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Study reveals widespread telecoms and sourcing dissatisfaction

Monday January 25 2010

Top 500 global corporations lose £12 billion annually due to sourcing failures, with retailers losing out of 20% of contract spend in savings

Top 500 global corporations lose £12 billion annually due to sourcing failures, with retailers losing out of 20% of contract spend in savings


Large enterprises globally are losing £12 billion annually through failures in the sourcing and governance of their telecom services, according to a study conducted by Forrester Consulting on behalf of Hudson & Yorke, specialists in telecommunications and network sourcing. These losses are due to 80% of all telecoms sourcing projects not being as efficient as they could be, with larger retailers potentially able to save 20% on each contract spend.


The independent study surveyed 81 multinational corporations, with an annual telecoms spend in excess of £6 million, from 12 countries, including US, UK, Australia, Switzerland, India, Sweden and Denmark and a variety of industries, including retail. The findings quantified how adoption of best practice in telecoms sourcing can result in increased efficiencies, reduced costs and improved service levels.


Costs increase with lack of oversight


The key findings, which are a stark warning to business leaders within the retail sector, include the fact that, while chief information officers (CIOs) are spending up to 20% of IT budgets on telecom services, they are committing well under one fifth of team time to managing their telecom strategy, sourcing and governance, resulting in financial loss and reduced quality of service from telecom service providers


While nearly three quarters of respondents (74%) had considered their total cost of ownership and current contracts in detail, only half that number said they felt they had thoroughly defined their telecoms sourcing strategy, which the study said demonstrated a lack of consistency.


Yet, at the end of a major sourcing project, one in five of respondents felt they were not satisfied that they had met the objectives set out in the original business case for the investment.


Sourcing dissatisfaction runs deep


Harry McDermott, chief executive at Hudson & Yorke, commented: “CIOs in the retail sector are increasingly expected by their CEOs and CFOs [chief financial officers] to deliver more services and improved quality at less cost. There is clearly a significant discrepancy between what large organisations hope to achieve with a major telecoms sourcing project, and the reality of what is currently being delivered with limited experience and resources.”


In response to the findings, Hudson & Yorke recommends that CIOs working in the retail sector adopt four key best practices that will enable enterprises to reduce costs whilst maximising service levels:


Planning is imperative

CIOs must get the technical and service strategy right before starting the sourcing process. Enterprises should develop a long-term telecom and network strategic plan which is tied to wider IT planning. Future as well as current requirements must be considered and alternative technologies, services and methodologies evaluated.


More resources required

Many large retailers underestimate the time required to complete a major sourcing project. Cutting corners at any stage of the process will have a significant adverse effect on the outcome. Attention to detail, proper timeline planning and use of skilled resources are all vital.


Multisourcing is a must

Large organisations in the retail sector can achieve significant benefits through selective multisourcing with best-of-breed vendors. This can reduce costs, improve service quality and encourage innovation.


External specialists critical

With large retailers typically negotiating a major telecoms contract once every 3+ years, it is unlikely that internal teams will have the necessary experience, skills and tools to manage the process as efficiently as possible. The engagement of external specialists is key – their fees will be more than recouped due to the lower charges and better quality of service achieved.


McDermott concluded: “With telecoms infrastructure increasingly underpinning the wider convergence of IT enterprise strategies such as virtualisation and cloud computing, its optimisation is more critical now than ever before. As organisations plan their IT projects for 2010 and beyond, CIOs need to change the way they approach, plan and source their telecoms in a disciplined and methodical way – looking beyond their existing sourcing models – whilst dedicating the right skills and adequate time to projects. With attention to detail and best practice, the results will follow.”