Technology Review and Market Knowledge
Whether a sourcing contract is new, or new services are being added to an existing contract, the contract should include market knowledge of prices, best practice service levels and key terms and conditions. The existing contracted service prices as well as pricing for new services should be evaluated or benchmarked against what the marketplace prices are for similar comparison services. Over the past five years there has been a trend towards voice and data convergence where technologies such as multiprotocol label switching and virtual private networks have matured to become the accepted network service platforms. These new and maturing services may have not been available when the contract was signed, and hence must be evaluated for value in light of the enterprise's long-term strategies.
Due Diligence
All current contracts should be evaluated for key service levels, and terms and conditions. The service levels include availability, performance, and repair times. The key terms and conditions include benchmark clauses, merger/acquisitions/divestiture clauses, and technology clauses. Data on all in-place technologies and services should be gathered. Contracts for each service provider should be collected and evaluated.
Strategy/Goals
The organization should conduct a strategy workshop to review with all stakeholders, whose main purpose would be to identify the current and future business needs and to agree on goals and objectives. These may include the need to obtain economic savings or implement newer technologies. A strategy definition should be the overriding statement for the telecom sourcing plan.
Outsourcing vs. Insourcing
An organization should evaluate whether to outsource or insource network services by developing a business case for each scenario. For example, outsourcing data management and maintenance services to a provider may gain economic benefits or allow for more focus on core business. Outsourcing land area network, wide area network and private branch exchange maintenance and management could take the burden off of current staff to stay on top of technology, make technology additions and changes, and monitor and manage network components and performance.
Provider Evaluation
Because of the range of services covered by telecom sourcing agreements, it is not unusual to have a large number of providers of these. This becomes further complicated when the enterprise has a global presence.
Generally speaking, service providers are easy to identify and the services they provide are usually well defined. Some of them are often a collection of niche players who fill specific technical needs, resell services or provide services in select geographies that the larger service providers don't support. An organization should carefully evaluate and select the right approach for the mix of service providers, both globally and regionally, that best fits the enterprise strategy for growth, technological needs and costs.
Sourcing Steps
Once the strategy, goals and objectives are agreed to, the organization should begin implementing its sourcing plan. The tendering process can be in the form of a request for proposal, request for information, or other form of solicitation. The providers' responses should be evaluated using a weighted point system for all areas including pricing, service levels and terms and conditions. A workshop should be held with all stakeholders to select the providers and plan for negotiations. Negotiations should commence using professional approaches to obtain the best contract deal. An implementation plan should then be developed with the chosen provider(s).
Supplier Management
The key to the successful management of a contract and relationship between the customer and service provider is to develop and manage a service provider management plan. This plan should include organizational roles, processes, communication paths and satisfaction surveys.
Job Johnson is a consultant with PA Consulting Group, specializing in sourcing and price benchmarking for outsourced services. Kyle Moody, Peter Siggins and Dogan Razon have also contributed to this article.
