Avoiding Unexpected Cost Increases While Trying To Save

No Jitter (www.nojitter.com)
Jim Blaszak & Andrew Brown

Historically, enterprise customers have been able to count on annual telecom cost reductions of 10-15%. Even with greater industry concentration, well-done deals can still realize significant cost reductions. But in current economic conditions, where IT and telecom departments need to show some serious savings, 10% off a number that has been drifting steadily downward for over ten years simply may not yield the savings that some enterprise organizations must produce. As a result, many companies look to outsource management of telecom services and equipment by entering into a managed equipment services (“MES”) agreement as a way to realize even greater cost savings by transferring to their suppliers some of the costs associated with acquiring equipment and managing equipment, networks and personnel.

Outsourcing through an MES agreement can, in fact, produce real savings. But outsourcing functions previously performed in-house can also lead to unexpected costs that swallow the anticipated cost savings. The objective of this article is to help enterprise customers avoid these unexpected costs. To that end, we offer suggestions regarding the specification of vendor responsibilities, the methods by which outsourced work will be performed, the mechanism through which changes to the initial scope of work will be made, and the charges associated with the service.