Top 500 Global Corporations Lose $19.1 Billion Annually Due to Telecoms Sourcing Failures

Study reveals widespread dissatisfaction amongst large organizations with telecom and network sourcing projects; staff shortcuts and short-sighted strategies cited in Hudson & Yorke report

1265066379174 10326593
London — February 1, 2010 — Large organizations globally are losing 12 billion pounds ($19.1 billion) annually through failures in the sourcing and governance of their telecom services, according to a new study.

The research, conducted by Forrester Consulting on behalf of Hudson & Yorke, specialists in telecommunications and network sourcing, suggested that the significant losses are due to 80 percent of all telecoms sourcing projects not being as efficient as they could be, with firms potentially able to save 20 percent on each contract spend.

The independent study surveyed 81 multinational corporations from 12 countries and a variety of industries. The findings quantify how adoption of best practice in telecoms sourcing could result in increased efficiencies, reduced costs and improved service levels.

The key findings, which Hudson & Yorke called "a stark warning to business leaders," include:

Staff Shortcuts: While CIOs are spending up to 20 percent 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.

Short-sighted Strategy: While nearly three-quarters of respondents (74 percent) had considered their total cost of ownership and current contracts in detail, only half that number felt they had thoroughly defined their telecoms sourcing strategy, demonstrating a lack of consistency.

In addition, 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.

"CIOs are increasingly expected by their CEOs and CFOs to deliver more services and improved quality at less cost," noted Harry McDermott, CEO at Hudson & Yorke. "There is clearly a significant discrepancy between what large organizations 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 recommended that CIOs adopt four key best practices to help enable enterprises to reduce costs while maximizing 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 that 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 firms 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: Organizations 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 enterprises typically negotiating a major telecoms contract once every three-plus 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 can be key, and their fees can be more than recouped due to the lower charges and better quality of service achieved, the consultancy asserted.

"With telecoms infrastructure increasingly underpinning the wider convergence of IT enterprise strategies such as virtualization and cloud computing, its optimization is more critical now than ever before," said McDermott. "As organizations 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."

A copy of the report "Telecommunications Sourcing: Enterprises Need a Strategic Approach to Maximize Business Benefit" can be requested (registration required) at A PDF summary of the report can be accessed at that link with no registration required.