You can’t manage what you don’t measure.
But when it comes to vendor spending, especially telecom, cloud, and IT services, many firms aren’t measuring all the right things.
Here’s the truth: It’s common to not know what every single line item on your vendor bills are for, who it serves, and whether it’s priced correctly or competitively.
The result – with services such as WAN/Internet/Voice/Mobile, or Cloud or SaaS you’re leaving 20 to 50% of total spend on the table.
These are the 7 KPIs I recommend to every senior IT or finance leader who wants to bring their IT vendor costs under control – without more complexity or disruption.
1. ✅ Inventory Coverage Ratio
Definition: % of billing line items tracked in an up-to-date, structured inventory.
If an individual billing line item for a service is not tracked in your inventory, it’s not being managed. This KPI measures how much of your actual spend is visible at the line-item level. Without line-item visibility, savings and accountability are impossible.
Target: 100%
Most clients we help start off without an inventory. They track total spending on each bill, but don’t have an inventory with granular visibility down to the individual billing line item.
2. 🔍 Business Need Verification Rate
Definition: % of inventoried services that have a documented, current business need.
Services with no current business need should be eliminated or right-sized. This KPI highlights how much of your spend is verified and proven to be necessary rather than “assumed useful.”
Target: >95%
Bonus points if you reverify every 3 months.
Services assumed to be “still in use” are often not, especially after location moves, upgrades, or organizational changes.
3. 📊 Utilization Audit Score
Definition: % of services reviewed in the past 90 days for usage vs capacity.
Underutilized services are hidden waste. This KPI helps you track whether services are right-sized, or just wasting money quietly.
Target: >90% audited quarterly.
Clients who consistently verify and document need and utilization, spend by 10 to 30% less than those who don’t.
4. 📉 Contract Compliance Index
Definition: % of billed services confirmed to match contract terms.
Many services can be billed incorrectly, especially when it comes to bills from telecom providers like AT&T, Verizon, Lumen, etc., especially as time goes on. This KPI makes sure what you signed for is what you’re paying for.
Target: 100%
We’ve found $400 services billed at $2,000+. Multiply that by multiple line items billing in error twelve times a year.
5. 📉 Market Rate Parity Score
Definition: % of services benchmarked against third-party market data.
Even if billing is contractually correct, you could still be overpaying. This KPI reflects if you get market pricing data from independent sources, which keeps your vendors honest and your pricing competitive.
Target: >80% annually
A client saved $100K/year after we benchmarked just one “standard” rate against the true market rate.
6. 💰 Predictive Billing Accuracy
Definition: % of variance between costs as forecasted in the inventory and actual billed costs.
This validates if your inventory is truly accurate. If your team can’t predict the bill using the inventory, they’re flying blind. This KPI measures how much of your vendor spend is truly controllable and understood.
Target: <3% variance
The inability to predict future costs from the inventory typically signals hidden issues: billing errors, usage surges, or hidden charges. (Yes, there are ways to take unpredictable but valid demand driven usage into account.)
7. 💰 Realized Savings Rate
Definition: % of identified savings that were actually executed and captured.
Finding savings is nice. Capturing them is the goal.
Target: >90%
Visibility is step one. Find savings is step two. Execution is what delivers real bottom-line results.
Recap: The 7 KPIs That Matter
KPI What It Measures Target
Inventory Coverage Ratio Line-item visibility 100%
Business Need Verification Alignment with operations >95%
Utilization Audit Score Right-sizing of services >90%
Contract Compliance Billing accuracy 100%
Market Rate Parity Pricing competitiveness >80%
Predictive Billing Accuracy Financial control <3% variance
Realized Savings Rate Execution & impact >90%
Why These KPIs Matter
CIOs, CTOs, and CFOs are under pressure to:
These KPIs aren’t theory detached from reality.
They measure whether your spend management process is truly working.
The right processes, the ones these KPIs help track, have helped our clients reclaim millions in overspending, all without disruption, drama, or internal bandwidth drain.
If you want clarity on where you stand today, or support implementing these processes and KPIs across your IT and telecom vendors, let’s talk.
We’ve helped 100+ organizations unlock 20-60% in hidden savings in multiple IT vendor categories.
We would be glad to show you how.
Bonus: Additional KPIs for Managing IT Vendor Spending
We find most clients have something in place around these, but they are worth mentioning just in case.
1. Spend Governance Score
Definition: % of vendor spend routed through approved, compliant processes.
Why it matters: This single KPI captures how well your organization controls its vendor spending. It reflects both coverage (Spend Under Management) and compliance (low Maverick Spend). A high score means spend is visible, vetted, and optimized.
Formula: 100% − Maverick Spend Rate
(Assumes the remainder is compliant, managed spend.)
Target: ✅ ≥ 95% indicates possibility of strong vendor control and minimal waste – IF other controls are in place. ⚠️ < 80% often signals high risk, hidden costs, and poor visibility.
NOTE: Not being aware of for example total spend on landline telecom vendors for WAN/Internet/Voice is also a red flag. Typically this data is available as AP pays these bills every month.
2. SLA Performance Compliance
Definition: Tracks SLA adherence across:
Target: ≥99% SLA compliance + 100% tracking of violations + credit recovery
5. Vendor ROI
Definition: Net benefit derived from the total of a set of new or marginal vendor costs.
Target: Positive ROI, with clear tie to business value
Most organizations can’t tie the drivers of increases in cloud spending back to increases in business demand and positive business outcomes. That’s a visibility failure.
Comparing projected costs with projected costs and determining the root cause of variances is also important.
Ready to take more control of your IT vendor spend?
Whether you’re looking to assess your current state or put the right systems in place, we help IT and finance leaders bring structure, transparency, and measurable results to managing IT vendor spending.
We’ve partnered with over 100 organizations to uncover 20–60% in avoidable costs in multiple categories – without adding workload to internal teams, or having to switch vendors or wait for contract renewals to save.
If you’re looking to reduce costs and gain better visibility into your IT vendor spending, feel free to send me a direct message here on LinkedIn. Let’s discuss how we can achieve these goals together.
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