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Visibility - Key to Network Cost Management

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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 the network and make tight management possible, yet they aren’t provided with network cost management systems that give them visibility it to their costs. This makes optimal management of the costs impossible and excess spending inevitable.

With networks especially much of the cost is a sunk cost - the capital spent on buying and deploying fiber and equipment. Carriers, whose network is their business, are conscious of the need to maximize dollars of profit per unit of capacity. (Interestingly some accounting practices aren’t congruent with this goal, more on this in a future post.)

Many people might assume that all telecom carriers have only labor costs once the equipment is installed. 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 their own capacity every time. In order for us to make long distance and international calls, many carriers need to be paid. In addition the equipment itself needs support and maintenance from the manufacturer. All this creates recurring costs.

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

 

Note: Network Management vs. Network Cost Management

Interestingly most firms have a network management system. They know full well what services and device they have and whether they go up and down. Operations has a very clear view 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 the support and maintenance contract associated with the device and whether you’re still being billed for something that is off your network.

With Visibility

Bills are consolidated and broken down.
We can see connections, without always having to look at multiple files, or worse yet flip through 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 was a service the firm was paying for that no one wanted, at least not anymore. This happens more often than one would hope. We regularly find expensive items buried in bills that serve no business purpose.

Given the poor quality the data received by carriers or enterprises from many if not most of their vendor’s, 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 they have no one on staff with the time and expertise to take the data they have and put it in a proper database. 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 for $100,000 a year vendor categories.

With Visibility

We can manage each cost by:

  1. Eliminating or consolidating unused and underutilized services
  2. Fixing billing errors
  3. Renegotiating rates

Service

New Cost

Bill

New Cost

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

GRAND TOTAL

1050

950

almost 50% savings

 

In the above example we assumed there were no billing errors. We were able to remove the unused service saving a significant amount. We routinely find many unused services for our clients, saving a significant portion of their budget. Many costs in the IT and telecom world have also fallen dramatically, including of course voice and data services. It is also possible to get lower costs on many IT Support and Maintenance contracts with OEMs like Cisco. With our connections in the market place we’re able to routinely roll over and re-negotiate contracts for our clients at a much lower price point.

We’ve seen how with visibility one can manage costs. While the 50% savings above may seem like an exaggeration, we routinely find those kinds of saving for clients by giving them visibility and managing their costs for them. Even 20% savings, low for our clients, is a substantial win with a large enough budget.

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