Juicy transport pricing found in managed services procurements

When I say "managed services," what do you think of? Managed services can be limited to extending the scope of the data network service to include the WAN access router, or they can include outsourcing the management of a company's entire network infrastructure, including data, telephony and related ancillary equipment.

Different managed service operating models suit different companies, and there's no single overarching best practice in this area. But one decision point is especially important to business users considering the various service-delivery options for managed services. That's the sourcing decision to combine a transport services procurement with managed services procurement.

A straightforward managed-router service is almost certain to be procured with transport services. But at the other end of the scale, some companies don't think of doing an RFP for voice and data transport along with a comprehensive network services management deal. Not considering this sourcing approach can be a mistake, because the traditional transport service providers have been responding very aggressively to opportunities that include a significant degree of managed services on their part.

In fact, large deals that include both transport services and managed network services are currently driving the leading edge of the market for transport pricing. Some of these large deals also feature some of the most improved terms and conditions, and the biggest cushions between the annual commitment and the expected transport spend. Think about the ways in which you may need this deal flexibility going forward. Just consider the possibilities of more wild economic swings, or carrier restructurings, or radical behavioral changes by end-users, all with possibly huge impacts on the size and mix of telecom spend in your company.

To get those benefits, you don't have to be shy about customizing your managed services requirements. It's typical for companies to retain core and unusual competencies in-house (such as custom network security management processes, network architecture and design, or vertical-industry-specific management tasks), while outsourcing more routine network management tasks including equipment monitoring, incident management, configuration management, reporting and the like.

Of course, finding the transport pricing gold mine isn't the only consideration in taking on a managed services procurement. Among the key factors that an enterprise should consider in their managed services decision-making:

-- Migration. Doing both transport and managed services together is a big undertaking, and you may have to calculate whether any time lag in booking your savings cancels out some of the advantage in hitting the transport pricing sweet spot. But do your own time and savings analysis! Tipping off carriers to this point is an invitation for them to make "RFP avoidance" offers that deliver a quick price-down but provide neither market-leading savings nor appropriate going-forward leverage.

-- HR issues. You'll need to assess the costs and complexity of displacement of internal staff by the outsourcer.

-- Provider capability and sourcing flexibility. For global deals, a large carrier may or may not have best price and service for both their core transport and managed service in each and every country or region. Some resulting deals require multiple awards and some don't, depending on the performance measurements and other mechanisms used.

-- Hidden cost traps. You obviously don't want the provider's profit from the managed services piece to outweigh the data and voice transport savings, so a close analysis of all available enterprise market experience and data is warranted. And watch for pitfalls -- in areas of the world where Value Added Tax is collected, if it's not reclaimable on the provision of a management service, it could be offsetting other cost gains. This should be modeled against a volume baseline in advance, just like any tax or surcharge.

With those precautions, "discovering" the leading-edge market in this way can be a very rewarding experience. As with any deal, an all-in Total Cost of Ownership model is the way to go. It's rigorous to achieve but key to a great result in the end.