.
1. Create granular visibility into your spending, creating an inventory of every single
service.
2. Review every single service for savings, checking to see if:
a. The service is billed for correctly.
b. The service doesn’t support business needs (i.e. is unprofitable, underused or
unused, and can be removed or consolidated.
c. There are better rates available.
3. Remove all billing errors and unnecessary services. Consolidate services.
4. Negotiate and implement better rates and plans.
5. Track all these changes to completion.
6. Document your work so you can show other people how much money you saved.
If you do all of these things you will have minimized your spending.
Visibility
In order to manage something you need visibility. You can’t manage what isn’t being measured.
Basics
1. Identify all the vendors you’re buying from and their accounts and bills and your
spending. In the telecom category, we’ve seen that some firms don’t even have visibility
in to all the telecom vendors they work with and their total telecom spending.
2. Gather all bills and billing data.
3. You need people who have the time and expertise – many organizations don’t have
enough qualified people with time to minimize substantial vendor spending. We’ve seen
this lead to individual organizations spending millions of dollars unnecessarily, and in
just one category of spending like telecom.
4. Create an inventory of services - break down the bills in to individual services.
Single Pane of Glass – your inventory must be stored in software that allows you to do the
following. (E.g. Properly designed Microsoft Excel spreadsheets can easily handle inventories
with tens of thousands of services.)
With your inventory can you?
20. Predict bill total for each account based on the cost of services meeting current business
need, not past bills.
Can you pull up all services?
21. Of a given type.
22. In a certain location, or relating to a certain process or person?
23. From a certain vendor.
24. Above or below a given cost.
25. Using combinations of the above or other criteria.
Reducing costs
Unnecessary services
Does the system and process identify potentially unnecessary or unused services based on the
following criteria:
31. Business need. Does the service meet a real business need? We’ve seen Finance
departments tell us they can’t match their revenue segments to the corresponding
vendor spending segments. Make sure costs are driven by profitable customer demand.
E.g. services with usage costs can be used to deliver what clients want. However the
revenue can be less than the costs of the usage. Therefore usage costs need to be tied
to the business need driving the usage.
32. Utilization – how much is the service being used?
33. Service Status – is it functional on the vendor end? Is it not connected to your systems
and processes? E.g. a phone line or data line ostensibly on standby for disaster recovery
might be unplugged.
34. Actual location, person, or process the service serves.
35. Mismatch between above - Does the usage not match with a real business need?
36. The service serves an abandoned location, former employee or customer, or a de-
commissioned process or equipment.
Conclusion
You’re now aware of the 53 critical success factors for minimizing vendor costs. Unfortunately
most vendors don’t supply their clients with a clear path to minimizing costs. They leave that up
to the client to figure out for themselves. In areas like telecom, where companies purchase
large numbers of services across multiple locations, companies spending $100,000 or more in
service annually often discover 50% of their telecom spending is unnecessary. Fortunately
outside help is available from firms like Berlin Pacific.
Berlin Pacific has published a book, Principles of Telecom Expense Management (available on
Amazon,) explaining each step of the process and why each one is important.
Experts at companies like Berlin Pacific can help you recover savings as well as improve your
level of service.
If you or anyone you know is in a similar situation or spending a lot of money on telecom, and
would like to find out how much you could save, please contact us. We’d be happy to look at it
for you or anyone else at no charge, and there’s no fee to learn how we can help.
+1 212-247-2502
info@berlinpacific.com