The 80/20 rule goes by a few names and has a few different applications. You may have heard it referred to by such honorifics as, “The Law of the Vital Few,” “The Principle of Factor Sparsity,” or you might know it as the “Pareto Principle.” In any case, the 80/20 rule states most simply that 80% of results derive from 20% of all efforts. For example, 20% of your clients make up 80% of your sales. In the case of spend management, the 80/20 rule suggests that typically, 80% of a company’s spend in a particular category is with the top 20% of the suppliers. Conversely, this also means that 20% of the spend is spread out across the remaining 80% of suppliers.
Let’s assume, for the purposes of this discussion, that across your organization’s telecommunications spend, the strategic 80% of your spend is well-managed, well-negotiated, well-monitored. Relationships with 20% of your suppliers are healthy. Your organization is content with the situation and your strategic, high-value spend is under control.
Leaving Money On The Table
When you look at your whole portfolio of telecom spend, you have the nagging feeling that you’re leaving cost savings opportunities on the table. There are numerous small, local suppliers out there and there are just as many decentralized buyers who order equipment and services as needed. You know they don’t have the same visibility or level of decision support that you have. Additionally, they don’t have the time to manage the suppliers in the same way that you, at the corporate level, manage your strategic suppliers. Things are going to fall through the cracks – whether it’s paying for disconnected lines, getting billed for tariff rates incorrectly, or paying a bill twice because it’s such a nominal amount. But multiply these nominal costs over the number of lines, users, locations, and everything else you manage, and the dollars start to add up.
You recognize this as an issue. The next question is how are you going to find the time and resources to manage all of this? There are always going to be higher visibility, higher priority tasks on the to-do list, not to mention all the fire drills that arise daily. So you find yourself time and again reviewing your laundry list of telecom category management priorities, and saying, “We’ll get to that someday.”
But suppose you put a stake in the ground, and decide to get outside help. With help, you gain the expertise of people who’ve done the work before, you don’t have to bring them on as full-time resources (with salaries, benefits, overhead, etc.) and you likely don’t have to manage them too closely. So you shop around for a telecom management firm that seems to have the right tools for the job. How do you know you’re selecting the right partner? If you’re looking specifically for help managing that pesky 20% of telecom spend, and you don’t properly vet your provider or solution, you may end up doing more harm than good.
Identifying The Right Partner and Solutions
How do you identify the right telecom partner/provider/solution? Here are a few guidelines:
Know Your Requirements
It's important that you have a firm understanding of what end-state you’re trying to reach and that you communicate that when qualifying potential providers and stakeholders. You don’t want to pursue a course of action that saves money but compromises operations.
Be Open To New Ideas
While you should approach the engagement with a solid understanding of what you want to achieve, the ideal provider can offer approaches that you haven’t thought of yet. You know your specific business, but they know the industry and the market. A good partner can often make suggestions that help you mitigate risk and achieve better savings.
Be Realistic And Practical
What is the right blend of automation and critical thinking required? Don’t be swayed by a provider who makes things sound simpler or conversely, more complex than they are. One size does not fit all when it comes to managing telecom spend.
Understand The Basic Courses Of Action Open To You
Think about basic cost-saving initiatives that are right in front of you. Are there lines or services you can decommission because you don’t need them? Can you sub-in alternates? Are there any ways you can consolidate or reconfigure under existing primary carriers?
You may feel that managing your telecom tail-end spend is neither simple nor easy. Universally, getting all these costs under control is not an easy task. But that doesn’t mean it can’t be done. Find the right partner with the right capabilities to manage all this for you and you won’t have to worry about savings that go unrealized.
This information was contributed from Corporate United’s supplier partner Source One. We thank Source One for providing valuable insight to add to our blog.
Ken Gaul: Associate Director at Source One Management Services