Strategic Sourcing Secrets: Best Practices, Trends, and Money Saving Advice

Presenter: Leo Berz, Director Professional Services, Telecom - Ecova Date: 9/25/2013

Overview

Strategic Sourcing

Industry Trends and Issues

Unique Procurement challenges

Bidding Secrets

Strategic Partnership secrets

Industry Trends

The dominant enterprise trend is to reduce the quantity of vendors, fewer carriers overall.

Incumbent carriers receive preference when new contract are sourced – 77% of enterprises grant preference to the incumbent.

Issues & Problems

Amount of time to perform requirements gathering

Subject matter expertise in telecom sourcing

Evaluating carriers and comparing carrier offerings to one another

Issues & Problems cont…

Evaluating total cost of services versus actual cost

– Too many dependencies, variables, taxes, surcharges, fees

Gaining confidence in the reliability of carrier performance

– Experiences influence expectations

Managing carrier performance after the contract is signed

– High effort is the perception

Quickly changing landscape

– Technology

– Heated M&A activity

– Regulatory uncertainties

Survey Question

How is Telecom procurement handled within your organization?

– Initiated and led by Procurement

– Initiated and led by IT/Telecom

– Initiated and led by Process Improvement of Cost control group

– Internal partnership between IT/Telecom, Procurement and or PI

– Don’t know

Positioning for Success

Strategic Sourcing Perspective

Integral function of Telecom Expense Management (TEM)

It’s a Process; not just a procurement event

The more you put into it, the more you get out of it

Think long term

Cost is only one factor

Secret: Indentify Strategic Partners and work with them as such

Selecting the Right Tool

•Evolving technology

•Industry education

Request for Information

•Commodities

•Vendor capabilities are well known

Request for Quote

•Solution already identified

•Expect variations between providers

Request for Proposal

•Extremely short timeframes

•Working with strategic business partner

Direct Negotiations

•Adding services to contract

•Market pricing considerable below contract

Mid-term Amendments

Timing

When to go to market

Control the clock

New business opportunities

Evaluating new technology

Bidder Communications

One voice, one message

To E-mail or not to E-mail

Identify deal breakers up front

Never award contract untilterms and conditions are complete

Secret: Ask for something you don’t really care about that will be problematic for the bidders; makes for a great bargaining chip

Know the Carrier’s Playbook

Burning the clock

Hold your telecom spend hostage

Bypass your process

Limit their liability

Blame it on regulatory bodies

Obfuscate their pricing

Survey Question

How do you determine when to go to bid?

– Corporate policy that all contracts go to bid

– Corporate policy based on contract value

– Corporate policy based on contract age

– Individual cased based decision

– Don’t know

Secrets for Success When Bidding

Never get pressured into an agreement; if time is short ask for a 6 to 12-month extension

Include meaningless contract requirements that the providers don’t want to agree to as a bargaining chip

Never commit more than 60 to 80% of potential spend

Term contracts are always preferable

Bidders become invested over time

Secrets for Success With Strategic Partners

Identify your Strategic Partners and treat them as such

Get your Strategic Partners to identify additional savings opportunities to you as they become available

Mid-term amendments are always available

Schedule standing Stewardship meetings

Fair accountability

Successful sourcing requires effort but it is worth it

We can achieve significant savings without sacrificing quality

Planning activities in advance offers better control of the outcome

Service agreements must be looked at holistically

Changes to the technology and regulatory landscapes can be leverage

Healthy strategic partnerships are critical

Lessons Learned

Q&A

Thank You for Attending