CHAPTER 1
Organizing the Telecom Area Administratively
Initially, we would like to focus on four administrative strategies that are usually associated with the effectiveness of a telecom area:
• voice and data controlled together
• telecom as part of the organization's information technology structure
• controlling telecom in a centralized way
• deployment of control systems and consequent processes
Of course, these are general guidelines, and specific contexts may impose different strategies; however, these four points usually are the way to go. Subsequent sections will discuss the reasons.
1.1 Voice and Data Controlled Together
Although this strategy may seem obvious, some organizations do not control voice and data in a unified way. In today's technological environment, it is very advisable to have a control structure wherein the same area within the organization manages both voice and data contracts. There are four main reasons for this:
1) There is a technological trend to unify voice and data services over the same equipment and protocols.
2) The providers of both services are usually the same.
3) The billing control processes are similar.
4) The technical and administrative skills required from the people involved in the control of both services are very similar.
These elements are at the root of the trend to unify the control of telecom resources (voice and data) under one area of an organization. That is by itself a very important administrative decision, which tends to improve the quality of resource management. Very often, by just unifying the control of voice and data resources, overall costs can be reduced.
Some organizations control mobile resources and devices separately; our view is that these devices should be controlled by the same group within the organization responsible for controlling data and voice resources.
1.2 Telecom as Part of the Organization's Information Technology Structure
The structure and responsibilities of managing telecom within a large organization have changed over time as shifts in technology took place. Generally, the objective has been to bring telecommunications into the IT sphere of influence, unifying voice and data disciplines in a telecommunications/network area.
The migration of the telecom area from general services to IT is an administrative trend that follows the technological trend of integrating voice and data over the same network.
In addition, managing a telecom infrastructure in today's large organization requires skills more often found in people working in the IT department than anywhere within the organization.
1.3 Controlling Telecom in a Centralized Way
Telecom management is one area where centralized control tends to generate better results. Of course it isn't an absolute truth; multinational companies must balance the benefits of centralized management against the difficulties of managing infrastructures in different countries with different languages, currencies, and cultures.
It is our experience that policies and standards should be defined globally as far as possible. This creates an environment where teamwork and cross-regional support are possible, greatly enhancing the efficiency of the human capital deployed across the organization.
Here we emphasize the need to have unified inventory databases, processes, and technological standards. Sometimes, several arms of a large organization spread around the world do not understand the benefits of unified policies and standards. Usually, the telecommunications team in each country tends to believe that its own ways are the best, but anyone who has managed a multinational telecommunications area knows that having standards is better, even if they are not going to be optimal in every environment. When telecom management is centralized, it leads to the following benefits:
• better prices (usually due to global negotiation, where the full weight of the organization is brought to the table, yielding better discounts)
• better control (when only one group is responsible for telecom resources, it usually reduces problems such as overcharges, overlaps, and having unidentified resources or resources that are not used)
• lower operational costs (when headcounts are reduced, there is a consequent reduction in personnel costs)
Centralizing control usually enables the organization to identify its telecom expenses. That fact alone is usually enough to justify centralization, because it shows how much telecom represents within the IT/infrastructure budget and keeps the subject on management's radar.
In more general terms, we have to keep in mind that telecom is a logistic system, and as such, the whole may be more than the sum of the parts.
It would be interesting to insert a caveat into the argument here that centralized management doesn't necessarily mean a centralized operation. If you have the right tools, you may be able to control and contract in a centralized way and yet keep the operation distributed, enabling different telecom teams to operate in different countries, for example.
This is feasible, as long as you manage to make all teams use the same management tools, under a defined hierarchical framework. That means that the local telecom teams may have some autonomy to contract telecom resources (the ones not covered for the worldwide contract, for example), but they have to include each contract and resource in a corporate telecom management tool in such a way that headquarters can see all the telecom expenditures and all resources contracted in all countries. The local teams will see only their own expenditures and resources.
Therefore, we may divide the term "centralization" into two types: financial and technical. Even if operational aspects force technical decentralization, financial centralization remains crucial. The centralized telecom management has to keep track of what is contracted and how much it is costing.
Financial centralization refers to the following:
• centralized resource inventory (including data, voice, and mobile resources)
• centralized contract inventory (including voice, data, mobile services, and maintenance)
• centralized telecom bills (even if received in different countries, all bills would be included in a common tool in a standardized framework, allowing centralized control)
• centralized billing system
• centralized bill auditing process (at least in a country basis)
Technical centralization refers to the following:
• centralized help desk for telecom issues
• centralized point of contact with the telecom providers
• centralized point of contact for equipment maintenance
• centralized network operational center (NOC)
1.4 The Deployment of Telecom Expenditure Control Software
It is important to understand that these concepts are applicable whether you have specific software or just use a spreadsheet to control your data. In this section, we will discuss the benefits of deploying software to control telecom expenditures.
Many companies control telecom costs manually, using spreadsheets; there are two problems with this strategy:
• The entities are interrelated, and in most cases, it is difficult and time consuming to control them. For example, a last mile is associated with an address, a contract, a cost center, a service provider, and equipment. Every time you change one of these entries in the spreadsheet, you may have to adjust the associated ones. When these adjustments must be done manually, they are often missed, and the database becomes outdated.
• Even when stored in a shared directory, it is difficult to access information (what information is where?) and to keep track of changes (which versions of the spreadsheets are the updated ones?).
In addition, using spreadsheets isn't helpful when linking the databases to the main groups of processes associated with managing a telecom area:
• control of the contracts and bills
• interacting with the providers (ordering new resources, canceling resources, changing resources, and maintenance)
• generating reports with financial association for several criteria (addresses, providers, contracts, business units, cost centers, last mile)
The lack of automatic linkage between these processes and the spreadsheets is a guarantee that the data depositories will soon become outdated.
Another important consideration that is very often overlooked is the fact that using a spreadsheet makes it difficult to know what information is where, which in turn creates the situation where an organization must rely on a specific individual to find specific data. The use of spreadsheets also makes it easier for a disgruntled employee to sabotage the organization's data.
Those are the reasons why using telecom expenditure control software (such as Northridge, Sentinel, Tangoe, or TRMS) can be very helpful. They support all the processes in regard to inventory control, bill processing, service ordering, and maintenance control. This is why these tools are usually worth having. Nevertheless, it is important to keep in mind that these tools helps with control, but they don't solve the problems by themselves.
Therefore, it is important that the people in charge of controlling telecom expenses understand that proper processes, contracting strategies, and trained personnel are just as important in controlling telecom costs as having the right software package. Tools for summarizing telecom expenses can be an important (and sometimes essential) part of controlling expenses, but they are still just one part of the process.
A common mistake when implementing this kind of tool is the expectation that it will solve all problems. The providers of the tools usually include an initial implementation cost, which covers populating the databases and training the users. This cost only includes data gathering and training; it doesn't cover processes or contractual adjustments with the telcos. Those issues are usually the organization's responsibility.
Only the organization holds the power to negotiate its own contracts and command its people to change the way they work. The providers of the tools may act as advisors (although, in most implementations, this isn't part of their mandate), but at the end of the day, the organization has the responsibility and the means to make the necessary adjustments.
Never assume that the problem can be completely outsourced just because you contract a tool. Even if you contract a consulting company to implement the tool, you have to be realistic about your expectations and understand that the consulting company will only gather the data, populate the databases, train the people, design how the processes are supposed to be, and determine how the contracts should be renegotiated. What a consulting company usually can't do (and isn't supposed to do) is to command the people to follow the processes and negotiate the contracts directly with the service providers. This is your responsibility (and it is not easily transferable).
Depending on the scenario, having a control tool may not be optional, if you manage several business units operating in several countries, each one with several telecom teams with autonomy to contract and cancel resources, having a tool may be the only way to balance the act between autonomy and centralized control.
Tools like that would give you accurate cost verification, at the same time allowing each business unit to keep its operational independence (able to contract and cancel the telco's services), as long as it complies with a standardized framework (provided by the software). A typical tool would cover the following items:
• physical control of the business unit's addresses, including number of people and workstations per location
• control of all the organization's data connections, guaranteeing that each connection (whether leased line, frame-relay, MPLS, etc.) is clearly identified (end A, end B, last mile, equipment, committed and extended information rates [CIRs and EIRs], nominal bandwidth, technology, IP, DLCI, service provider, contract and cost), and also guaranteeing that all information can be consolidated by address, business unit, country, and cost center
• control of all interaction with the service providers, automating all processes linked with requesting new services, requesting changes in existing ones, requesting maintenance, and canceling services; that increases control, reduces mistakes, and standardizes and simplifies procedures
• control of the costs in segmented or consolidated ways
The tool should also address the following issues:
• give telecom country managers a complete view of the infrastructure under their responsibility, and at the same time, allow the headquarters managers to have a complete view of telecom costs for all countries, normalized by currency (an ideal tool should be multilevel, multicountry, and multicurrency)
• control the physical locations where the organization (and its business units) has the ends of its connections installed (normalizing the addresses avoids problems such as different business units located in the same physical address contracting duplicated connections)
• control the business units, associating them with their physical locations, and in this way control the business unit's points of presence (POPs)
• control the existing connections, identifying the end A, end B, bandwidth capacity (CIR, EIR, and nominal), cost, and contract of each connection (a connection encompasses equipment and last mile costs)
• control all processes of contracting, changing, maintaining, and canceling a connection, guaranteeing that the quality of service (QoS) provided is the one defined by the service level agreement (SLA)
• control the telco's invoices, guaranteeing that the values charged are the ones defined by the contracts
• control the values paid, regardless of the currency in which it was contracted
The tool should also control the following entities:
• addresses and Zip codes
• business units
• business unit points of presence
• connections (dedicated or not)
• contracts
• cost centers
• equipment
• invoices
• last miles
• service providers
• telco interactions (requests for maintenance, cancellations, provisioning, changes)
CHAPTER 2
Sourcing and Procurement
Contracting and negotiating services is part of the day-by-day work of any telecom area in a large organization. But we have to keep in mind that we have two types of negotiation processes: retail negotiation and wholesale negotiation. Retail negotiations with service providers are common. In these day-to-day negotiations, proposals and requests for individual resources are made regularly, and technical and economic aspects are discussed.
Wholesale negotiations, on the other hand, are much more challenging and usually encompass more resources (trunks, circuits, or other equipment). Negotiating a large contract encompasses strategic aspects not present in retail negotiations. These negotiations deal with aspects such as high values, a lengthy transition process, and quality of service issues; they are also carried out by more experienced telco negotiators. All these aspects make proper planning essential.
In this context, we must separate sourcing and procurement into two types: retail negotiations, which are associated with simple quotations and ordering, and wholesale negotiations, which in turn usually encompass complete renegotiation of a WAN contract. This chapter focuses on wholesale negotiations, including strategies and concepts.
Wholesale negotiations usually take place at intervals not smaller than three years. Even longer intervals often elapse between contract reviews; this is due to the habit of just renewing existing contracts instead of opening a completely new negotiation, including potential providers.
This "law of least effort" of choosing to stay in the same contract, even when it may not be the best choice, is one of the main reasons why we find so many telecom contracts with higher-than-expected prices. All large organizations have some level of inertia that has to be overcome to allow a proper wholesale negotiation. Regular negotiations are key to achieve the best results; renewing an existing contract may be practical but rarely yields the best price.
