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8/9/2019 Visibility - Key to Network Cost Management
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Berlin Pacific – Vendor Management 212-247-2502 [email protected]
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Visibility is the key to managing any cost, including network costs.
Surprisingly even smaller firms have network management systems that give visibility in to thenetwork and make tight management possible, yet they aren’t provided with network costmanagement systems that give them visibility in to their costs. This makes optimal managementof the costs impossible and excess spending inevitable.
With networks especially, much of the cost is a sunk cost - the capital spent on buying anddeploying fiber and equipment. Carriers, whose networks are their business, are conscious of theneed to maximize dollars of profit per unit of capacity. (Interestingly some accounting practicesaren’t congruent with this goal, more on this upon request.)
Many people might assume that all telecom carriers have only labor costs once the equipment isinstalled. This would be wrong. In today’s world carriers are constantly interconnecting and have
recurring carrier and equipment vendor costs of their own. Wireless firms need a way to backhaul traffic from their cell towers, and use local low cost providers rather than building theirown capacity every time. In order for us to make long distance and international calls, manycarriers need to be paid. In addition the equipment itself needs support and maintenance from themanufacturer. All this creates recurring costs for carriers as well as enterprises.
Without Visibility
We know our important services. We usually know what bills pay for services, but little else.A service can be anything, including a support and maintenance contract, or a voice or data line.Vendors don’t provide consolidated bill break down with a single pane of glass for all vendors.
Operations Finance
Service Cost Bill Cost Bill Service A ? Bill A Service B ? Bill A 1000 Total Bill A
Service C ? Bill B 1000 Total Bill B
8/9/2019 Visibility - Key to Network Cost Management
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Berlin Pacific – Vendor Management 212-247-2502 [email protected]
Note: Network Management vs. Network Cost Management
Interestingly most firms have a network management system. They usually know full well whatservices and devices they have and whether they go up and down. Operations has a very clearview in to all their devices and carrier services connecting them.
What the systems don’t do is tell you the recurring monthly or annual cost of the circuit or thesupport and maintenance contract associated with the device and whether you’re still being billedfor something that is off your network or unutilized.
With Visibility
Bills are consolidated and broken down.We can see connections, without always having to look at multiple files, or worse yet flipthrough paper bills.
Service Cost Bill Service A 500 Bill A Service B 500 Bill A
1000 Total Bill A Service C 500 Bill B Service Z 500 Bill B
1000 Total Bill B
Note that there is a service on this list that wasn’t on the example list above. This is a service thefirm was paying for that no one wanted, at least not anymore. This happens more often than onewould hope. We regularly find expensive items buried in bills that serve no business purpose.
Given the poor quality of many vendor’s data, creating visibility can be quite a task in any area,
not just networks. One of the reasons firms use us to help manage their costs is because theyhave no one on staff with the time and expertise to take the data they have and put it in a properdatabase. Often additional data has to be requested from the vendors themselves.
Since nothing can be managed without visibility, it is usually worth the effort to create it even forspend categories costing $100,000 a year.
With Visibility
We can manage each cost by:
1. Eliminating or consolidating unused and underutilized services2. Fixing billing errors
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Berlin Pacific – Vendor Management 212-247-2502 [email protected]
3. Renegotiating rates
Service NewCost Bill
NewCost Savings Notes
Service A 500 Bill A 350 150 Re-negotiated to market rate Service B 500 Bill A 350 150 Re-negotiated to market rate
1000 Total Bill A 700 300 Service C 500 Bill B 350 150 Re-negotiated to market rate Service Z 500 Bill B 0 500 Unused service is removed
1000 Total Bill B 350 650
2000 GRANDTOTAL 1050 950 almost 50% savings
In the above example we assumed there were no billing errors. We were able to remove theunused service saving a significant amount. We routinely find many unused services for ourclients, saving a significant portion of their budget. Many costs in the IT and telecom world havealso fallen dramatically, including of course voice and data services. It is also possible to getlower costs on many IT Support and Maintenance contracts with OEMs like Cisco. With ourconnections in the market place we’re able to routinely roll over and re-negotiate contracts forour clients at a much lower price point.
We’ve seen how with visibility one can manage costs. While the 50% savings above may seemlike an exaggeration, we routinely find those kinds of saving for clients by giving them visibilityand managing their costs for them. Even 20% savings, low for our clients, is a substantial winwith a large enough budget.
Berlin Pacific Vendor Management - Anything Less Is A Waste Of Money.
