Network Sourcing: How Can Costs Be Reduced By 10-40%?
Published May 13, 2024
- IT Strategy & CTO Advisory
- Sourcing & Services Optimization
For large organisations, the network accounts for a sizeable slug of IT spend often running into £100m’s over the span of a contract, with little way of knowing whether the price is fair for what should be a market driven commodity buy.
The good news is that changing technologies and a changing marketplace have coincided recently to create significant opportunities to reduce costs and optimise performance.
Current opportunities for significant financial savings arise from a combination of changes in the maturing of service integrators (SIs), adoption of new network technologies and shifting away from traditional network topologies.
This is very important, being both disruptive and facilitating major and regional network providers. Traditionally service integrators, would have played a limited role in network service aggregation with some service management wrap thrown in. We’re now starting to see true service integrator behaviours and benefits in this space. They have seen the prize and the commercial advantage they can bring by playing off network providers against one another.
Market activity is also being encouraged by technology advances. The emergence of SD-WAN has encouraged organisations to take a holistic view of their network architecture rather than tactical end-of-life refresh making re-tendering an obvious choice. Organisations making the choice to adopt new technologies are enjoying material savings alongside service and security benefits, both from their supply chain, but also with their internal organisations from automation and orchestration.
Network costs are further impacted where the architecture shifts from traditional network topologies to utilising lower cost non-dedicated links to carry non-critical traffic.
Why Do So Many Organisations Miss Out On Opportunities To Reduce Cost?
Too many organisations are missing out on these opportunities for the simplest of reasons: underestimating the time and commitment required.
Organisations should take a long-term strategic view of their contract lifecycles. As a rough guideline, traditional large scale network sourcing exercises should commence at least 24 months before the current contract ends to allow for network transition activities which can take a year or more due to complex dependencies on multiple third parties. If less than 24 months remain, an accelerated sourcing approach should be considered to reduce the time to contract signature.
Author
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John Gorrell
Associate Partner – UK, London
Wavestone
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