Most organizations employ an 80-20 management approach for their voice and data telecommunications spend. That is 80 percent of their spend is with the top 20 percent of their suppliers, and conversely, 20 percent of their spend is with the other 80 percent of their suppliers within the category. That 20 percent of tail-spend typically goes unmanaged due to a variety of factors: it’s tactical and low value, inadequate resources exist to manage it, there is limited visibility into it, among others. But even with a keen awareness of these concerns, many organizations fail to see that development of a program to address these challenges would translate into opportunities for significant cost reduction and go-forward management efficiencies.

The first natural objection to focusing on that last 20 percent of tail-spend would be that it’s only a small piece of the overall category spend, it’s tactical, and it will perceivably take a lot more work than the other 80 percent to rein in and control. But that’s precisely the reason that it should be your company’s focus within the telecom category. Things move quickly in telecom. Services are ordered and disconnected all the time. Contracts are all over the place, invoices are for small amounts and are difficult to understand, and so unused services bill at un-discounted, tariff rates without anyone noticing. The problem is all of these small invoices add up to costs that can be easily significantly reduced once you understand what you have. What’s more, telecom tail-spend is often the place where you can find and recovery money due to billing errors. So, of course focusing on the top 80 percent of your spend makes sense at first, but that spend is highly visibly and much more thoroughly managed than the tail-spend and it’s for that reason we have actually had clients realize more savings within their tail-spend than the top 80 percent of spend.

The biggest challenge to taking on telecom tail-spend is finding the time and resource to do the due diligence and create the visibility necessary to make better decisions about the services you’re buying and utilizing. Some may be able to plan it as a special project, but there are almost always more mission critical needs that take priority. Most hire outside help, but the risk there is that many consulting firms also focus on the top 80 percent of your spend and want little to do with the rest. So vetting partners is critical and really drilling into their approach to your challenges and how much involvement they will require from your team will help you to make the right decision. From that point on, they can create visibility and your team can develop a plan for how to address your tail-spend. Typically, services fall into a few buckets: they are unused and can be decommissioned, they can be replaced by other services available at a location (e.g. POTS and PRIs with SIP, Internet via the WAN, etc.), they can be consolidated under existing primary carriers, they can be optimized (i.e. configured to get the most value for your dollar and potentially eliminate other services), or some combination of these. All of these adjustments almost always result in reduced cost accompanied by simpler management and better visibility.

While data gathering is occurring, your team can determine some basic metrics to better understand and rationalize the connectivity requirements to each location. After auditing a few locations, this will provide you with a gauge to quickly assess whether or not you are overspending at a particular location or on a particular service. Further, having a standardized approach in mind as you embark in this process will allow you to consider your current state as it relates to your desired end state vs. trying to look at your current state and then plan from that point forward. Depending on your industry or operation, the metrics may vary but some examples would include metrics based on staff quantity, users, or location category (e.g. warehouse, business office, call center, etc.). These will not only give you an idea of the services and costs you should have for each location, but they’ll also help you to place each cleanly into your roadmap.

When it comes time to execute, all of your decisions will be based on the hard-earned due diligence done during data gathering and discovery. Based on this and the parallel planning you’ve completed, you should be able to gain an upper hand in managing your spend by increasing the amount of spend with your top 20 percent of your suppliers and reducing the number of suppliers supporting the bottom 20 percent of your spend. The savings and cost recovery you will have realized will be well worth your efforts and the impact of your consolidation and rationalization efforts will make controlling costs into the future much easier.
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David Pastore

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