IT and telecom are two spend areas that conceal a lot of savings behind walls of industry terms and technical jargon, making it difficult for the average procurement department to make any inroads. Our IT & Telecom team here at Source One just wrapped up an extremely successful telecom optimization project, with multiple components producing very large savings. The wireless optimization arm of the project will be discussed at a later date, but here we focus on finding savings within the WAN, or wide area network.
The client for this project was a very large technology manufacturer, with facilities located throughout the United States. The provider of its WAN, the high-bandwidth connections that allow for robust, modern voice and data systems, was delivering poor service, with numerous disconnections and repeated bouts of unexplained, unreported downtime. Costs were also higher than they should have been, leaving little room in the budget to add the bandwidth necessary for planned future upgrades. Finally, the WAN consisted of more than 100 separate connections, and billing was decentralized and disorganized, all of which quickly overwhelmed the account management resources the company had on hand.
The project goal was to find a more affordable provider with a better service offering, and minimize the burden placed on the manufacturer’s own management resources.
The overarching theme of the sourcing process was to optimize the manufacturer’s WAN to make the management of it minimally reliant on internal management resources. The incumbent WAN provider was able to provide service to all of the company’s facilities, and in sourcing alternative suppliers, we looked for those that could provide complete coverage as well. In addressing the management of the company’s multitude of connections and need for more bandwidth, we identified singular services that could replace groupings of low-bandwidth T1 lines while offering both a lower cost and much greater bandwidth.
When all was said and done, we identified an alternate supplier that would:
- Provide a single invoice for all services
- Reduce the number of managed connections by nearly half
- Increase bandwidth to some facilities by as much as 800 percent and to all facilities by an average of 70 percent
- Reduce the annual cost to nearly 25 percent of its original figure.
In addition, since the incumbent provider had provided such poor and unreliable connectivity, we negotiated a stronger service level agreement with the alternate supplier, redefining what constituted “downtime,” decreasing the amount of downtime that would necessitate a report from the provider, and implementing a penalty structure for repeated bouts of downtime.
In analyzing which alternate supplier would serve as a suitable replacement for the incumbent, we reviewed a number of factors outside quoted connection price and bandwidth that would likely have been glazed over but significantly altered pricing if went unchecked.
Access Costs. When dealing with business data connections, it is important to realize that a provider’s connectivity may not be universal, or in any proximity to the intended facility. A provider may be able to offer a very competitive price on the connection alone, but it may have to undertake significant construction costs to get the service to a building. These construction costs will be passed on to the owner and can be high enough to mitigate any savings gained by switching services.
Service Charges. Quality of Service (QoS) is a method of traffic engineering to ensure that high-bandwidth and high-importance services running through data connections are prioritized to minimize interruptions. Typically, video will be prioritized because of its high bandwidth requirements, and voice will be given low priority due to its minimal bandwidth requirements. Some carriers and providers charge for services like QoS prioritization, whereas others include them in their basic service offerings. QoS and other telecom services are fertile areas for savings opportunities.
Network Management Costs. Much like how a residential broadband connection enters through a modem or gateway that can be rented or purchased from the cable or telephone company, enterprise-grade connections need similar hardware. If an organization owns its equipment and has the capabilities to maintain it, then it will not need network management services from the provider and should look to remove them from quotes and contracts. Similarly, if the organization does not have the equipment or resources, then these network management services should not be considered when identifying cost-cutting measures.
Technology categories — specifically, IT and telecom — are notoriously difficult to source due to the technical expertise required, the incredible speed at which new solutions debut and become outdated, and the degree to which solutions can be tailored to specific organizations and their needs. No two projects are the same, and likewise no solution will produce the same answer twice.
Jamie Burkart is a Project Manager for Source One Management Services LLC, working as a part of the telecommunications and information technology team to identify and execute process improvements, infrastructure optimization, and cost-reduction opportunities. He leverages over 15 years of information technology, telecommunications, data quality, and process optimization experience to assist clients with opportunity identification and strategy development.