Mobile Procurement Hidden Costs

Are Your Mobile Procurement Savings Hiding Hidden Costs?

Mobile contract negotiations are lengthy processes, often they stretch across a number of months in an effort to secure an appropriate deal. Upon engaging in a contract and pricing review or RFP (Request For Proposal), carriers will often offer large procurement savings of up to 20-30%, sometimes even exceeding this.

At face value, such procurement savings look highly valuable to a business. The purchasing of an entire fleet of new iPhones can be a costly activity; therefore, the possibility of a large procurement cost saving is extremely appealing. Because of this, it is often rare for IT, Finance and Procurement teams to stand back and evaluate why it is possible for carriers to allow them to secure such large savings in the first instance. Often, it is seen as a job well done, and the search for the next contract commences.

Fast forward two or three years and it is time for a new fleet of devices for the company. Once again, the exercise is repeated and another 20-30% saving is negotiated, allowing the cycle to continue. IT cost management is often approached with a ‘procurement first’ strategy.

Scratch below the surface and most businesses would see that a combination of events really occurred over the preceding contract term which resulted in significant and hidden overspending. These can include paying for unused services, not optimising tariffs, not invoking benchmarking clauses, exceptional and uncontrolled usage, lack of visibility of spend, poor inventory management, incorrect or inefficient deployment of technology, poor or limited training – the list is extensive, with mobile carriers making it incredibly easy for a company to fall foul of a multitude of those mentioned.

The procurement exercise was a short-term solution, quickly allowing the business to initially cut costs, but without plan management, costs quickly stacked up. Once CIO’s and IT leaders become aware of this, then a new opportunity arises to save money and avoid any significant costs which may come to light.

HOW MUCH EXCESS AND HIDDEN COST IS YOUR BUSINESS CARRYING?

Most businesses are overspending by at least 10-20%, often more, on mobile and telecom services; it’s common that these savings could have been released long before contract renewal time came around. As a result, despite businesses thinking they’d made a huge 20-30% saving through their procurement negotiations, the reality is that at least half (most likely more) was wastage and hidden cost anyway. The mobile carrier simply adjusted their pricing in order to mask these hidden costs.

PROACTIVE MANAGEMENT IS THE BEST SOLUTION

There is a multitude of ways to save money, however many require proactive management or a ‘management first’ principle. With the majority of cases, there is nothing stopping businesses exploring and implementing these methods, regardless of when a network contract is due for renewal.

EFFECTIVE APPROACHES:

1. Manage and measure usage – removing wastage, tracking usage and spend, managing excessive usage and maintaining accurate inventory will all greatly attribute to keeping costs optimised throughout the contract term. All of these are likely accountable for 10-20% of current mobile costs, and around 5-10% of fixed line costs. Find out more about simple tips to reduce mobile data usage in order to cut costs.

2. Change or deploy technology and commercials for each ‘use case’ – Within mobile telecoms, it is extremely common for businesses to deploy the exact same tariffs and technology to all users and ‘use cases’ regardless of their usage. Far too often, different job roles require a different amount of mobile services in order to do their job to the best of their abilities. By identifying the 1-2% of outliers which often account for 20% or more of usage costs, and subsequently tailoring services to their needs, can dramatically reduce costs and improve productivity.

3. Look at the operating and support model for telecoms – how effective is your business really at supporting and deploying services? Often, IT help desks are tasked with building, deploying and managing mobile phone and tables for their users. Realistically, they often do not have the right tools and resources required to successfully implement this. All too often, IT support processes are poorly defined or lack the right tools and systems to manage telecoms services. As a result, it’s common for both network and resource costs to increase, errors to be made in provisioning that lead to future costs (e.g. wrong tariffs applied) and for security risks to increase.

4. Identify hidden IT and Telecoms budgets – An increase in BYOD and cloud services has seen a rise in IT spend being generated (unchallenged and unmanaged) in other departments’ budgets and even in employee expenses. Often these areas hide substantial IT spend but also create un-managed security risks. BYOD expense claims, for example, can often exceed the cost of corporate services that they were supposed to remove or reduce in the first instance.

5. Procure better terms – Procurement remains a critically important part of contract negotiations, however, it should be invoked from an optimised position in which the business has at minimum already identified any hidden costs and wastage. For example, a saving of 30% on a £10 line rental for a service which is unused, is still an overpayment of £7. Multiply this by the number of unused services and already a large unnecessary cost can emerge. If indeed they are separate, a business’s procurement team should also be able to work alongside IT to identify how the use of services are likely to change over the contract term and where costs are likely to rise, so flexible and appropriate terms can be negotiated as well as great pricing to ensure the business can easily adapt to change in the future. Find out more about how the introduction of 5G will greatly affect mobile contract costs.

An approach of ‘management first’ won’t work for every business, with some happy to continue in a procurement first cycle. In the process, however, these businesses risk not only overspending over the lifetime of each contract, but also fail to identify easily preventable material support issues, wastage, and potential security risks.


How Mobliciti Can Help

Free up your IT team, secure your mobile devices and data and reduce your mobile costs with the support of Mobliciti.

Our specialist independent team works with corporate IT teams across a wide range of industries and sectors; taking care of mobile security, network administration, managing mobile costs & usage, negotiating market leading contracts; and supporting business users with their mobile devices. By assisting our customers to quickly free up their in-house IT teams and budgets whilst eliminating hidden costs, they can focus on IT transformation and their core business.

To learn more about effective mobile management and telecoms procurement, get in touch.