Identifying Bias in Telecom Sourcing Support

With the many different parties looking to help your company evaluate and choose telecom service providers, it can be confusing to understand where priorities lie and who is most likely to provide you with objective support in matching the right carrier with your company’s unique requirements.

The most common type of vendor in the world of telecom is an agent; agents have agreements in place with many carriers to sell and support their services. The selling point many agents rely on is that they offer stability in the services you receive: while the relationship with the carrier may change over time, your agent will still be there to support your needs and maintain continuity. The savings from working with agents are generally a result of replacing like-for-like services at a lower cost. Agents typically work on commission from carriers and have established structures for one-time or ongoing commissions based on the services a customer purchases. This is a common practice in the telecom industry and, when done without bias, can be advantageous to all parties involved.

The other big player in the telecom arena is a telecom consultant; consultants tend to act with a more holistic view of your operation. They should evaluate current costs, the telecom contract landscape, and current and future requirements to recommend potential carriers and overall strategy for your network, sourcing decisions, and technology roadmap. The savings opportunities that result from working with consultants are typically from evaluating your company’s service requirements. Similar to the services from an agent, consultants can certainly identify areas where current services are above market price and identify alternates, but the greater opportunity is through identifying areas for consolidation and optimization of services to the requirements of the business. This involves looking beyond the current service to find alternative solutions to meet your company’s telecom needs and goals. Consultants should be evaluating your total cost of ownership across multiple services and looking to enhance pieces (if not all) of the infrastructure you have in place. Beware, some consultants can also work on commission with certain carriers, but this is less common than in the agent community.

Consultants and agents will recommend carriers that make sense from a service and cost perspective.  Using an outside resource makes a lot of sense for companies who are looking to mitigate time associated with qualifying carriers, finding which carriers can service which locations, understanding a carrier’s strengths and weaknesses, and aggregating  service needs. The consultant or agent can act as a “pre-screen” for determining which carriers are easier to work with or which carriers typically have more compelling price points. As you enter a consulting or agency arrangement, you should understand the potential risk of bias that these relationships can introduce in the sourcing process. 

To avoid bias (or fully understand what bias could exist), you will need to understand:
1. The relationship that your outside resource has with any carriers. Without an established relationship between the partner with whom you are working and the carrier, there is risk for conflicting priorities throughout the sourcing process. It is not unheard of for third parties to negotiate their commission while simultaneously working to negotiate your company’s deal. Understand whether or not the agent you choose has established relationships in place and where there may be opportunity for bias in the recommendations coming forward if these relationships aren’t solidified ahead of time. When established relationships are in place, agents and consultants working through commission can be a great efficiency to the process of choosing a carrier and simplify the process of paying for sourcing and consulting services.

2. Which carriers were considered/included in the bid process and which were not. Outside resources without bias should be open to the carriers you wish to include in the sourcing process. If they do not present a basis for excluding a certain supplier, you should stand firm in pushing for more information or for inclusion of suppliers you would like to see included. It could be bias as it relates to commission levels, carrier quotas they are trying to hit, or past experience that isn’t relevant to your company’s needs. Certainly some agents are unable to include carriers that they do not have relationships with, but carrier-agnostic consultants should not have these restrictions. If you are relying on an outside resource to choose which suppliers are included in a sourcing event, understand the thought behind the chosen supplier group. Many consulting firms or agents have a wide breadth of experience with carriers and have a strong basis for including a given group of suppliers, e.g. coverage, past customer experience, typical costs, etc.

3. The fees (or lack of fees) you are paying to the outside resource. Echoing what was discussed above, when no direct fee is involved, be sure to understand how the agent or consultant is being compensated for their time, e.g. is it from a pre-established commission structure?, are they going to be negotiating their commission while negotiating your rates? If so, how could that affect the recommendations they are putting forward? Depending on the goals of the project and services you are looking to source, working without a fee may be a viable option if you are looking for quick wins, like-for-like, and lowest cost options. A more transparent model is to have a fee structure established with the outside resource. If you are paying a consultant directly (either fixed fee, hourly, or on contingency basis), you are paying for process management, market intelligence, and decision support for choosing a carrier and services that best fit your needs. While you may be paying more for the services through a consultant, you should expect an increased level of value from the work being performed.

When looking at options for utilizing outside resources for telecom projects, consider what the goals of that engagement are and how the objectives of the relationship will motivate the agent or consultant. Existing relationships with carriers are commonplace and can be beneficial in creating efficiencies and gaining deeper insight into the supply base; the key is to be educated on potential entry points for bias and be able to identify and address any red flags to mitigate such bias. Source One is vendor-agnostic and can work within a contingency model for telecom services where we are paid as a percent of savings achieved – this helps to further align the motivations and objectives of the client and Source One to maximize the value our clients receive.