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Can Purchasing more Technology Lead to Cost Creep?

Cost Creep. Has this HAPPENED to YOU?

Your company starts to grow, and you need more technology to keep up with additional staff, customers and to help improve process. You are aware of the efficiencies and cost savings made possible by new technologies and are upgrading their infrastructures as a result.

But are you aware of How Purchasing more Technology can lead to Cost Creep?

Every CFO knows about “cost creep”; the slow build up over time in the cost/revenue ratio.   In today’s marketplace, there are an increasing number of service providers who can deliver more efficient solutions, giving end users more options than ever.

In the beginning new suppliers are on their very best behavior, cutting deals and slashing cost. The client will enjoy some pretty large cost savings during the first couple of years.

However, as the Contract matures and becomes less visible to the client, costs begin to slowly creep up until, if unchecked, they can accelerate way beyond the initially agreed upon amount.

When you purchase more services, your plans may mutate, creating new contracts that incur additional charges. Over time, small ancillary charges can appear but are not questioned, increasing your bills slowly. This “creep” may leave you paying for services you do not need and may not even understand.

Because data is at the heart of every business and it plays a crucial role in businesses staying connected, technology bills are perceived as a necessary fixed expense and are often overlooked even when the initial cost has increased yet services have not changed.

A small to mid-sized financial institution can easily incur monthly expenses ranging from thousands to tens of thousands of dollars each month.  Managing the financial component of vendors can be a nightmare! Looking at just telecom you have: Multiple carriers, multiple contracts, introductory offers, equipment, and different locations. Just these factors can lead to poor financial management and procurement processes.

Are you overlooking the financial costs of managing suppliers? What are the risks of doing that?

Here are findings from top research names in the industry. While cost creep can occur with any supplier these statistics share the finding in just Telecom alone…

  • Telecom costs rank in the top 5 expenses for most companies (Gartner)
  • 80% of carrier bills contain errors (Gartner)
  • Telecom analysts spend on average 20% of their time identifying errors (Gartner)
  • Enterprises forfeit 12%-17% of telecom expenses without a proactive approach to telecom cost management (Aberdeen Group)

With a Vendor Management Solution contract experts can negotiate a fixed rate for a particular service. The contract terms must be met ensuring that both parties are aware of what is expected and any variances will be flagged and the vendor will be held accountable for any charges and changes outside of the agreed terms.

If you have questions about any of our VMS benefits contact us today at 866-504-4050 or email LIMITLESS at [email protected] to learn more about our Vendor Management Solutions



This post first appeared on What Is Your P & L Missing?, please read the originial post: here

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Can Purchasing more Technology Lead to Cost Creep?

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